Report of Cash Payments Over $10,000 Received in a Trade or Business - Motor Vehicle Dealership Q&As
Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or related transactions must complete a Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business (PDF). Form 8300 is a joint form issued by the IRS and the Financial Crimes Enforcement Network (FinCEN) and is used by the government to track individuals that evade taxes and those who profit from criminal activities. Although the cash reporting requirements apply to many types of businesses, auto dealerships frequently receive cash in excess of $10,000 and are required to comply with the filing requirements.
The Motor Vehicle Technical Advisor Program in conjunction with IRS specialists on money laundering would like to assist dealers in their compliance with the filing requirements of Form 8300. In pursuit of that goal, we have compiled a list of dealership-specific questions and answers. As we receive additional questions that need to be addressed, we will update this document as appropriate.
To learn more about the why, when and where to file Form 8300: IRS Form 8300 Reference Guide is now available on IRS.gov. This guide’s purpose is to educate and assist U.S. persons who have the obligation to file Form 8300; and for tax professionals who prepare and file Form 8300 on behalf of their clients.
A customer purchased a vehicle for $9,000 cash. Within the next 12 months, the customer paid the dealership additional cash of $1,500 for a repair to the vehicle's transmission, accessories and a customized paint job, etc. Should a Form 8300 be filed?
- No, unless the dealer knew or had reason to know the sale of the vehicle and the subsequent transactions were a series of connected transactions (for example, if the dealer and the customer agreed, as a condition of the sale of the vehicle, that the customer would be obligated to buy an additional $1,500 of goods or services).
- Transactions are related if they occur within a 24-hour period. Transactions are related even if they are more than 24 hours apart if you know, or have reason to know, that each is one of a series of connected transactions. For example, items or services negotiated during the original purchase are related to the original purchase.
A customer wired $7,000 from his bank account to the dealership's bank account and also presented a $4,000 cashier’s check. Does the dealership complete Form 8300?
- A wire transfer does not constitute cash for Form 8300 reporting. Since the remaining cash remitted was below $10,000, the dealer has no 8300 filing requirement.
A customer makes weekly payments in cash to a dealership as a lease payment or loan payment on a vehicle. During a 12-month period, these payments total more than $10,000. Are these payments considered related transactions and is the dealership required to file a Form 8300?
- Yes, the weekly lease or loan payments constitute payments on the same transaction (the leasing or purchase of the vehicle).
- Accordingly, the dealership is required to file Form 8300 when the total amount exceeds $10,000.
- Each time the payments aggregate in excess of $10,000 the dealership must file another Form 8300 within 15 days of the payment that causes the previously unreportable payments to total more than $10,000
A husband and wife purchase two cars at one time from the same dealer and the total cash received is $10,200. How many Form 8300s should the car dealer file?
- The transaction(s) can be viewed as either a single transaction or two related transactions. Either way, it warrants only one Form 8300.
If a customer purchased a cashier's check at the bank for over $10,000, would the bank report the transaction? Does the seller of a vehicle need to report the transaction if the same cashier's check is subsequently used to purchase a vehicle?
- If the cashier's check was purchased with cash exceeding $10,000, the bank would file a Currency Transaction Report (not a Form 8300).
- The purchase of a vehicle with a cashier's check, bank draft, traveler's check or money order with a face amount of more than $10,000 is not treated as cash and a business does not have to file Form 8300 when it receives them.
Form 8300 requires providing the Taxpayer Identification Number (TIN) of the person providing the cash. If the business is unable to obtain the Taxpayer Identification Number of a customer making a cash payment of over $10,000, should the business file Form 8300 anyway?
Yes, to fail to file the Form 8300 is prohibited in this situation. However a filer may be able to avoid penalties when the customer refuses to provide a TIN by showing that its failure to obtain the TIN is reasonable under circumstances more fully described in 26 CFR 301.6724-1(e). At a minimum:
- The business should request the TIN at the time of the transaction. If the person providing the cash refuses to provide the TIN, the business should inform the person required to provide the TIN that he or she is subject to a $50 penalty imposed by the Internal Revenue Service under section 6723 [26 USCS § 6723] if he or she fails to furnish his or her TIN;
- Maintain contemporaneous records showing the solicitation was properly made and provide such contemporaneous records to IRS upon request,
- Accompany the incomplete filed Form by a statement explaining why the TIN is not included.
