4.26.12 Examination Techniques for Form 8300 Industries

Overview

  1. This Section discusses basic information and auditing techniques for specific industries that fall under Internal Revenue Code (IRC) § 6050I. It does not apply to examination and auditing techniques for compliance of 31 USC 5331 as further outlined in 31 CFR 103.30 31 CFR 103.30. It is a guide to assist the Bank Secrecy Act (BSA) examiners in conducting a Form 8300 Compliance Review for IRC § 6050I. BSA examiners must remember that all cases are subject to factual development. BSA examiners should adapt the procedures in this section, as necessary, to each particular situation.

  2. The examiner is responsible for supporting the goals of the BSA program: to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion, or other unlawful activity. The examiner must be alert to efforts by customers or businesses to structure transactions to avoid the filing of Form 8300.

  3. This section applies only to reviews for compliance of IRC 6050I. A review for compliance of IRC 6050I cannot be changed to a BSA examination unless a related statute determination can be made. See IRM 4.26.14 for related statute determinations

  4. Any anti-money laundering programs required for certain non-financial trades or businesses as per the BSA cannot be enforced in an IRC 6050I compliance review. Any other potential BSA violations (e.g., bank did not file Currency Transaction Reports (CTRs) on a non-financial trade or business) discovered during an IRC 6050I review cannot be disclosed unless a related statute determination can be made. See IRM 4.26.14 for related statute determinations.

Attorney Overview

  1. Attorneys have the potential for receiving large amounts of cash for legal services or funds to be held in trust.

  2. Attorneys usually generate fees based either on retainer or contingency. See Terminology for definitions and discussion.

  3. In addition to general operating accounts, attorneys have trust or escrow accounts to hold funds in trust for their clients. Dollar amounts may be large and the potential for cash transactions is high.

  4. Attorney-client privilege is a legally recognized privilege that protects confidential communication between attorney and client. However, the identity of a client and the amount of cash paid by the client to the attorney is not generally considered privileged information under the attorney-client privilege.

  5. Attorneys may practice as sole proprietorships, in a partnership, or as an employee of a corporation.

  6. Attorneys in a general law practice may handle everything from personal injury cases to corporate reorganizations. Others may specialize (e.g., patent law, criminal defense, estate or corporation law). Generally, even specialists diversify to some degree.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on Form 8300 by January 31 of the succeeding calendar year. A copy of the filed Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. There is no general exception from the reporting requirements of IRC 6050I for attorneys.

  4. In certain instances involving "special circumstances " preparation and filing of Form 8300 may violate attorney-client privilege. "Special circumstances" exist when disclosure of the Form 8300 information reveals a confidential communication, such as the motive or reason the client consulted the attorney, or provides a "last link" to such information.

  5. Cases in which extraordinary circumstances are present will be the exception. Thus far, invocation of the "last link" doctrine as a defense to the disclosure required by section 6050I has been unsuccessful. United States v. Goldberger & Dublin, P.C. 935 F.2d 501, 505 (2d Cir. 1991) finding no "direct linkage" [between the disclosure and the incrimination] is apparent in IRC 6050I. See In re Grand Jury Proceedings 88-9, 899 F.2d 1939 (11th Cir. 1990); In re Shargel, 742 F. 2d 61 (2d Cir. 1984) (disclosure of fee information and client identify are not privileged, even though it might incriminate the client). See also, In re Osterhoudt, 722 F .2d 591, 593 (9th Cir. 1983) (information regarding fee arrangement ordinarily not part of the subject matter of the disclosure of privileged information.)

  6. Generally, since attorneys are not involved in the retail sale of consumer durables, collectibles or travel and entertainment, reporting of monetary instruments is not required. However, if the attorney knew or should have known that the use of monetary instruments was for the purpose of avoiding the filing of the Form 8300, such monetary instruments become reportable. (Treas. Regs. 1.6050I-1(c)(1)(ii)(B)(2).)

  7. Several Federal Circuits have tested the attorney-client privilege as it relates to withholding information required by IRC 6050I. Decisions favorable to the IRS position are:

    • U.S. v. Goldberger & Dubin P.C., 935 F.2d 501 (2d Cir. 1991);

    • U.S. v. Leventhal, 961 F.2d 936 (11th Cir. 1992);

    • U.S. v. Sindel, 53 F.3d 874 (8th Cir. 1995);

    • U.S. v. Blackman, 72 F.3d 1418 (9th Cir. 1995); and,

    • U.S. v. Ritchie, 15 F.3d 592 (6th Cir.), cert. denied, 115 S Ct. 188 (1994).

  8. In two circuits, the courts did not accept the IRS’s representations that it was examining the summoned person, finding rather that the Service was attempting to examine the liabilities of the unknown payers. These cases were resolved in a manner at least partially unfavorable to the IRS position:

    • U.S. v. Gertner, 65 F.3d 963 (1st Cir. 1995); and

    • U.S. v. Ritchie, 15 F.3d 592 (6th Cir.), cert. denied, 115 S Ct. 188 (1994).

  9. One penalty case was resolved in the Service’s favor, the court upholding the imposition of the intentional disregard penalty of IRC 6721(e)(2)(C):

    • Gerald B. Lefcourt, P.C. v, U.S., (1997, CA2) 80 AFTR 2d 97-6523, affg (1996, DC NY) 78 AFTR 2d 96-5051,96-2 USTC Para.50345

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Case time records

    • Cash receipts journal

    • Client billing records

    • Client case file

    • Client identification or client card index

    • Daily log or receipts book

    • Duplicate deposit slips

    • Notary log

    • Trust fund or escrow account records, including segregated trust accounts and general trust accounts

Terminology

  1. Annual retainer - An agreed fixed fee for legal services for a specific period of time, generally a year.

  2. Billing hours (a.k.a. billable hours) - Refers to the practice of billing the client by the hour or portion thereof for work in non-contingency cases. This would either be in addition to, or in fulfillment of, the retainer.

  3. Contingency fee - A fee payable only upon the occurrence of the contingency, generally the winning or settlement of a lawsuit for damages. It generally represents a stated percentage of the proceeds of successful settlement of the case.

  4. General trust accounts - Funds held for multiple clients in one accounts.

  5. Referral fee or forwarding fee - An amount, often a percentage of the ultimate fee, paid to the attorney for referring the case to another attorney.

  6. Retainer - A fee generally paid up-front, for "retaining " the services of the attorney.

  7. Specific retainer - An agreed fee for a particular case, part of which may be payable in advance.

  8. Trust accounts - May be called IOLTA (Interest on Lawyers Trust Account) or IOLA (Interest on Lawyers Account), depending on the state. Trust accounts may also be termed escrow or trust fund accounts. These accounts may be segregated, holding only the funds for one client or case.

Form 8300 Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review the examiner should:

    • Review the CBRS for cash activity. By reviewing the CTRs for substantial cash deposits, the examiner is able to identify businesses that have deposited more than $10,000 in cash;

    • Review prior compliance reviews;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation, or Compliance.

  2. The examiner should become familiar with the common business practices of the trade or business.

  3. Any attorney may receive cash in the course of business activities. Attorneys that are compensated through third party payments (i.e., insurance settlements) are less likely to receive currency.

  4. Certain attorneys that are more likely to be paid directly by the client include:

    • Criminal defense attorneys;

    • Estate and trust attorneys;

    • Real estate attorneys; and,

    • Tax attorneys.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring

    .

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Form 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Form 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Form 8300;

    9. For attorneys, it is important to determine if any prior Form 8300 has been filed blank or incomplete because of a claim of attorney-client privilege, professional ethical obligations or Constitutional protections. If so, the examiner must coordinate with Area Counsel through their manager before proceeding with any summons or penalty actions.

    10. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport or other document?

    11. Procedures used by the business to notify transactors;

    12. The entity’s membership in various trade associations; and,

    13. Related entities.

  3. The interview and inspection of records must be solely for the purpose of the Form 8300 compliance review. No inquires should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transaction involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Form 8300 was filed on such transaction.

  2. The examiner should be alert to identifying transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. There may be a need, on a case by case basis, to interview a client to obtain all the facts needed to develop the issues.

  4. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  5. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transaction not reported, filed incomplete or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Form 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty consideration, see IRM 4.26.11.

  7. For attorneys, note that any penalty or summons enforcement action where claims of attorney-client privilege, professional ethical obligations or Constitutional protections may be raised must be coordinated with Area Counsel through the examiner’s group manager before proceeding.

  8. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can potentially be involved in money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Form 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

  4. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques

  1. Ensure that sources of cash received are properly identified in the books and records. Claims of unknown or unidentified sources should be scrutinized.

  2. Ensure that trust fund ownership is properly identified on filed forms. If filed CTRs do not fully identify the owner of trust funds, there should be a Form 8300 filed by the attorney. (The exception in Treas. Reg. 1.6050I-1(a)(3)(ii) only applies if the principal in the transaction is fully identified and all cash is transferred by the agent within 15 days.)

  3. Ensure that cases that may involve claims of attorney-client privilege, professional ethical obligations or Constitutional protections are properly coordinated with Area Counsel through the examiner’s group manager before proceeding with any summons or penalty actions.

