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Workbook on Reporting Cash Payments of Over $10,000


Introduction

The law requires that trades and businesses report cash payments of more than $10,000 to the federal government by filing IRS/FinCEN Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business (See Exhibit 1, Form 8300).
Transactions that require Form 8300 include, but are not limited to:

  • Escrow arrangement contributions
  • Pre-existing debt payments
  • Negotiable instrument purchases
  • Reimbursement of expenses
  • Making or repaying a loan
  • Sale of goods/services
  • Sale of real property
  • Sale of intangible property
  • Rental of real or personal property
  • Exchange of cash for other cash
  • Custodial trust contributions

The information contained in the form assists law enforcement in its anti-money laundering efforts. When businesses comply with the reporting laws they provide authorities with an audit trail to stop tax evasion, drug dealing, terrorist financing and other criminal activities.

Objectives

  • Determine what transactions a business must report
  • Define cash
  • Determine how and when businesses should report payments
  • Understand that civil and criminal penalties may be applicable for noncompliance

Type of Payments to Report

Trades and businesses must report cash payments received, if all of the following criteria are met:

  • The amount of cash is more than $10,000.
  • The business receives the cash as:
    • One lump sum of more than $10,000 or
    • Installment payments that cause the total cash received within one year of the initial payment to total more than $10,000 or
    • Previously unreported payments that cause the total cash received within a 12-month period to total more than $10,000.
  • The establishment receives the cash in the ordinary course of a trade or business.
  • The same agent or buyer provides the cash.
  • The business receives the cash in a single transaction or in related transactions.

Cash Includes

Cash includes the coins and currency of the United States and a foreign country.
Cash may also include cashier’s checks, bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less, if the business receives the instrument in:

  • A designated reporting transaction, as defined below, or
  • Any transaction in which the business knows the customer is trying to avoid reporting of the transaction on Form 8300.

Example:  Tom Greenwood purchases a used car from XYZ Auto Dealership for a total of $12,000. He pays with a cashier’s check having a face value of $12,000. The cashier’s check is not treated as cash because its face value is more than $10,000. The business does not need to file Form 8300.

A designated reporting transaction is the retail sale of any of the following:

  • A consumer durable, such as an automobile, boat, or property other than land or buildings that:
    • Is suitable for personal use.
    • Can reasonably be expected to last at least one year under ordinary use
    • Has sales price of more than $10,000.
    • Can be seen or touched (tangible property).
  • A collectible (a work of art, rug, antique, metal, gem, stamp or coin).
  • Travel or entertainment, if the total sales price of all items sold for the same trip or entertainment event in one transaction or related transactions is more than $10,000. The total sales price of all items sold for a trip or entertainment event, includes the sales price of items such as airfare, hotel rooms and admission tickets.

Example: Ed Johnson asks a travel agent to charter a passenger airplane to take a group to a sports event in another city. He also asks the travel agent to book hotel rooms and admission tickets for the group. He pays with two money orders, each for $6,000. The travel agent has received more than $10,000 cash in the designated reporting transaction and must file Form 8300.

Cash Does Not Include

Cash does not include personal checks drawn on the account of the writer.

Cash does not include a cashier’s check, bank draft, traveler’s check or money order with a face value of more than $10,000. When a customer uses currency of more than $10,000 to purchase a monetary instrument, the financial institution issuing the cashier’s check, bank draft, traveler’s check or money order is required to report the transaction by filing FinCEN Form 104, Currency Transaction Report.

Example: Jim Roberts purchases an automobile from ABC Auto Dealers for $19,000. He pays with $4,000 in currency and a personal check in the amount of $15,000. Since a personal check is not considered to be cash, ABC Auto Dealers does not need to file a Form 8300.

Cash does not include a cashier’s check, bank draft, traveler’s check or money order that is received in payment on a promissory note or an installment sales contract (including a lease that is considered a sale for federal tax purposes). However, this exception applies only if:

  • The business uses similar notes or contracts in other sales to ultimate customers in the ordinary course of its trade or business and
  • The total payments for the sale that the business receives on or before the 60th day after the sale are 50 percent or less of the purchase price.

Cash does not include a cashier’s check, bank draft, traveler’s check, or money order that is received in payment for a consumer durable or collectible, and all three of the following statements are true:

  • The business receives it under a payment plan requiring:
    1. One or more down payments and
    2. Payment of the rest of the purchase price by the date of sale.
  • The business receives it more than 60 days before the date of the sale.
  • The business uses payment plans with the same or substantially similar terms when selling to ultimate customers in the ordinary course of its trade or business.

