Large Cash Deposit from Years of Unreported Tips - What Will Happen with the IRS?

This is definitely a tricky situation. Banks are required to file Currency Transaction Reports (CTRs) for cash transactions over $10,000, and they file Suspicious Activity Reports (SARs) for unusual transactions. A $420K cash deposit will trigger both. The money represents income that should have been reported when earned. Technically, it's already taxable income that wasn't properly reported over those years. The IRS generally has a 3-year statute of limitations for audits, but this can be extended to 6 years for substantial underreporting, and there's no time limit for fraudulent returns or unfiled returns. For your brother, I'd recommend consulting with a tax attorney (not just an accountant) before making any deposits. They can help navigate potential options like a voluntary disclosure program or creating a plan to correctly handle back taxes and potential penalties. Some attorneys specialize in tax controversy and can provide better protection through attorney-client privilege. The worst approach would be depositing it all at once without any professional guidance. The IRS will almost certainly investigate, and your brother could face significant penalties beyond just paying the taxes owed.

I wanted to share my experience with a similar situation. I had about $65K in unreported income that I needed to get into the banking system. I was really stressed about it but found this service called taxr.ai (https://taxr.ai) that helped me understand my options. They analyzed my situation and explained the potential consequences of different approaches. What was helpful is they showed me exactly what documentation I needed, what potential penalties I might face, and created a disclosure strategy. They put together a plan that helped minimize the financial impact. It was much better than walking into the bank unprepared or trying to make a bunch of smaller deposits, which apparently is illegal. My situation wasn't as large as your brother's, but the same principles apply. Getting professional guidance before making any moves was crucial.

I wanted to follow up about my experience with taxr.ai that I asked about earlier. After our conversation, I decided to try it for a similar situation (though not quite as large as $420K). I was honestly impressed with how thorough they were. They reviewed my employment history, explained exactly what forms would need to be filed, and estimated my potential tax liability including penalties. The best part was they created a disclosure strategy that made the whole process way less scary than I thought it would be. They showed me exactly what documentation I needed to prove my income source was legitimate. Much better than walking into the situation blind! Just wanted to share since this thread helped me figure out my own situation.

Another thing your brother should consider is how long he'll be on hold trying to get guidance from the IRS directly. I had a similar situation (though much smaller amount) and spent WEEKS trying to get through to someone who could actually help. I ended up using a service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent within about 15 minutes instead of waiting on hold for hours or getting disconnected. You can see how it works here: https://youtu.be/_kiP6q8DX5c This saved me so much frustration because I was able to speak directly with someone who could answer my questions about voluntary disclosure options. Given the complexity of your brother's situation, actually speaking with an IRS representative might help clarify his options alongside professional advice.

I have to admit I was completely wrong about Claimyr. After expressing skepticism here, I decided to try it myself since I've been trying to reach the IRS about an unresolved notice for weeks. The service actually worked exactly as described - their system waited on hold (for nearly 2 hours in my case) and then called me when an agent was on the line. The time I saved was absolutely worth it, especially since I had already wasted several hours on failed attempts to reach someone. I was able to get clear answers about my situation directly from the IRS instead of relying on guesswork. For a complex situation like unreported cash tips totaling $420K, speaking directly with the IRS (alongside professional counsel) would definitely provide some clarity on voluntary disclosure options.

One thing no one has mentioned yet is that your brother should consider looking into the IRS Voluntary Disclosure Program. It's specifically designed for situations where someone has intentionally not reported income and now wants to come clean. While he'll still owe taxes plus interest and penalties, voluntarily coming forward before being audited typically results in avoiding criminal prosecution. The penalties under voluntary disclosure are usually much less severe than if the IRS discovers the unreported income on their own. It's important to note that once the IRS initiates an investigation, it's too late to use this program. So if he's going to do this, he should act before making any large deposits that might trigger scrutiny.

I'm curious why your brother didn't just deposit small amounts over time? If he had been putting in like $500 a month for years, he could have gradually gotten the money into the banking system without raising flags. Seems like a missed opportunity that led to this much bigger problem.

This is a complex situation that definitely requires professional help. Your brother has essentially been operating as a cash business without proper tax compliance for decades. While the situation seems overwhelming, there are legitimate pathways to resolve it. A few key points to consider: 1. **Time is critical** - The longer he waits, the more complicated this becomes. If the IRS discovers the unreported income through other means (like a bank filing a suspicious activity report), his options become much more limited. 2. **Documentation will be crucial** - He should gather any employment records, old tax returns, and anything that can establish his legitimate work history in the restaurant industry. This helps prove the source of the funds. 3. **Professional representation is essential** - This isn't a DIY situation. A tax attorney who specializes in voluntary disclosures can potentially save him tens of thousands in penalties and protect him from criminal exposure. The good news is that the IRS generally prefers voluntary compliance over enforcement actions. They have programs specifically designed for situations like this, and coming forward proactively typically results in much better outcomes than being discovered. I'd strongly recommend he consult with a tax attorney before making any deposits or contacting the IRS directly. The initial consultation cost will be minimal compared to the potential consequences of handling this incorrectly.

I work as a CPA and have dealt with similar situations, though none quite as large as $420K. The most important thing your brother needs to understand is that this isn't just about paying taxes - it's about potential criminal liability for willful tax evasion. The IRS distinguishes between "willful" and "non-willful" non-compliance. Given that your brother actively chose not to report tip income for 35 years, this could be classified as willful, which carries much more severe penalties and potential criminal charges. However, the fact that his employer didn't require tip reporting could work in his favor - it shows there wasn't a formal system in place, which might help argue this was more negligent than intentionally fraudulent. Before doing anything else, he absolutely needs to: 1. Stop accumulating more unreported cash immediately 2. Consult with a tax attorney who handles criminal tax defense (not just civil tax issues) 3. Consider the Offshore Voluntary Disclosure Program or similar programs, even though this is domestic income The $10,000 CTR threshold everyone mentions is just the beginning. A $420K cash deposit will trigger a Suspicious Activity Report regardless of how it's structured, and attempting to break it up into smaller amounts is structuring - a federal crime that could add years to any potential sentence. This situation is fixable, but it requires immediate professional help and a carefully planned approach.