  4. Ensure that trust funds are clearly identified on filed reports. One widespread practice, which may obscure the ownership of funds, involves attorney trust accounts. Attorneys in some states may be required (or may have the option to) keep their client's funds in a trust account (IOLTA or IOLA.) Attorneys deposit funds into the account. Interest from such accounts may accrue for a public service purpose--such as providing legal services for the poor. However, the identity of the attorney depositing funds or the true owner of the funds may not be identified on CTRs filed by the bank. There are often no Forms 8300 filed. While this practice is not necessarily indicative of money laundering, it does effectively obscure the ownership of the funds.

Casinos and Card Clubs Overview

  1. Casinos and card clubs, which have gross annual gaming revenues (GAGR) of $1,000,000 or less, are subject to the requirements of IRC Section 6050I. They are not required to comply with the reporting and recordkeeping of the BSA provisions of Title 31.

  2. For casinos and card clubs operating in Nevada, state Regulation 6A replaces the BSA for casinos with GAGR of $10,000,000 or more. Casinos in Nevada with $1,000,000 to $10,000,000 in GAGR are subject to the provisions of the BSA. Casinos in Nevada with less than $1,000,000 in GAGR are subject to IRC 6050I.

  3. Since tribal governments do not have to file Forms 8300, but tribal members and others do, the examiner should determine the ownership structure of a tribal casino before proceeding with a Form 8300 review.

  4. Wherever the term casino is used in this section, it includes card clubs.

  5. Casinos vary in size. IRC 6050I and the filing of Form 8300 only apply to the smaller casinos. It is imperative the examiner not confuse the requirements in 31 CFR Part 103 (the BSA regulations under Title 31) with the requirements under IRC 6050I.

  6. Some casinos may also maintain separate rooms or parlors that offer other games such as Keno, Bingo, Poker, Race Betting, Sports Betting, etc.

  7. In addition to a gambling casino, the casino complex may include hotel facilities, restaurants, bars and lounges, theaters and showrooms, sports and health facilities, convention space, and various exclusive shops and stores.

  8. Casinos are licensed and regulated by state, tribal, and local governments. Their organizational structure may vary depending upon applicable laws and regulations, and management needs within each individual casino. Generally, a typical gambling casino is organized into two separate, yet related operations, the casino floor and the casino cage. Larger casinos may have more than one casino floor and/or more than one casino cage. See Exhibit 4.26.12-1.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on Form 8300 by January 31 of the succeeding calendar year. A copy of Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on the law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Casino records that can be used to identify cash transactions will vary depending upon state, tribal, and local laws and regulations as well as the needs of casino management.

  2. Generally, transactions occurring at the gaming tables may be identified through casino Player Rating Systems and/or Multiple Transaction Logs (MTLs), while transactions occurring at the cage may be identified through casino Credit Management Systems and other cage records. See Exhibit 4.26.12-2.

  3. In addition to the normal records found in other businesses, a casino will generally maintain:

    • Casino cage cash logs and registers

    • Casino cage check logs and registers

    • Casino cage customer markers

    • Casino cage customer payment/redemption markers

    • Casino cage deposit slips

    • Casino cage wire transfer logs and registers

    • Casino cage withdrawal slips

    • Customer action cards

    • Form W-2G

    • Jackpot pay out slips

    • Multiple transaction logs (MTLs)

    • Player rating cards

  4. In many casinos, these systems may be highly computerized and the records may be computer generated. Casino records that are processed by or through a computer should be retained by the casino in machine-readable form.

Terminology

  1. Action Card (a.k.a. Bucket) - a record maintained by the cage for deposit and credit players that is used to record each account transaction in chronological order. Separate cards are maintained for each player and each type of account. There is no requirement to maintain buckets under IRC 6050I.

  2. Cash Equivalent - All negotiable monetary instruments exclusive of currency (e.g., certified checks, cashier’s checks, travelers’ checks, money orders, personal checks, etc.)

  3. Casino Cage - The area of the casino that records, tracks and monitors all financial transactions. It is the financial center of the entire casino operation and is the point at which all cash, chips and other funds are ultimately accounted for. Larger casinos may also maintain satellite cages in slot areas, high roller areas or in the betting parlors. Under the supervision of the Casino Cage Manager, the casino cage operates much like a commercial bank and is generally organized into five components:

    1. Main bank - The area of the casino cage where all cash is stored. It is through the main bank that cash is transferred from the gaming tables, to and from the cashier’s windows, and to or from the casino’s commercial banking institution.

    2. Chip bank - The area of the casino cage where all of the gaming chips are stored. It is through the chip bank that chips are transferred to and from the gaming tables and to or from the cashiers’ windows.

    3. Marker bank - The area of the casino cage where all marker activity related to credit accounts is recorded, processed and stored.

    4. Credit management - The area of the casino cage where customer credit accounts are managed.

    5. Cashier (Teller) windows - The area of the casino cage where financial transactions between the casino cage and its customers occur. Cashiers who conduct the financial transactions and prepare source documents staff the windows.

  4. Cash-in - Places in the normal operations where a casino receives cash. Examples of this may include:

    1. Purchases of chips, tokens and plaques;

    2. Front money deposits;

    3. Safekeeping deposits;

    4. Payments on any form of credit, including markers and counter checks;

    5. Bets of cash;

    6. Cash received by a casino for transmittal of funds through wire transfer for a customer;

    7. Purchases of a casino’s check; and,

    8. Exchanges of currency for currency, including foreign currency.

  5. Casino floor - The area of the casino where all gaming activities occur. It is usually organized into Gaming Pits and Slot Zones and operates under the direction of the Casino Manager.

  6. Chips (a.k.a. Checks, Tokens, Plaques) - A medium of exchange of various denominations used by a casino for gaming purposes.

  7. Chip Redemption - The exchanging of chips by a customer for cash or casino check.

  8. Credit Management System - A financial accounting system used to record and monitor the account-related activity of customers who maintain deposit and/or credit accounts with the casino. The credit management system consists of financial accounting records. Transactional records are prepared by Cage Cashiers and are generally recorded and summarized by cage personnel on Customer Action Cards. Transactional records prepared by the cashiers include the following:

    1. Deposit slips - Record each separate deposit made into the customer’s account and will usually show whether any portion of the deposit occurred in the form of cash.

    2. Withdrawal slips - Record each separate withdrawal from the customer’s account and will usually show whether any portion of the withdrawal occurred in the form of cash.

    3. Payment/Redemption vouchers - Record payments on credit (a.k.a. marker redemption) and may also be used to record other receipts or disbursements of funds such as reimbursements of customer travel expenses and foreign currency exchanges. The payment voucher will usually show whether any portion of the transaction occurred in the form of cash.

    4. Markers Issued - Record the extension of credit to customers in the form of chips or cash.

  9. Marker (a.k.a. Counter Check) - A debt obligation issued by a customer to the casino in exchange for cash or chips. Markers represent draws against previously established lines of credit with the casino.

  10. Marker Redemption - The redemption or paying off of a previously issued marker by a customer.

  11. Multiple Transaction Logs (MTLs) (a.k.a. Action Control Logs - ACLs) -. Generally used to record any type of cash-in or cash-out transaction for amounts starting at $2,000 - $3,000 depending on the jurisdiction. MTLs are often maintained in the Pit, Cage, or Slot areas pursuant to state, tribal, or local laws. There is no requirement to maintain MTLs under IRC 6050I.

  12. Pit - The area of the casino floor enclosed or encircled by gaming tables in which casino personnel administer and supervise the games being played at those tables. Pits may be comprised of tables offering only one type of game or may be made up of tables offering a number of different types of games. Pit personnel may include the following:

    1. Pit Boss - A management employee who has supervisory authority over all gaming activity taking place in the pit.

    2. Floor person – A management employee who has supervisory authority over all gaming activity taking place at a given number of tables within the pit.

    3. Dealer - A casino employee who conducts the gaming activity at a single gaming table within the pit.

  13. Player Rating System - A method used by many casinos to monitor the gaming activity of its customers for purposes of determining the amount of complimentary services and items to be extended to individual customers. It is primarily a marketing tool used to identify and reward good customers. A separate player rating card is prepared for each rated customer at the table by the "Rater" (usually a Floor person) assigned to that table. In addition to the customer’s name and account number, the date, time, pit and table number, the rater generally records the amount of cash received from the customer for the purchase of chips and cash bets.

  14. Rated Player - A customer whose gaming activities on the casino floor are tracked through the casino’s player ratings system.

  15. Slot Zone - The area of the casino floor, usually separated from the gaming pits, where slot machines are grouped into rows, circles and banks of machines. A slot zone may also include slot booths and coin redemption stations where coins and tokens can be purchased or redeemed, slot markers can be issued or redeemed, and slot jackpots can be paid.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to developing a plan, the examiner should determine the scope of the review by:

    • Review of the CBRS for cash activity;

    • Review of the prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

      Note:

      If CBRS research shows the casino is filing CTR By Casinos, CTR By Casinos - Nevada, or has a volume of CTRs sufficient to indicate there is greater than $1,000,000 in gross annual gaming revenues (GAGR), the casino is subject to the reporting and recordkeeping requirements of Title 31 BSA and is not subject to the cash reporting requirements of IRC 6050I (Treas. Reg. 1.60501-1(d)(2)(i)).