Cash does not include a cashier’s check, bank draft, traveler’s checks, or money order received for travel or entertainment if all three of the following statements are true:

  • The business receives it under a payment plan requiring:
    1. One or more down payments and
    2. Payment of the rest of the purchase price by the earliest date that any travel or entertainment item (such as airfare) is furnished for the trip or entertainment event.
  • The business receives it more than 60 days before the date on which the final payment is due.
  • The business uses payment plans with the same or substantially similar terms when selling to ultimate customers in the ordinary course of its trade or business.

Definition of a Related Transaction

The law requires that trades and businesses report transactions when customers use cash in a single transaction or a related transaction. Related transactions are transactions between a payer, or an agent of the payer, and a recipient of cash that occur within a 24-hour period. If the same payer makes two or more transactions totaling more than $10,000 in a 24-hour period, the business must treat the transactions as one transaction and report the payments. A 24-hour period is 24 hours, not necessarily a calendar day or banking day.

Example: A retail motorcycle dealer sells a motorcycle for $9,000 in cash to Gary Smith at 10:00 a.m. During the afternoon on the same day, Mr. Smith returns to buy another motorcycle for his son and pays $9,000 in cash. Since, both transactions occurred within a 24-hour period, they are related transactions, and the motorcycle dealer must file Form 8300.

Transactions are related even if they are more than 24 hours apart when a business knows, or has reason to know, that each is a series of connected transactions.

Example:  A client pays a travel agent $8,000 in cash for a trip. Two days later, the same client pays the travel agent $3,000 more in cash to include another person on the trip. These are related transactions, and the travel agent must file Form 8300.

Example:  A customer purchases a vehicle for $9,000 and then within the next 12 months pays the dealership additional cash of $1,500 for items such as a new transmission, accessories, customized paint job, etc. The dealership is not required to file a Form 8300, if the additional transactions are not part of the original sales contract and the customer has no additional legal obligation to make such additional transactions.

Reporting Suspicious Transactions

There may be situations where the business is suspicious about a transaction. A transaction is suspicious:

  • If it appears that a person is trying to prevent a business from filing Form 8300.
  • If it appears that a person is trying to cause a business to file a false or incomplete Form 8300, or
  • If there is a sign of possible illegal activity.

The business should report suspicious activity by checking the “suspicious transaction” box (box 1b) on the top line of Form 8300. Businesses are also encouraged to call the IRS Criminal Investigation Division Hotline at 800-800-2877 or the local IRS Criminal Investigation unit. If a business suspects that a transaction is related to terrorist activity, the business should call the Financial Institutions Hotline at 866-556-3974.

The business may voluntarily file a Form 8300 in those situations where the transaction is $10,000 or less and suspicious.

When to Report Payments

The amount of cash a customer uses for a transaction, and when the customer makes the transaction are the determining factors for when the business must file the Form 8300. 

Generally, a business must file Form 8300 within fifteen days after the cash is received. If the fifteenth day falls on a Saturday, Sunday, or holiday, the business must file the report on the next business day.

Multiple Payments

In some situations, the payer may arrange to pay in cash installment payments. If the first payment is more than $10,000, a business must file Form 8300 within 15 days. If the first payment is not more than $10,000, the business adds the first payment and any later payments made within one year of the first payment. When the total cash payments exceed $10,000, the business must file Form 8300 within 15 days.

After a business files Form 8300, it must start a new count of cash payments received from that buyer. If a business receives more than $10,000 in additional cash payments from that buyer within a 12-month period, it must file another Form 8300 within 15 days of the payment that causes the additional payments to total more than $10,000.

If a business must file Form 8300 and the same customer makes additional payments within the 15 days before the business must file Form 8300, the business can report all the payments on one form.

Example: On January 10, a customer makes a cash payment of $11,000 to a business. The same customer makes additional payments on the same transaction of $4,000 on February 15, $5,000 on March 20, and $6,000 on May 12. By January 25, the business must file Form 8300 for the $11,000 payment. By May 27, the business must file another Form 8300 for the additional payments that total $15,000.

Where to File Form 8300

Form 8300 can be filed electronically using the Bank Secrecy Act (BSA) Electronic Filing (E-Filing) System. E-filing is free, and is a quick and secure way for individuals to file their Form 8300s. Businesses can also mail the Form 8300 to the IRS at:

IRS Detroit Computing Center
P.O. Box 32621
Detroit, MI 48232

Required Written Statement for Customers

When a business files a Form 8300, the law requires the business to provide a written statement to each person named on Form 8300 to notify them that the business has filed the form.