- If a TIN is not received as a result of the initial solicitation (at the time of the transaction) the first annual solicitation must be made on or before December 31 of the year in which the account was opened (transaction occurred) or January 31 of the following year for accounts opened in the preceding December following the same procedures.
How should a dealership handle a nonresident alien with no SSN?
- Use the IRS Individual Taxpayer Identification Number (ITIN) if the nonresident has one. If there is no ITIN, item 6 of Form 8300 should be left blank. Pub 1544 provides a list of exceptions in which a filer is not required to provide a Taxpayer Identification Number of a person who is a nonresident alien individual or a foreign organization.
- You must verify the individual's name and address and insert this information on Item 14 of Form 8300. For nonresident aliens, acceptable documentation would include a passport, alien registration card or other official document.
Do payments in excess of $10,000 in cash paid to a body shop need to be reported? Do the 8300 filing requirements apply to services as well as goods?
- Yes. Cash, in the form of currency, received in excess of $10,000 must be reported. However, a service is not a consumer durable so the expanded definition of cash does not apply to payments for services. The body shop would file an 8300.
A dealership sold cars on Jan. 31 and Feb. 6 to one customer and received $20,000 cash in two payments of $10,000 each on the same date for the two cars. Is a Form 8300 required?
- Yes. The dealership received over $10,000 in cash within 24 hours.
Customer purchased five cars, each separately though the year totaling $15,000 and none of which individually exceeded $10,000. Is Form 8300 required?
- If the dealer knows, or has reason to know, that each transaction is one of a series of connected transactions a Form 8300 would be required. If there is no reason to believe that they are connected, the five transactions would be viewed as separate transactions none of which exceed $10,000 in cash and a Form 8300 would not be required.
A dealership receives greater than $10,000 in cash on day one for the sale of a vehicle. On day three, the deal is cancelled due to an inability to finance the deal. The dealership returns the cash. Is a Form 8300 required?
- Yes. Once the dealership receives cash exceeding $10,000, a Form 8300 must be filed.
- The deal not going through may in fact be an attempt to launder illegal funds.
- If $10,000 or less was received by the dealer and the deal was cancelled, the dealer may voluntarily file a Form 8300 if the transaction appears suspicious.
Does the IRS consider it cash, or a cash equivalent, if a dealership receives a cashier's check drawn on the funds of the bank with the customer's personal account number and customer name on it (not checks drawn on a personal checking account or on a personal account of the customer)?
- Cashier's checks (sometimes called a "treasurer’s check" or "bank check") drawn on the bank’s account and not the account of the customer in the amount of $10,000 or less are considered cash under the expanded definition, unless they are loan proceeds. See the definition of "cash" in the instructions for the Form 8300 for more information on the expanded definition of cash, including when it applies.
- The fact that there are notations on the check or that the check is made payable to the dealership does not negate this.
A customer purchases a vehicle for $15,000 and pays for it with $9,000 in cash and puts the remaining $6,000 on a personal credit card. Should a Form 8300 be filed? Instead of a personal credit card, the customer pays the remaining $6,000 with his ATM or debit card. Is the ATM or debit card amount considered cash or a cash equivalent that makes the total amount received over $10,000 and thus reportable on Form 8300?
- No Form 8300 is required.
- Less than $10,000 in cash was received. A credit card is not cash.
- The ATM or debit card works the same as a credit card in this instance. The only difference is that the account will be charged with a debit against existing funds in the customer's bank account instead of creating a debt to be repaid later.
- An ATM or debit card transaction is not treated as cash for purpose of filing a Form 8300 ; therefore, since the amount received in cash or cash equivalents is less than $10,000, the transaction is not reportable.
For wholesalers, where a purchasing retailer buys more than one vehicle in a single day, is that one transaction, a series of related transactions or a series of unrelated transactions given that there are multiple vehicles? What happens on separate purchases over the course of a week? What about a month?
- Two or more transactions within a 24-hour period are related transactions. A trade or business that receives more than $10,000 in related transactions must file Form 8300.
- If purchases are more than 24 hours apart and not connected in any way that the seller knows, or has reason to know, then the purchases are not related and a Form 8300 is not required.