  2. An in-depth compliance review should be considered if:

    1. The casino has never been reviewed for compliance;

    2. A prior review revealed deficiencies; or,

    3. The casino has filed relatively few Forms 8300 .

  3. If the casino has been previously reviewed and only minor deficiencies were noted, a more limited scope review may be considered.

  4. When an in-depth review is warranted, the examiner should determine whether the casino’s records are prepared or processed through a computer system prior to developing the plan. If the casino’s records are computerized, an IRS CAS should be assigned to the case and involved in the development of the review plan.

  5. The examiner and CAS, if one is assigned, need to develop a plan that includes the following:

    1. The period to be covered by the compliance review.

    2. Procedures that will analyze and evaluate the casino’s internal control and procedures. The analysis should identify potential weaknesses and deficiencies that may exist in the casino procedures and result in failures to properly file required Form 8300.

    3. An analysis of Form 8300 filed with the Detroit Computing Center to determine the level of accuracy and completeness of those reports.

    4. Procedures that will identify employees or customers who may be structuring cash transactions in an effort to circumvent the reporting requirements.

  6. A Form 8300 compliance review of a casino should be conducted on-site. This provides ready access to casino records and casino employees who have the knowledge regarding those records.

  7. Examiners should familiarize themselves with state, tribal and local laws and regulations related to casinos in their jurisdictions. Particular attention should be placed on casino records, documents and reports required by those laws and regulations that may assist in detecting cash received.

Systems Analysis
  1. Casino records and management needs vary depending upon applicable laws and regulations. A complete analysis should be conducted of the casino accounting system used to record and process customer transaction. This accounting system may be separate from the general accounting system used to report income and expenses of the business. The analysis of the gaming accounting system will establish the audit trail leading to reportable transactions.

  2. The analysis should include:

    1. Identifying the flow of information through the system;

    2. Determining what kinds of original source documents and records are prepared relative to customer transactions, who prepares them, and how they are stored and organized;

    3. Determining what records are prepared by the casino that specifically identify cash received from the customer; and,

    4. Determining the kinds of reports prepared by the casino in the ordinary course of its business that may identify and/or summarize recorded customer transactions, particularly cash received.

  3. If the casino accounting systems are computerized, the CAS should determine:

    1. What computer files and records are maintained relative to customer transactions and what information is stored in those files and records;

    2. What computer files and records are prepared that specifically identify cash received from the customer;

    3. Whether the casino has retained those records; and,

    4. What kinds of computer generated reports are prepared by the casino in the ordinary course of its business that may identify and/or summarize recorded customer transactions, particularly cash received in excess of $10,000.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the casino. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. A formal MOU has been negotiated with Indian Tribal Governments (ITG) in TE/GE for contacts with tribal casinos. The examiner’s group manager is required to contact the appropriate ITG field manager prior to any tribal contact.

  3. The Form 8300 compliance review should be conducted at the casino.

  4. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the casino, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The Form 8300 filing requirements;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring

  5. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the casino and the employee responsible for filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the casino;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Form 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the casino to identify reportable transactions and file Forms 8300;

    4. The internal controls of the casino with regard to cash transactions. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    5. The number and types of bank accounts;

    6. The type of records maintained on transactions required to be reported on Form 8300;

    7. Whether or not the casino has filed any Form 8300 ;

    8. Procedures used by the casino to ensure that the information contained in the Form 8300 is complete and correct. For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or other official document;

    9. Procedures used by the casino to notify transactors;

    10. The entity’s membership in various trade associations; and,

    11. Related entities.

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the casino that the information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The records to be reviewed to determine a casino’s compliance with IRC 6050I are different from those reviewed in any other business. This is because the records to be reviewed are those generated in the gaming area and not necessarily the accounting records. Refer to IRM 4.26.12.3.2 for the types of records commonly found in casinos. Identify, with the CAS (if used), the appropriate records to be reviewed. The records chosen should assist the examiner in finding:

    1. Transactions involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Forms 8300 were filed on such transactions.

  2. Generally casinos will have cash going in and out of the casino. IRC 6050I requires reports only of cash received and therefore the focus should be restricted to funds coming into the casino, not funds going out.

  3. The examiner should be alert to identifying transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  4. There may be a need, on a case by case basis, to interview the customer to obtain all the facts as required to develop the issues.

  5. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  6. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the casino the transactions not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the casino to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The more cash intensive a business is, the more likely it will attract individuals or groups seeking to use the "normalcy" of currency in the business as a cover to launder funds obtained from illegal sources. Casinos by nature are cash intensive. Either the casino and/or its customers can be involved in potential money laundering schemes. The examiner must focus on both the casino and the customers during a Form 8300 compliance review.

  2. Money laundering techniques which could be used by the casino include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions; and,

    4. Conducting numerous transactions at the same location at different times during one day.

  4. Examiners should be alert to situations where casinos or their customers may structure transactions in amounts of $10,000 or less to circumvent the reporting requirements of the IRC 6050I.

  5. Examples of how casino employees may structure transactions or advise customers how to avoid a Form 8300 filing include the following:

    1. Employees may fragment larger cash transactions into amounts of $10,000 or less, when preparing source documentation.

    2. Employees may advise customers to limit their cash activity to amounts of $10,000 or less per transaction.

    3. Employees at the gaming tables may advise customers, who are buying chips with cash, that they are approaching the reporting threshold thereby suggesting or implying that they should move to another table. This action could be viewed as potentially assisting in structuring transactions.

  6. Examples of how customers may structure transactions, with or without the knowledge of the casino, to avoid a Form 8300 filing include the following:

    1. A customer may move from table to table limiting their cash buy-ins to amounts of less than $10,000 per table.

    2. A customer may conduct cash transactions at the casino cage in increments of $10,000 or less. He may conduct the transactions at different windows or at different times of the day using different cashiers.

    3. A customer may maintain more than one account with the casino, sometimes using an alias, and limit cash transactions to $10,000 or less per account.

    4. A customer may structure cash transactions throughout the casino to avoid the filing requirement.

    5. A customer could purchase a large amount of chips with cash (in amounts just below the reporting threshold) at a table, engage in minimal gaming and then go to the cage and redeem the chips for a casino check.

    6. A customer could make a large deposit using numerous small denomination bills, engage in minimal gaming and then withdraw the funds in large denomination bills, a casino check or a wire transfer.

    7. A customer could insert cash into a slot machine bill validator, accumulate credits with minimal or no gaming activity and then cash out the credits for large denomination bills or a casino check.

    8. When reviewing customer cash transactions, if an examiner identifies transactions at or near the reporting threshold, the examiner should review all other activity by that customer for that day (and prior and subsequent days) to determine if the customer was attempting to structure transactions and whether a filing was required.

  7. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques for Manual Systems

  1. Examination techniques used to conduct compliance reviews of casinos will vary significantly depending upon whether the casino inputs and processes its customer transaction records by or through a computer system, and has retained those records in machine readable form or uses a manual system of records.

  2. If casino records are computerized and have been retained by the casino, the examiners should use a computer audit specialist. See IRM 4.26.12.3.9.

  3. If computerized records are available for some transactions but not for others, a combination of manual examination techniques and computer auditing techniques should be utilized.

  4. In a manual environment, the examiner should consider the following steps in reviewing filed Forms 8300:

    1. Inspect the casino’s retained copies of Forms 8300 for completeness.

    2. Reconcile retained copies to those found on CBRS to ensure all were filed.

    3. Examine the source documents associated with these transactions to ensure that all information required to be reported and was available from source documents was included on Forms 8300.

    4. Take appropriate steps to verify that customers had been provided with the required written statement.

  5. All identified potential reporting violations should be grouped as either single transactions over $10,000 or multiple and related transactions totaling over $10,000. In the case of all reporting violations, the examiner must determine whether the total transaction amount includes one or more single transactions in cash greater than $10,000 or whether the amount is comprised exclusively of multiple transactions of less than $10,000.

  6. A single transaction is one that involves a physical transfer of cash from the customer to the casino in one event, even though the cash may be intended for more than one purpose and may appear in the casino’s records as more than one transaction.

    1. Example #1 - A customer redeems three markers of $5,000 each by making one payment, at one time, of $15,000 cash at the cage. This represents a single transaction even though it may appear in the casino’s records as three separate transactions.

    2. Example #2 - A customer uses cash to redeem a marker of $5,000 and also to make a deposit of $10,000, at the same time. This represents a single transaction even though the funds are intended for separate purposes and result in two separate records.

  7. Multiple transactions are those that are aggregated and total over $10,000. Some examples:

    1. From a Multiple Transaction Log, a customer is identified as making five trips to the cage to purchase chips which total over $10,000.

    2. An individual repays a $15,000 marker in installments of $5,000 each with currency.

Receipt of Cash by the Casino (Cash-in)
  1. When reviewing casino records to determine if a Form 8300 is required to be filed for a cash-in transaction, all cash-in transactions are to be aggregated together regardless of the type of transaction involved.