The statement must include the following information:

  • The name and address of the cash recipient's business.
  • Name and telephone number of a contact person for the business.
  • The total amount of reportable cash received in a 12-month period and
  • A statement that the cash recipient's is reporting the information to the IRS.

The code and regulations only specify the information that the business is required to include on a statement, not the format of the statement. A business may use its invoice for the statement of notification, as long as the invoice includes all required information. Providing a copy of Form 8300 to the payer(s), although not prohibited, is not advisable due to the sensitive information contained on the form, for example, Employer Identification Number or Social Security Number of the filer.

When to Provide a Statement to the Customer

The business must provide the written statement to its identified customers on or before January 31 of the year after the year in which the customer made the cash payment that caused the business to file Form 8300. A business that chooses to mail the statement must mail the statement timely to ensure the customer receives the statement by January 31.

Recordkeeping

A business should keep a copy of every Form 8300 it files and the required statement it sent to customers for at least five years from the date filed.

Penalties

Businesses may be subject to civil and criminal penalties for noncompliance with the law.

Civil Penalties

Civil penalties and applicable rules are:

  • The penalty for negligent failure to timely file, to include all required information or to include correct information is $100 per return, not to exceed $1,500,000 per calendar year, IRC Section 6721(a) (1): For persons with average annual gross receipts of not more than  $5,000,000, the ceiling is $500,000.,The penalty applies to each return IRC 6721(d)(1)(A).
  • If any failure to file under IRC Section 6721(a) is corrected on or before the 30th day after the required filing date, the penalty is reduced to $30 in lieu of $100 and the maximum amount imposed shall not exceed $250,000 per calendar year. IRC 6721(b)(1). The ceiling is $75,000 for persons with average annual gross receipts of not more than $5,000,000, IRC 6721(d)(1)(B).
  • The penalty for intentional disregard of the requirement to timely file or to include all required information, or to include correct information is the greater of: (1) $25,000, or (2) the amount of cash received in the transaction, not to exceed :$100,000 (with no calendar year limitation applicable). The penalty applies to each failure. IRC Section 6721(e) (2) (C).
  • The penalty for negligent failure to furnish a timely, complete and correct notice to the person(s) required to be identified on the Form 8300 is $100 per statement not to exceed $1,500,000  per calendar year, IRC 6722(a)(1). For persons with average annual gross receipts of not more than $5,000,000 the ceiling is $500,000,IRC 6722(d)(1)(A).
  • If any failure to furnish described in IRC 6722(a) is corrected within 30 days  the penalty is $30 in lieu of $100 and the ceiling is $250,000, IRC 6722(b). For persons with gross receipts of not more than $5,000,000 the ceiling is $75,000, IRC 6722(d)(1)(B).
  • Intentional disregard of the requirement to furnish timely, correct and complete notices is  , $250 per failure, or if greater, 10 percent of the aggregate amounts of the items required to be reported correctly (with no calendar year limitation applicable).  IRC Section 6722(e).

Criminal Penalties

 A person may be subject to criminal penalties for:

  • Willful failure to file
  • Willfully filing a false or fraudulent form
  • Stopping or trying to stop a form from being filed or
  • Setting up, helping to set up, or trying to set up a transaction in a way that would make it seem unnecessary to file Form 8300.

Any person required to file Form 8300 who willfully fails to file, fails to file timely, or fails to include complete and correct information is subject to criminal sanctions as a felony under IRC Section 7203. Sanctions include a fine up to $25,000 ($100,000 in the case of a corporation), and/or imprisonment up to five years, plus the costs of prosecution.

Any person who willfully files a Form 8300, which is false with regard to a material matter, may be fined up to $100,000 ($500,000 in the case of a corporation), and/or imprisoned up to three years, plus the costs of prosecution. (IRC Section 7206(1))

The penalties for failure to file may also apply to any person (including a payer) who attempts to interfere with or prevent the seller (or business) from filing a correct Form 8300. This includes any attempt to structure the transaction in a way that would make it seem unnecessary to file Form 8300. “Structuring” means breaking up a large cash transaction into small cash transactions.

Putting It All Together

In this lesson you learned:

  • Who must file Form 8300.
  • When a Form 8300 must be filed.
  • What constitutes cash.
  • How to identify designated reporting transactions.
  • What is a related transaction.
  • How to identify a potentially suspicious transaction.
  • What penalties may be assessed for noncompliance.