What exactly can be said to a customer who inquires about IRS Form 8300 reporting? Some dealers are advised not to refer to IRS Form 8300 reporting in the presence of the customer. In particular, dealers are concerned that advising customers that they need information for an IRS 8300 report could degenerate into a structuring conversation. What if the customer asks what the information is for? Can the dealer volunteer that it is for IRS Form 8300 reporting?
- A customer can be, but is not required to be, told at the time of the transaction about the law requiring the reporting of cash payments over $10,000 to the IRS and FinCEN.
- What a dealer cannot do is aid a customer in structuring a transaction to prevent a Form 8300 from being filed.
- A dealer who is filing Form 8300 voluntarily in order to report a suspicious transaction should not inform the customer of the filing.
What are the penalties if a dealership does not file a Form 8300?
- There are civil penalties for failure to file a correct Form 8300 by its due date and for failure to provide a statement to the payor as required. No statement to the payor is required when voluntarily filing a Form 8300 in order to report a suspicious transaction. The statement to the payor is only required when the business is required to file a Form 8300.
- Additional penalties apply for intentional disregard of the filing requirements and criminal penalties may apply in the case of willful filing of false or fraudulent Forms 8300.
- Penalties for violation of the Form 8300 filing and furnishing requirements have been increased by the Trade Preferences Extension Act of 2015. Increased penalties apply to Forms 8300 and related notices requiring filing or furnishing after December 31, 2015. See Form 8300 Penalties Increase for more information.
Can Form 8300 be filed electronically?
- Yes. On Sept 19, 2012, FinCEN announced that businesses are now able to electronically file their Form 8300 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. Filers will receive an electronic acknowledgement of each submission. For more information about Form 8300 e-filing, read the FinCEN news release.
A dealership receives monthly ACH payments [automatic payments from a customer bank account]. If the payments total in excess of $10,000, should the payments be treated as cash?
- ACH payments are not considered cash for the purpose of reporting on Form 8300.
A related finance company provides financing to customers of multiple related used vehicle dealerships. The finance company purchases contracts from the used car lot and a cashier's check is issued to the car lot for the amount of the car deal. Would the definition of cash to include cashier's checks and money orders apply to the finance company?
- As to the sale to the customer, the dealership’s sale of the vehicle constitutes a retail sale of a consumer durable requiring reporting of certain monetary instruments if the face amount was $10,000 or less and the total transaction exceeds $10,000.
- When the finance company purchases the "finance contract," they do not have a designated reporting transaction. The finance contract is not a consumer durable, collectible, or travel or entertainment activity. Thus monetary instruments with a face amount of $10,000 or less received from the finance company to pay off the finance contract would under normal situations not be reportable.
I understand that the dealership must provide a written statement to the customer by Jan 31 of the year following the Form 8300 filing. Can the dealership use the sales invoice (or the Form 8300) to satisfy the written statement requirement if the invoice has language printed on it that cash sales over $10,000 are reported to the IRS?
- There is nothing in the Code or regulations mandating a specific format for the customer statement. The regulations, however, establish certain minimum requirements. As long as these minimum requirements are met, there would be no problem if the seller chose to print the required language on an invoice.
- The statement must contain the following information:
- The name and address of the person completing Form 8300;
- The aggregate amount of reportable cash in all related cash transactions; and
- A legend stating that the seller is reporting the information contained in the statement to the Internal Revenue Service.
- If during the calendar year, the dealer has more than one transaction with the customer, furnishing multiple copies of the sales invoice (or Form 8300s) would not meet the notice requirements because it is not a 'single' statement. In this situation, the dealer should provide a single written notice for all of the transactions.
What type of records might an examiner request during an 8300 examination?
- Records requested may vary by examiner but typically the following records are requested:
- Checking, savings, and/or other financial account statements and deposit slips.
- An electronic bank deposit reconciliation in a spreadsheet format extracted from the dealer’s Dealers Management System (DMS). The report generally requires all receipts of the business from any source including:
- The amount, date received, method of payment (cash, check, credit card number, etc.),
- Payer name, and
- Receipt number.
- Receipt sources should include new and used vehicle sales, leases, service, parts, body shops and any non-customer receipts.
- Deal jackets for leases and sales during the examination period.
- Sales journals, cash receipts journals, accounts/notes receivable, sales invoices.