  2. Casinos may maintain various types of records that will track "cash-in" from customers.

  3. Where Multiple Transaction Logs (MTL) are prepared, review the MTLs to identify single and/or aggregated reportable cash transactions.

    Note:

    If a casino prepares a MTL, it should be used.

  4. Player Rating Cards - If the casino tracks or monitors certain customer’s gaming activities through the use of a player rating system or similar process, review the player ratings reports which may summarize individual customer transactions. These reports will generally identify the total amount of cash received from the customer. Such reports may include Daily Player Rating Audit Reports, Trip History Summary Reports, and Player Complimentary Reports.

  5. Customer Deposits (Front Money and Safekeeping) - Review individual Customer Action Cards or Buckets for deposit account activity. This card will show, in chronological order, the date and amount of each separate deposit and will generally identify the medium used (e.g. cash, chips, check, wire transfer, etc.).

  6. Marker Redemptions - Review individual Customer Action Cards or Buckets for credit account activity. This card will show, in chronological order, the date and amount of each separate marker issued and each marker redeemed and will generally identify the medium used (e.g. cash, chips, check, wire transfer, etc.).

  7. Checks Purchased - Review records of casino checks issued to customers. Such records will usually include check registers or logs, as well as the casino checks themselves, and will generally identify the purpose for which the check was issued.

Computer Auditing Techniques

  1. If casino records are computerized and have been retained by the casino, examiners should use the techniques described in this Section to identify potential reportable cash transactions. As previously stated, if computerized records are available for some transactions but not for others, a combination of these computer auditing techniques and the manual review techniques described in this handbook should be utilized.

  2. The CAS should develop application programs to identify reportable cash transactions using the casinos retained machine-readable files and records. The computer auditing techniques and sample computer generated reports included in this Section are to be used as a guide and are not intended to limit the CAS’s ability to customize applications to the casino records being examined. However, computer generated reports should provide the basic information described in the following sub-sections.

  3. The CAS should secure machine readable records of all Forms 8300 filed by the casino during the examination period from the Detroit Computing Center. The records should be used to produce a report listing all Forms 8300 filed by the casino in chronological date order and also in alphabetical order by customer name. In addition to the date, customer name, amount, and type of transaction, the report should state whether any of the key items of identifying information was missing from the Forms 8300. These reports will be used in conjunction with the other reports generated by the CAS to eliminate correctly filed Forms 8300 and to identify potential reporting violations.

Review of Form(s) 8300
  1. Using the machine-readable records of filed Forms 8300, provided by the DCC, the CAS should analyze the records to determine both the number and percentage of filed Forms 8300, which are missing key items of required information.

  2. The CAS should not include missing SSNs of non-resident aliens or missing account numbers on non-account related transactions in the analysis of incomplete Forms 8300.

Receipt of Cash by the Casino (Cash-in)
  1. Using the casino’s machine-readable records of customer account transactions, the CAS should produce a report that will list, in chronological order and in summary form, all of the potential reportable cash transactions related to cash received by the casino from each of its customers during the review period. The report should identify the aggregated total of all cash received from the customer without regard to where in the casino the transaction occurred or the type of transaction that was conducted.

  2. For each potential reportable transaction listed, the report should identify the date of the transaction, the name and account number of the customer, and the total amount of cash received by the casino. The report should also identify the types of transactions being conducted and provide information as to the number of single transactions included within each category.

  3. When aggregating cash-in transactions, the CAS should include as many of the types of cash-in transactions as are processed through the computer, and for which there are common customer identifying fields. Generally, player rating records and transactions related to deposit and credit accounts are recorded using the same account number. Sorting these transactions by account number, aggregating the total cash received as recorded in the account, and then printing out the accounts with aggregated total cash-in greater than $10,000 can produce this report.

  4. Examiners should compare this report to the report of Forms 8300 actually filed to identify potential failures to file as well as failures to report the correct amount of cash on filed Forms 8300.

Detail Listing of Transactions
  1. For all potential reporting violations identified, the CAS should prepare a report listing every transaction conducted by the customer during that gaming day. The report, which will be used to document the violations and to provide the necessary audit trail information back to the casino’s original source documentation, should only be prepared for those transactions where potential violations exist. The report should list, in chronological order and in detail form, all of the customer’s individual account transactions.

  2. The report should be prepared for all potential reporting violations including failures to file Forms 8300, filing of Forms 8300 with incorrect amounts, and filings of incomplete Forms 8300 on single transactions. Separate reports may be prepared for cash-in and incorrect IRC 6050I violations, or a single report may be prepared that includes all types of reporting violations.

  3. In addition to listing every account related transaction conducted by the customer that day, the report should include:

    1. The customer’s name;

    2. Complete address;

    3. Social security number;

    4. Account number; and,

    5. Information relating to documents used to verify the customer’s identity (e.g., drivers license number, passport number, etc.) to the degree that such identifying information is recorded in the system.

  4. For each account related transaction listed, the report should include all information needed to document the nature of the transaction, establish knowledge on the part of an employee, and locate the original source documentation. Such information will generally include:

    1. The time and location of the transaction;

    2. Document numbers;

    3. The identities of the casino employees who conducted and approved the transactions;

    4. The type and amount of the transaction; and,

    5. The medium used to conduct the transaction (e.g., cash, chips, check, etc.).

Additional Analysis
  1. Depending upon the findings of the cash-in analysis, examiners may wish to expand the scope of the review to include additional testing of transactions, particularly when the casino’s tracking system for cash transactions is totally dependent on data entered into the computer.

  2. Examiners may want to include testing of transactions that have been recorded in the computer as having occurred in a form other than cash. If Forms 8300 are prepared from computer records, casino employees may attempt to conceal cash received by recording them in the system as non-cash transactions.

  3. The purpose of these analysis is to ensure that transactions have not been incorrectly entered into the computer, whether by intent or accident, thereby circumventing the casino’s tracking systems

Construction Industry Overview

  1. The construction industry covers a broad area of business activity, ranging from heavy construction, such as building bridges and dams, to home remodeling.

  2. The size of the firms range from very small (representative of most of the contractors) to multinational firms. The smaller firms perform construction work only, while the larger firms, often referred to as "engineering and construction" firms, provide a wide range of services besides construction.

  3. Building construction includes the construction of office buildings, warehouses, hospitals, single-family dwellings, and multi-family dwellings. The majority of contractors are engaged in building construction.

Law

  1. IRC Section 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Back charges

    • Balance sheet

    • Billing schedules

    • Building permits

    • Cash receipt journal

    • Certificates of payment

    • Change orders or add-ons

    • Bank statements (checking and savings)

    • Construction contracts

    • Duplicate deposit slips

    • Internal reports

    • Invoices

    • Job listings

    • Job status reports

    • Project control statements

Terminology

  1. Advance payments - Payments generally made to a prime contractor prior to performance of any work under a contract.

  2. Back charges - Cost of incomplete work charged to the contractor.

  3. Backlog - The accumulation of unfinished jobs of a contractor, including those not started, measured by the amount of revenue expected from them.

  4. Bid - A formal offer from a contractor, which specifies the price to be charged for completing work in accordance with project specifications and contract requirements.

  5. Claims - Amounts in excess of the original contract price which the contractor seeks to collect from the owner or others due to unanticipated circumstances.

  6. Construction - The converting of the plans and specifications into physical structures and facilities, involving the organization and coordination of all the resources for the project to complete the project on schedule, within budget, and according to specifications.

  7. Construction manager – A contractor who enters into an agency contract with the project owner to supervise and coordinate the construction activity on the project, including the negotiation of contracts with others on behalf of the owner for all the construction work.

  8. General contractor (also called a prime contractor) - Contracts with the project owner for the construction of the project and takes full responsibility for its completion.

  9. Guarantee or retention payment - The final payment after certification of project completion, usually 10% of contract amount.

  10. Job listing - Lists all active projects by job or project customer, contract or project number. It also may list job locations, description or scope of work and date started.

  11. Progress reports - Daily reports prepared by the supervisor for the contractor on the progress of the job.

  12. Progressive payments - Payments received over the course of a contract as specific benchmarks in the contract are met.

  13. Specialty trade construction - Subcontracts for electrical, carpentry, plumbing, roofing, heating and air conditioning, mechanical, steel erection, excavation and foundation and demolition.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review, the examiner should:

    • Review the CBRS for cash activity;

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should become familiar with the common business practices of the construction industry.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Forms 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a drivers license, passport or other official document?

    10. Procedures used by the business to notify transactors; Request copies of the written statements furnished and review for completeness;

    11. The entity’s membership in various types of trade associations; and,

    12. Related entities.

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transaction involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions totaling in excess of $10,000; and,

    3. Whether a Form 8300 was filed on such transaction.

  2. The examiner should be alert to identify transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Upon completion of the interview conduct a random sample of transactions, tracing the customer’s payment through the banking and accounting records. The review of sample transactions should be used to confirm the information given in the interview about the records and also to test that the records to be reviewed are complete and include all sales. Note any discrepancies.