Exercises

1. ABC Retail Jewelers sells jewelry to John Smith for a total price of $12,500. Mr. Smith pays the total amount with a personal check. Is ABC Retail Jewelers required to file Form 8300?

a. Yes
b. No

2. Jim Jones purchases lumber and hardware for a home improvement project from Joe’s Lumber Company. The total price is $10,500 and Mr. Jones pays with a cashier’s check with a face value of $10,500. Does Joe’s Lumber Company need to file Form 8300?

a. Yes
b. No

3. If Jim Jones purchased $10,500 worth of lumber and hardware as in question 2, but paid with $500 in currency and a cashier’s check with a face value of $10,000, would Joe’s Lumber Company need to file Form 8300?

a. Yes
b. No

4. City Motors is a retail auto dealership who sells a car to Anita Robbins for a total price of $17,700. She pays with a personal check for $8,000 and says that she will be back later that afternoon with the balance of $9,700. She does, indeed, return that afternoon with $9,700 in currency. Does City Motors need to file Form 8300?

a. Yes
b. No

5. Same scenario as in question 4, except that Ms. Robins pays you with a cashier’s check for $8,000 and returns in the afternoon with $9,700 in currency. Does City Motors need to file Form 8300?

a. Yes
b. No

6. Thomas and Amanda Moore buy a boat from Marina Boating, valued at $16,000 and scheduled delivery in 10 days. They pay for the boat with currency. The following day Mr. Moore comes to Marina Boating Company and cancels the sale. Marina Boating Company refunds his $16,000 in the form of a company check. Does Marina Boating need to file Form 8300?

a. Yes
b. No

7. Otto’s Farming Equipment Leasing leases equipment to Marcus Jones, who signs a lease agreeing to pay $1,000 per month, not to exceed 24 months. Mr. Jones pays on the first day of every month starting Feb 1, 2012 through Jan 1, 2014, and he always pays you in currency. Does Otto’s Farming Equipment Leasing need to file Form 8300?

a. Yes
b. No

8. Referring to question 7, by which date(s) does Otto’s Farming Equipment Leasing need to file Form 8300?

a. November 16, 2012
b. December 16, 2012
c. November 16, 2013
d. December 16, 2012, and Nov 16, 2013

9. Referring to question 7, by which date(s) must Otto’s Farming Equipment Leasing provide a written statement to Marcus Jones?

a. December 31, 2012
b. January 31, 2013
c. January 31, 2014
d. January 31, 2013, and Jan 31, 2014

(See Exhibit 2 for answers to exercises.)

Exhibit 1

Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business (PDF)

Exhibit 2, Answers to Exercises

1) b. Personal checks are not considered cash.

2) b. A cashier's check with a face value of more than $10,000 is not considered cash.

3) b. Since the transaction does not meet the definition of a retail sale of a consumer durable, the cashier's check would not be treated as "cash" and Joe's Lumber Company would not be required to file a Form 8300. A "consumer durable" is defined as an item of tangible personal property of a type that is suitable under ordinary usage for personal consumption or use, that can reasonably be expected to be useful for at least one year under ordinary usage, and that has a sales price of more than $10,000. There is no provision in the regulations that allow grouping two or more consumer durables for the purpose of the $10,000 threshold.

4) b. Personal checks are not cash.

5) a. Because the cashier's check is $10,000 or less, it is considered cash.

6) a. The fact that there was a refund issued does not alter the fact that Marina Boating received a total of more than $10,000 in cash and therefore is required to file Form 8300.

7) a. Otto's Farming Equipment Leasing must file Form 8300 once more than $10,000 in installment payments are received within a 12 month period.

8) d. When Otto's Farming Equipment Leasing is paid in monthly (installment)payments, the business must add the first payment and any later payments made within one year of the first payment. When the total cash payments are more than $10,000 the business must file Form 8300. After filing Form 8300, the business must start a new count of cash payments. If the business receives more than $10,000 in additional cash payments within a 12-month period, it must file another Form 8300.

9) d. Notification statements must be provided to customers by January 31 of the year following the cash transaction. Otto's Farming Equipment Leasing received more than $10,000 from Mr. Jones in 2012 and 2013, so notification statements to Mr. Jones are required by January 31, 2013, and January 31, 2014, respectively.

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Page Last Reviewed or Updated: 16-Jul-2014