If you run a business that handles larger cash transactions, you probably know that federal law requires you to report cash payments of more than $10,000 by completing a Form 8300, which is jointly issued by the IRS and the Financial Crimes Enforcement Network.
This form, which requires the payor’s name, address, and tax identification number (among other things), must be completed and filed within 15 days after receiving the cash. Failure to do so can result in large civil penalties and even criminal charges.
What Transactions Require a Form 8300?
According to the IRS website, certain transactions that involve a cash payment of $10,000 or more need to be reported. They include:
- Sale of goods, services, and real or intangible property
- Debt or loan payments
- Making loans
- Exchanging one form of currency for another
- Expense reimbursement
It is important to note that ‘cash’ doesn’t only mean currency. It can include bank drafts, money orders, cashier’s checks, or traveler’s checks received by a business in a designated reporting transaction, which is the retail sale of the following:
- A tangible consumer item such as a car or boat that is suitable for personal use, can be expected to last at least a year and is priced at over $10,000
- A high-value collectible item such as artwork, coin, or antique
- Travel or entertainment if the total sale price for the same trip or event is over $10,000
The IRS also identifies transactions that are not considered cash. They are:
- Personal checks that are drawn on the writer’s account
- A money order, bank draft, cashier’s check, or traveler’s check with a face value of over $10,000 (for transactions that are not designated reporting ones)
If you suspect that a customer is trying to structure a transaction to prevent a Form 8300 from being filed, the law requires you to file the form and report the suspicious transaction.
What About Installment Payments?
The reporting requirement isn’t limited to single payments of $10,000 or more. If you run a jewelry business and a client pays for a $15,000 diamond necklace in three payments of $5,000 each, you need to file Form 8300 because the transactions total more than $10,000.
Annual Filing Requirement
There is an annual filing requirement in addition to the 15-day one. You must provide a written statement to every party whose transaction was reported in a Form 8300. This document, which has to be filed by January 31 of the year following the cash transaction, needs to include the following information:
- The name and address of your business
- The name of the contact person for the business
- How much cash was received during the 12-month period from that person
- A statement informing them that you reported the transaction to the IRS
Penalty for Noncompliance
Although paying for something in cash is perfectly legal, the federal government monitors large cash transactions to detect and combat crimes like money laundering. Therefore, the penalties for intentionally failing to file a Form 8300 on time can be severe. They include:
- A fine that is either $25,000 or the amount of cash you did not report, whichever is greater. (The maximum penalty is $100,000.)
- Criminal prosecution that could result in a five-year prison sentence and a fine of up to $250,000 ($500,000 if you run a business).
Even if your failure to file was only due to negligence or you did file but the information is incorrect, the IRS may still impose a $250 penalty.
Keep Thorough Records of Your Form 8300
After you file Form 8300 and comply with the annual filing requirement, be sure to keep detailed records of the transaction and the filings. If you are audited, the IRS will examine your Form 8300s along with your other tax forms and penalize you if anything is amiss.
Contact a Tax Attorney if You Need Help with Your Form 8300
When you accept large cash payments, it can cause issues because the rules regarding who must file Form 8300 (and when), which transactions trigger the requirements, and what constitutes cash for reporting purposes are often confusing.
At Paladini Law, we will provide you with the tax and legal advice needed to remain compliant with these complicated laws. If you receive an audit letter, contact our IRS audit team immediately, especially if you have questions or concerns about past Form 8300 transactions. We can also help develop a strategy if you haven’t been filing Form 8300. Attorney Brad Paladini has supported many clients across the country during high-risk interactions with the IRS and will apply tax solutions and strategies aimed at protecting you and your business.