  4. Adjust pre-plan to include information gained from the interview and the random sample.

  5. When recording potential cash transactions, it is important to note:

    1. The date funds were received;

    2. The amount;

    3. The date funds were deposited;

    4. The name of the transactor;

    5. The receipt number; and,

    6. Account number and account owner (if different from transactor).

  6. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any other supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  7. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  8. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  9. There may be need, on a case by case basis, to interview the customer to obtain all the facts needed to develop the issues.

  10. For additional information refer to IRM 4.26.11 .

    Note:

    The examiner may encounter inadequate records in some operations. Be alert for transactions between related entities or parties.

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transactions not reported, filed incomplete or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

  4. Money laundering techniques specific to the construction industry include:

    1. Financing a project and receiving the sales proceeds,

    2. Payments received from the general contractor to underreport income.

  5. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques

  1. A transaction for the construction industry is the contract, job, or accepted bid amount. Included in this are all subsequent change orders and any other additions to the project.

  2. Additional agreements (add-ons) are entered into and added to the original contract and could be paid for in cash outside the contract.

  3. Always look for contracts signed by one contractor and worked and completed by another. Also look for rebates and returns between contractors, which could involve large amounts of cash that are subject to the Form 8300 requirements.

  4. Public records may be inspected for leads to projects. Building permits and zoning permits are available at the municipal offices where the contractor is involved in projects.

  5. Good sources of cash payments that could be over $10,000 and require Form 8300 filing are:

    • Selling of fill material from excavations to a third party or another contractor.

    • Selling of topsoil.

    • Disposal of various pieces of equipment, in sales between contractors.

    • Selling of salvage from demolition of large projects.

    • Job listings can identify cash transactions that occurred and had a CTR filed. By matching jobs to payments received, the examiner can trace any large cash payments requiring a Form 8300 to be filed.

    • Progress reports show the job number, customer name, scope of the work to be performed, job cost incurred to date, estimated cost to complete, change order dates, estimated fees, and the amount of the contract price earned to date. The reports are updated on a regular basis. If CTR(s) are compared, it may show cash other than that reported that is subject to the Form 8300 requirements.

    • Large amounts of cash may be found in claims filed in excess of the original contract, usually between contractors.

Court Clerks Overview

  1. IRC Section 6050I(g), relating to court clerks, became effective on February 13, 1995, in the Violent Crime Control and Law Enforcement Act of 1994 (Public Law 103-322).

  2. These provisions apply to court clerks in both Federal and State court systems. Specific statutory provisions limit the applicability of the Form 8300 filing requirement for court clerks.

Law

  1. IRC 6050I(g) requires any clerk of a Federal or state criminal court who receives more than $10,000 in cash as bail for any individual charged with any of the following specified criminal offenses to file a Form 8300:

    • Any Federal criminal offense involving a controlled substance;

    • Racketeering;

    • Money laundering; and,

    • Any state criminal offense substantially similar to one listed above.

  2. Certain monetary instruments with a face amount of $10,000 or less are included within the definition of cash for court clerks. ( Treas. Reg. 1.6050I-2(b))

  3. If someone other than the clerk receives bail on behalf of the clerk (such as a sheriff), the clerk is treated as having received the bail. The clerk must file the Form 8300 if the other filing requirements are met. ( Treas. Reg. 1.6050I-2(a) )

  4. If multiple payments are made to satisfy bail reportable under this section, and the initial payment does not exceed $10,000, the initial payment and subsequent payments must be aggregated, and the information required by IRC 6050I(g) must be filed by the 15th day after receipt of the payment that causes the aggregate amount to exceed $10,000. However, payments made to satisfy separate bail requirements are not required to be aggregated. ( Treas. Reg. 1.6050I-2(c)(ii))

  5. The court clerk is required to provide a statement of the aggregate amount of reportable cash by each payer of bail. This requirement can be satisfied either by sending a single written statement with an aggregate amount listed, or by furnishing a copy of each Form 8300 relating to that payer of bail.

    Note:

    This is the only instance where the regulations allow copies of Forms 8300 to satisfy the requirement to furnish the statement. ( Treas. Reg. 1.6050I-2(d)(2))

  6. A copy of each Form 8300 filed by the court clerk must also be sent to the United States Attorney in:

    1. The jurisdiction in which the individual charged with the specified crime resides; and,

    2. The jurisdiction in which the specified crime occurred, if different.

    Note:

    This copy must be sent by the 15th day after the date the reportable cash bail is received. ( Treas. Reg. 1.6050I-2(b)(1)

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Cash receipts journal

    • Duplicate deposit slips

    • Duplicate receipts book

    • Internal reports of bail status

    • Record of bail received

Terminology

  1. For general terminology, see IRM 4.26.10.

  2. Bail refers to bond posted as a guarantee for the appearance in court of a defendant released from custody.

  3. "Specified criminal offense" is statutory language to denote the four types of offenses that require court clerks to file a Form 8300 if the other filing requirements of the statute are met. See IRM 4.26.12.5.1.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

  3. While Form 8300 compliance reviews are not recommended for Federal courts, they may be appropriate for State courts.

Pre-Plan
  1. Prior to a Form 8300 compliance review the examiner should:

    • Review the CBRS for cash activity;

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

Initial Contact
  1. Any initial request for an appointment should be scheduled through the court’s administrative office.

  2. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review may be mailed to the court clerk.

  3. The Form 8300 compliance review should be conducted at the court. See IRM 4.26.11.

  4. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the court, the examiner must discuss with the court clerk or designated representative:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  5. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the court clerk and/or designated employee to obtain basic information and to determine the person(s) responsible for compliance with IRC 6050I and filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the court;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The responsible person’s knowledge of the reports required under IRC 6050I;

    4. The internal controls of the court with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Forms 8300;

    8. Whether or not the court clerk has filed any Forms 8300;

    9. Procedures used by the court clerk to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a drivers license, passport, or other official document; and,

    10. Procedures used by the court clerk to notify transactors and U.S. Attorneys.

  3. The examiner should advise the court clerk that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transactions involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Forms 8300 were filed for such transactions.

  2. When reviewing entries in the cash receipts journal, ensure that only payments made for bail are considered. Payments for penalties or other surety payments are not covered under the statute.

  3. The examiner should be alert to identify transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I. However, most courts do not allow partial payments of bail or other situations conducive to structuring transactions. Also, court clerks do not have an aggregation requirement except for multiple payments relating to a single bail.

  4. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

Closing
  1. A closing conference should be held with the court clerk or designated representative. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the court clerk the transaction not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  5. For a discussion of penalty consideration, see IRM 4.26.11.

  6. For details regarding case content, assembly and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The court clerk is a public official/employee, with little incentive to assist transactors in structuring transactions. Because of the nature of bail payments and the requirements of the statute, transactors have fewer opportunities to structure payments.

  2. Most problems that will be encountered involve ignorance or misunderstanding of the law.

  3. Common problems which could be encountered include:

    1. Failing to obtain complete identifying information on transactors; (This is especially common when another entity, such as the sheriff, receives bail on behalf of the court clerk.)

    2. Failing to file Forms 8300 on reportable transactions; and,

    3. Failing to provide the required statement to transactors or U.S. Attorneys.

  4. Money laundering techniques which could be used by the transactor include:

    1. Using aliases or giving false identifying information when conducting transactions;

    2. Using a combination of currency and monetary instruments to conduct transactions; and,

    3. Using multiple payers of bail in an attempt to defeat the filing of the Form 8300.

Form 8300 Review Techniques

  1. Ensure that only payments for bail are being considered. Court clerks receive fines, penalties and other types of surety payments, which are not covered under the statute.

  2. Ensure that the bail is paid for one of the specified criminal offenses listed in the statute. Bail paid for other crimes does not trigger the reporting requirement.

  3. Ensure that payments in monetary instruments are considered, along with payments in currency. The definition of cash in the regulations includes monetary instruments.

  4. Ensure that the court clerk is providing both notifications required:

    1. To the payer of bail; and,

    2. To the U.S. Attorneys office(s).

  5. Ensure that a pattern of attorney payments of large cash bonds for clients is documented. It may warrant referral to the BSA Coordinator for an 8300 review of the attorney.

Escrow and Title Companies Overview

  1. Escrow companies are required to file Forms 8300 for transactions where cash received is greater than $10,000. The buyers will normally make payments into their trust sub-accounts using currency, wire transfers, direct deposits and monetary instruments.

  2. Escrow and title companies are normally associated with the sale of real property. In some states motor homes are treated as real property. Escrow companies are also used for the sale of businesses.

  3. The term Escrow Company is used interchangeably with Title or Land Company in this Section.

  4. Usually each escrow is given a unique identification number by the business for their internal recordkeeping. Most transactions relate to real property and business acquisitions.

  5. Generally this type of business has management, office staff, escrow officers and their staff, and a title search department. A specific escrow officer will normally be assigned to each escrow. The officer or one of their assistants receipts payments received on their specific accounts.

  6. Normally four payments are made into the customer’s sub-account:

    1. The initial deposit or "good faith" payment made with the offer to purchase;

    2. A second payment covering the balance of the down payment and projected closing costs;

    3. A third payment from the lender funding the loan; and,

    4. A final payment to reconcile the estimated closing costs with the actual closing costs.

      Note:

      The examiner should be aware that a series of payments may be observed if the down payment is substantial and the buyer draws from several bank accounts (or other sources) to make the down payment.

  7. Both title and escrow companies are licensed and regulated by each state. The examiner should check the rules for their area. The following are general guidelines for closing escrow(s):

    1. Escrow(s) paid in currency must be closed within 24 hours.

    2. Escrow(s) paid with certified monetary instruments must be closed within three days.

    3. Escrow(s) paid with personal checks must be closed within 7-10 days.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file a Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on the law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Customer Identification documents

    • Daily reconciliation of open customer trust sub-accounts

    • Duplicate deposit slips

    • Escrow closing documents

    • Escrow files

    • Escrow income reports

    • Escrow receipts

    • Monthly ledgers

  2. Generally, state law governs the documentation required to be held in the escrow file.

  3. Often this type of business has a record of all escrow deposits in the file and the file is "balanced" by the escrow officer prior to the closing of the escrow.

Terminology

  1. For general terminology, see IRM 4.26.10.

  2. Balancing the Escrow - The act of reconciling all the amounts deposited and disbursed in the escrow account at the close of escrow to effectively bring the escrow to a zero balance.

  3. Escrow File - A folder containing all the relevant documents relating to a given escrow, usually identified by escrow number and the names of the seller and buyers. Information included in the file should include:

    • Balancing worksheet

    • Copies of correspondence

    • Copies of payment receipts

    • Escrow closing documents

    • Escrow instructions

    • Escrow officer notes and comments

    • Identification documentation for both parties

    • Title search information

  4. Trust Sub-accounts - Escrow companies will maintain one trust account for customer payments. When an escrow is opened, a sub-account will be created within the trust account where all financial activities are recorded.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review, the examiner should:

    • Review the CBRS for cash activity,

    • Review prior compliance review results,

    • Check for previous penalties; and

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should become familiar with the common business practices and normal operations of escrow and title companies.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Form 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Forms 8300;

    8. Whether or not the business has filed any Forms 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a drivers license, passport, or other official document? Generally these businesses use state notarizing procedures to identify the transactors;

    10. Procedures used by the business to notify transactors;

    11. The entity’s membership in various trade associations; and,

    12. Related entities.

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Reference should be made to additional questions relating to knowledge and intent in IRM 4.26.11.

  5. The examiner should advise the trade or business that we may use the information from their records for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transactions involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Forms 8300 were filed for such transactions.

  2. The examiner should be alert to identify transactions that attempt to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Escrow companies do not normally maintain cash receipts journals but do maintain daily escrow income reports. These reports are posted to monthly ledgers.

  4. Each customer deposit of money into escrow is receipted with a numbered escrow receipt. The escrow receipt denotes the method of payment and refers to an escrow file control number.

  5. The escrow file number refers to an escrow file jacket containing duplicate escrow receipts, escrow closing documents, loan applications, a hard copy ledger, etc. The hard copy ledger is a journalized record of all payments and disbursements during escrow.

  6. The most efficient way to begin the Form 8300 compliance review is to request all escrow receipts within the review dates.

  7. An inspection of these receipts should disclose the method, date and amount of the payment the escrow number, and who received the payment. Often it will also show from whom the funds were received.

  8. Flip through the receipts noting those with large amounts of currency and multiple monetary instruments under $10,000.

  9. Record the findings in the workpapers, noting the following information:

    • The date;

    • The amount;

    • The escrow number;

    • The transactor; and,

    • The receipt number.

  10. During the review of these receipts, the normal business operation patterns will be discernible. Any irregularity in the normal patterns should also be noted and included in the workpapers.

  11. The examiner should record the bank records for the review period. Reconcile the duplicate deposit slips to the bank statements, any discrepancies should be noted in your workpapers.

  12. Duplicate deposit slips disclosing currency deposits in excess of $10,000, or multiple monetary instruments should be noted on a separate workpaper. This workpaper should show:

    • The date;

    • The amount of the deposit;

    • The type of the deposit; and,

    • Any identification of the source of the payment that is on the duplicate deposit record.

  13. Request the armored car service books which record all cash amounts handed over to that service. Inspection may reveal multiple or structured transactions.

  14. Review cashiers checks and money orders closely to note if the Escrow Company may be purchasing them with cash received from customers.

  15. The above steps will lead the examiner to escrow files for transactions greater than $10,000. Have the escrow company pull these files for further review.

  16. From a review of the escrow file, determine the total amount deposited into the escrow and the form of that deposit should be discernible.

  17. After reviewing all the files, the number of Form 8300 filings can be determined.

  18. To adequately document a Form 8300 violation, the examiner should make copies of the receipts for all payments received for that escrow, and other documents necessary to show that the information was available to complete the Form 8300. Copies should not be made of credit applications or other documents that are not relevant to the filing requirements.

  19. There may be a need, on a case by case basis, to interview the customer to obtain all the information needed to develop the issues.

  20. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  21. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  22. For additional information refer to IRM 4.26.11 .

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. It may be necessary to interview the escrow officer, and their subordinates to ascertain the facts involved in a specific escrow transaction.

  2. The examiner should first review with the business the transaction not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements of the Internal Revenue Code.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

  4. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques

  1. Often the escrow file will contain copies of the monetary instruments deposited into the escrow account, credit information and loan applications for the buyer. These may be useful in identifying structured transactions.

  2. Monetary instruments in amounts less then $10,000 in regular patterns need special scrutiny. This may be an indication of the potential structuring of the transaction to avoid the Form 8300 reporting requirements.

  3. Postal money orders may be purchased at a maximum amount of $700 for each money order. There is no recordkeeping requirement for the purchase of four money orders ($2,800). Money orders show the location purchased, the date, and the amount of the money order. The serial number of a money order is located along the top edge of the money order.

  4. In addition to structuring by the business or the customer, agents acting on behalf of the customer may aid and assist in the structuring of a transaction. Patterns may form involving a particular attorney, real estate broker, real estate agent, escrow agent, etc. Careful review of escrow files may reveal unusual patterns and trends. Forward information on any trends to the BSA Coordinator.

Mobile and Manufactured housing Overview

  1. Retail mobile home dealers are primarily engaged in the sale, rental and repair of new and used mobile homes. Some also sell insurance for mobile homes. A mobile home dealer typically will offer the products of three or four manufacturers. A dealer may also have some units on consignment either from a manufacturer or a customer.

  2. Dealers of manufactured homes will sell or rent new or used manufactured homes. The dealer also will act as a resale agent. The dealer may transport and set up the home on the owner’s property. The dealer may also act as a general contractor and make property improvements, such as pouring foundations, driveways and building garages as part of the sale.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file a Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on the law and statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Conditional sales contracts

    • Duplicate deposit slips

    • Inventory cards

    • License verification

    • Purchase invoices

    • Receipt books

    • Sales folder or jacket

    • Sales journal

Terminology

  1. Conditional Sales Contract - Also known as a financing sales contract. This is a contract where the seller has arranged or provided the financing for the purchase of the unit.

  2. Manufactured home - Similar to the traditional home, except that it is pre-built in a factory.

  3. Mobile Home - A pre-manufactured house, generally suitable for moving on wheels or by other transport. May be considered personal property or real property, depending upon local law.

  4. Modular Office - Similar to a mobile home but is marketed for use as an office, schoolroom, or other commercial purposes. These units may be rented, leased, or purchased

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review, the examiner should:

    • Review the CBRS for cash activity;

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should become familiar with the common practices of the business.

  3. In considering what reportable cash is, it is necessary to know how the product is characterized under state law. State law governs the definition of personal property. Manufactured homes are generally considered to be real property. Mobile homes and modular offices may be defined as personal or real property, depending upon local statute. Further, a mobile home, which is treated as personal property, may later be classified as real property if it is permanently located. Whether the product is classified as personal property or real property, for purposes of determining whether a transaction is reportable, depends on how it is classified under local statute at the time of the sale. The product may be classified differently on resale.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Form 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Forms 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport or other official document?

    10. Procedures used by the business to notify transactors;

    11. The entity’s membership in various types of trade associations; and,

    12. Related entities.

  3. The interview and inspection of records must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transaction involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Forms 8300 were filed on such transaction.

  2. The examiner should be alert to identifying transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Adjust pre-plan to include information gained from the interview and the random sample.

  4. When recording potential cash transactions, it is important to note:

    1. The date funds were received;

    2. The amount;

    3. The date funds were deposited;

    4. The name of the transactor;

    5. The receipt number; and,

    6. Account number and account owner (if different from transactor).

  5. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  6. There may be a need, on a case by case basis, to interview a customer to obtain all the facts needed to develop the issues.

  7. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  8. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  9. For additional information refer to IRM 4.26.11 .

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transaction not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner may secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

  4. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques

  1. If internal controls are inadequate or specific information exists that all cash sales are not recorded, the examiner should consider tracing a random sample of the current inventory back through the accounting records.

  2. A substantial part of a mobile home or manufactured home dealer's business is in the resale market. In this capacity, the dealer is acting as a broker. Resale units are not booked into inventory.

  3. The payment pattern of customers purchasing mobile homes and/or manufactured homes is similar to that observed in the retail auto industry. That is, it typically includes a down payment, possibly a trade-in, and financing arranged by either the customer or the dealer.

  4. A customer file for a mobile home dealer may be similar to either that of the auto industry or a title company. The difference is whether local regulations license the mobile home as a vehicle or whether it is considered to be real property.

  5. Mobile Home dealers are known as "traders" . Items they may receive in trade include:

    • Automobiles

    • Boats

    • Firearms

    • Furniture

    • Land

    • Livestock

    • Motorcycles

Other Service Occupations Overview

  1. This Section addresses trades or businesses that provide services to their customers as opposed to those engaged in the sale of goods. Attorneys are discussed separately in IRM 4.26.12.2.

  2. While all trades or businesses are required to report cash transactions over $10,000, the examiner should focus on those businesses where there is a likelihood that large currency transactions may occur. Some occupational services which should be considered are:

    • Accountants

    • Bail Bonds

    • Collection Agencies

    • Delivery Services

    • Entertainment Facilities

    • Insurance Companies

    • Medical Professionals

    • Musicians and Entertainers

    • Real Estate Brokers and Agents

    • Travel Agencies

  3. Although these businesses are very different, there are some similarities between them. Most importantly for the purposes of Form 8300, they may all receive large payments of cash for providing a business service.

  4. The organizational structure of these businesses will vary greatly. Some will be large corporations, others will be partnerships, and some will be small sole proprietorships. Regardless of the organizational structure of the business, there will be a procedure for recording payments received in the course of the business.

Pre-Plan

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file a Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on the law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Customer files

    • Customer receipts

    • Duplicate deposit slips

  2. Additional records which may commonly be seen in specific occupations are:

    • Bid proposals and acceptances

    • Customer account receivable ledgers

    • Customer contracts

    • Delivery receipts

    • Insurance policies

    • Trip tickets

    • Trust accounts

  3. Bail bond agents will have the following additional records:

    • Bail agreements

    • Collateral receipts

    • Invoices for blank bonds from the surety company

    • Numbered weekly reports to the surety company

Terminology

  1. For general terminology, see IRM 4.26.10.

  2. Many of these businesses have specific terminology. The examiner should refer to other industry specific sources, such as MSSP guides for a more complete listing of general industry terminology.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review, the examiner should:

    1. Review the CBRS for cash activity;

    2. Review prior compliance review results;

    3. Check for previous penalties; and,

    4. Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should be familiar with the common practices and normal operational flow of the business.

  3. Accounting firms provide more than accounting services. Firms today will provide management consulting services over a wide array of issues affecting businesses. Note that the services provided may result in reimbursement of expenses and goods purchased as part of the consulting contract. An example is computer software programs either written or purchased and provided as part of the contract.

  4. A bail bond firm arranges on behalf of its customer, to post a bail required by a court. Depending upon the jurisdiction, the customer may be required to post an amount anywhere from 10% to 100% of the bail amount. In addition, the bail bond company may also require additional amounts from its customer, to ensure the integrity of the bond.

  5. Collection agencies secure payments, often in cash for previously uncollected debts. Collection agencies will then deduct their fee and remit the balance to the firms, which contracted with them. The agency rule under Treas. Reg. 1.60501-2(b)I-1(a)(2) does not apply since the funds are received from the debtor not the principal.

  6. Delivery services often receive payments for items being shipped on behalf of the seller/shipper. Depending on the relationship with the shipper/business and the customer, the payment received by the delivery company may be required to be in cash.

  7. Entertainment facilities may receive large cash payments for special group sales, luxury accommodations, or special large ticket events. Initiation fees paid to country clubs and similar business organizations should also be considered.

  8. Insurance companies sell insurance policies, and annuities. Depending on the size of the contract, the cash payment could be substantial. Particular attention should be directed to those firms offering single premium or similar front loaded premium plans.

  9. Professional musicians and entertainers performing at large events may receive payment for their services in cash. Often they will also receive cash payments from the vendor(s) at the event based on a contracted percentage of the vendor’s total sales at the event.

  10. Real estate brokers and agents receive payments from their clients for transactions involving assets which are generally greater than $10,000. Depending on the prevailing state laws and licensing agencies, there are specific rules for the treatment of deposits received from the buyer/client. See IRM 4.26.12.6 for additional information on real property transactions.

  11. Some medical professionals, especially specialists, receive payments for their services directly from the patient. Many elective surgical procedures are not covered by medical insurance and are paid in cash, often in amounts greater than $10,000.

  12. Travel agencies arrange and book trips for individuals and groups. Total costs for trips often exceed the $10,000 threshold. Trips arranged for groups are treated as single transactions. Travel agencies may also provide financial services regulated by the BSA. These may include sale or redemption of travelers’ checks, currency exchange and wire services. The Service has regulatory authority for these financial services when provided by a business such as a travel agency. Refer to IRM 4.26.9 for guidance.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Education is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer or the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Form 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or official document?

    10. Procedures used by the business to notify transactors;

    11. The entity’s membership in various trade associations; and,

    12. Related entities

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries may constitute the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine if:

    1. Transactions occurred which involved the receipt of reportable cash in excess of $10,000;

    2. There are consecutive or related reportable transactions in excess of $10,000; and,

    3. Forms 8300 were filed on such transactions.

  2. The examiner should be alert to identify transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Upon completion of the interview, conduct a random sample of transactions, tracing the customer’s payment through the banking and accounting records. The review of sample transactions should be used to confirm the information given in the interview about the records and also to test that the records to be reviewed are complete and include all sales. Note any discrepancies.

  4. Adjust pre-plan to include information gained from the interview and the random sample.

  5. The records selected to be examined should be appropriate for the compliance review.

    • If the value of the services is consistently over $10,000, then starting with the customer receipts that identify both the amount and type of payment may be appropriate.

    • If only some of the services provided are valued at over $10,000, then beginning with trip tickets, bail bond certificates, contracts, or customer accounts receivable may be more appropriate.

    • If the definition of reportable cash is only currency, then starting from duplicate deposit slips may be the best approach. However, note that cash will include certain monetary instruments in any transaction that were used to avoid the reporting requirements of IRC 6050I.

  6. When recording potential cash transactions, it is important to note:

    • The date funds were received;

    • The amount;

    • The date funds were deposited;

    • The name of the transactor;

    • The receipt number; and,

    • Account number and account owner (if different from transactor).

  7. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any other supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  8. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  9. There may be a need, on a case by case basis, to interview customers to obtain all the facts needed to develop the issues.

  10. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review, with the business, the transactions not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

Form 8300 Review Techniques

  1. Pay special attention to cancelled contracts. Those paid in cash, cancelled in close proximity to the initial payment, and refunded by company check may be an indication of money laundering.

  2. Different individuals making multiple deposits for one transaction may be an indication of structuring.

  3. In real estate transactions, review the trust fund account. Patterns of trust fund deposits just below the reporting threshold may be an indication of structuring. In this instance, the structuring could involve the broker or agent, as well as the client.

  4. A good method for determining currency thresholds is to ascertain the number of payments generally made for the type of transaction and business. Then divide $10,000 by the number of payments and round to the next highest thousand. (For example, if there would normally be 3 payments in a transaction, divide $10,000 by 3, and round up to the next thousand = $4,000).

  5. Payments for service using certain monetary instruments in amounts less than $10,000 in regular patterns may be an indication of potential structuring of the transaction to avoid the Form 8300 reporting requirements.

  6. Patterns of monetary instruments purchased in blocks and then tendered as part of a payment in excess of $10,000 may indicate attempts to avoid the identification requirement of BSA (Title 31). The monetary instruments may not only identify a violation of IRC 6050I, but also of Title 31.

  7. For travel agencies and entertainment businesses, cash includes money orders and cashiers checks with a face value of $10,000 or less.

  8. Bail bond firms will require the receipt of "good" funds for posting of a bond. Therefore, currency may be seen more frequently in this service occupation than others. Be alert to the use of monetary instruments to avoid the filing of Form 8300. In addition to the amounts required under the bond, bail agents may also require additional collateral. Such collateral is related to the posting of the bond and is considered part of the transaction.

Other Retail Overview

  1. Other retail businesses sell items in exchange for cash, checks, wire transfer of funds, and/or financing arrangements. These businesses include, but are not limited to, the following:

    • Antique Dealers

    • Art Dealers

    • Auctions

    • Coin and Precious Metal Dealers

    • Electronics Stores

    • Furniture Stores

    • Furriers

    • Pawn Shops

    • Retail Jewelers

    • Sports Memorabilia Dealers

    • Stamp Dealers

  2. Many retail stores are owned and operated by large corporations identified under many different names at numerous locations. These stores maintain an inventory of items for sale. Many smaller specialty shops especially antique and art dealers, hold costly items. The potential for cash payments over $10,000 is extremely high.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file a Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. Cash - Cash includes the coin and currency of the United States, or any other country, which circulates and is accepted as money in the country in which issued. In addition, after February 2, 1992, cash also includes cashier’s checks, bank drafts, money orders or travelers checks having a face amount of not more than $10,000 that were:

    1. Received in a designated reporting transaction, or

    2. Received in any transaction in which the recipient knows or has reason to know that such instrument is being used in an attempt to avoid reporting the transaction as required by IRC 6050I.

  4. Designated Reporting Transaction - A retail sale of a consumer durable, collectible or a travel or entertainment activity.

  5. Consumer Durable - An item of tangible personal property of a type that is suitable under ordinary usage for personal consumption or use and has a sales price of more than $10,000. The item can reasonably be expected to be useful for at least one year under ordinary usage.

    Note:

    While an automobile with a sales price in excess of $10,000 is a consumer durable whether or not sold for business use, a dump truck or factory machine is not.

  6. Retail Sale - Any sale made in the course of a trade or business, if that trade or business principally consists of making sales to ultimate consumers.

  7. For additional information on the law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Cash receipts journal

    • Cash register tape

    • Customer cards

    • Customer files

    • Customer invoices and receipts

    • Duplicate deposit slips

    • Installment records

    • Inventory control sheets

    • Lay-away records

    • Professional appraisal

    • Sales journal

Terminology

  1. Auction Barn/Yard - Can include livestock and heavy equipment sales.

  2. Auction House - Also known as estate sales and private auction. There are generally valuable high-ticket items, such as antiques, that may be auctioned.

  3. Bid - Amount offered to purchase.

  4. Bullion - Precious metal in the form of bars or ingots.

  5. Customer cards - Record of customer purchases or account receivable cards.

  6. Furrier - Seller of apparel and accessories made from animal fur or artificial furs.

  7. In-house financing - Financing that is provided by the business without using outside sources.

  8. Loan Agreement - The loan contract containing the term of the loan.

  9. Pawn Ticket - Record of stock held for customer retrieval by a specific date in exchange for cash.

  10. Public Auction - Can draw large cash transactions depending on items presented.

  11. Rental Purchase Plan - A plan that allows the rental of goods such as furniture, electronics or appliances that will eventually allow the customer to own the items.

  12. Silent Auctions - Sealed bids are made on items - most often seen in art and antique sales.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review the examiner should:

    • Review the CBRS for cash activity;

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should become familiar with the common practices of the business.

  3. The examiner should become familiar with the general business structure for retail stores, which may include:

    • Owner/Corporate Headquarters

    • Store/Operations Manager

    • Office Manager

    • Sales Staff

    • Bookkeeper

    • Cashier

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Form 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or other official document?

    10. Procedures used by the business to notify transactors;

    11. The entity’s membership in various types of trade associations; and,

    12. Related entities.

  3. The interview and inspection of records must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could constitute the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine if:

    1. Transactions occurred which involved the receipt of reportable cash in excess of $10,000;

    2. There are consecutive or related reportable transactions in excess of $10,000; and,

    3. Forms 8300 were filed on such transactions

  2. The examiner should be alert to identify transactions that may be attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Adjust pre-plan to include information gained from the interview and the random sample.

  4. When recording potential cash transactions it is important to note:

    • The date funds were received;

    • The amount;

    • The date funds were deposited;

    • The name of the transactor;

    • The receipt number; and,

    • Account number and account owner (if different from transactor).

  5. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any other supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  6. The principal record will be a combination sales/cash receipts type journal. Some preferred customers have information cards kept that may include names and addresses, items purchased, purchase prices, and methods of payment.

  7. There may be a need, on a case by case basis, to interview the customer to obtain all the facts as required to develop the issues.

  8. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  9. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  10. For additional information refer to IRM 4.26.11 .

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Forms 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transaction not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Forms 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. See IRM 4.26.11 for detailed information.

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes.

  2. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  3. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions;

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements; and,

    6. Treating the purchase of related items as separate sales.

  4. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions.

    2. Using several individuals at one or more locations to conduct a transaction.

    3. Using aliases when conducting transactions.

    4. Conducting numerous transactions at the same location at different times during one day.

    5. Using a combination of currency and monetary instruments to conduct transactions.

    .

  5. Evidence uncovered of potential money laundering should be referred to CI on a Referral Report for Potential Fraud Cases Form 2797.

Form 8300 Review Techniques

  1. Cross reference customer cards for various purchases and form of payment. Look for matching items of jewelry that were agreed upon at the same time and purchased on different dates. Also, sales of large ticket items with accessories ordered and paid for at a later date. For example, stereo unit with speakers, cabinet and television, or other electronic items all ordered and agreed upon at purchase but paid for at different times.

  2. Identify multiple payments that are made in currency, or items defined as cash, on the same day or numerous days by customers. If this type of transaction occurs, review all available information to determine whether a Form 8300 was required.

  3. Watch for manipulation of inventory items to conceal the sale of large ticket items. If this is found, referral to the BSA coordinator may be necessary.

  4. A review of appraisals may lead to incorrect receipts or large cash sales which were not recorded. Again, this should be discussed with the BSA coordinator for possible referral.

  5. Identify multiple items purchased at the same time but recorded as separate purchases.

  6. Review in-house financing where multiple payments may exceed $10,000 during a 12-month period.

  7. Use of money orders and cashiers checks less than $3,000 could be an indication of structuring.

Retail Vehicles Overview

  1. Retail vehicles are sold in exchange for cash, checks, wire transfer of funds, and/or financing arrangements.

  2. Most of these businesses also provide parts and service to support products sold.

  3. Retail vehicle dealers discussed in this subsection include but are not limited to the following:

    • Aircraft dealers

    • All Terrain Vehicle (ATV) dealers

    • Farm implement/equipment dealers

    • Motorcycle dealers

    • New auto and truck dealers [See NOTE at IRM 4.26.12.9.1(5) ]

    • Recreational vehicle dealers

    • Snowmobile dealers

    • Tractor-trailer dealers

    • Used auto and tuck dealers

    • Watercraft (boats, yachts, etc.) dealers

  4. Generally, retail vehicle dealers are members of national, state, and local organizations and associations. The National Automobile Dealers Association (NADA) is one example. Most of the organizations provide educational information, pamphlets, and videos to dealers regarding the filing of Forms 8300. Additionally, this topic is covered at dealer conventions and meetings.

  5. Most of these businesses have separate management, sales staff, and office staff.

  6. Since most of these businesses sell consumer durables, the definition of cash includes certain monetary instruments of $10,000 or less.

  7. Some vehicle dealerships will allow certain customers to make payments over a specific period of time.

  8. Most of these businesses have multiple bank accounts with different financial institutions. Typically, there is a general operating account at one bank with direct loan funding accounts at other banks. Funds are transferred into the general account by check or by electronic funds transfer.

  9. Farm equipment dealers and tractor-trailer dealers generally do not sell vehicles considered consumer durables. Thus, cash is defined as currency for these transactions.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file a Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For retail sales of a consumer durable in a designated reporting transaction, certain monetary instruments are included in the definition of cash.

  4. There is also an exception to the reporting requirements for the proceeds of a loan. See IRM 4.26.10.

  5. For additional information on the law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Cash receipts journal

    • Customer deal jacket/folder

    • Duplicate deposit slips

    • Installment sales agreement

    • Invoices

    • Leasing contracts

    • Monthly reconciliation report

    • New vehicle inventory listing

    • Sales receipt

    • Salesman deal worksheets

    • Used vehicle inventory listing

    • Wire transfer ledger

Terminology

  1. Add on - Additional accessories or upgrade packages added to vehicle.

  2. All terrain vehicle (ATV) includes such vehicles as:

    • 4-wheeler

    • Dune buggy

    • Off road vehicle/two track

  3. COD - Cash on delivery.

  4. Deal jacket (also known as deal folder or customer file.) A folder containing all the paperwork relating to the sale to the customer which is often filed by customer name. Information inside can include:

    • Control number of specific deal

    • Customer identification information (e.g., driver’s license information)

    • Documents required by state motor vehicle department

    • Financing and lien information identifying the existence of a loan

    • Notation of add-on accessories

    • Sales contract

    • Sales receipt

    • Salesman deal worksheet

    • Title/registration information

    • Trade-in data

  5. Dealer Group - Multiple dealerships or locations owned by the same or related persons.

  6. Dealer trade - Vehicles traded with other dealers within dealer network.

  7. Either/Or - Customer is allowed to find own financing within an agreed time. Normally, there is a cash down payment with one subsequent payment.

  8. Hold check - A written and dated check held to be deposited at a later specified date.

  9. In-house financing - The dealership extends credit to customer with customer payment made directly to the dealership.

  10. Off-site sale - Dealers relocate inventory to various locations for vehicle sales events often involving several dealerships.

  11. One Pay - Customer is granted an extended period to make payment, for example, "90-days, same as cash."

  12. Pre-owned vehicle - Term generally replacing "used vehicle. "

  13. Rebate - Allowance offered by manufacturer with specific requirements.

  14. Recreational Vehicle (RV) - Common term for trailers, campers, and motor homes.

  15. Sport utility vehicle - Commonly referred to as SUV.

  16. Trade in - Vehicle taken in and its value allowed towards the purchase of another vehicle.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre-Plan
  1. Prior to a Form 8300 compliance review the examiner should:

    • Review the CBRS for cash activity

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. When possible, the examiner should identify all locations included in a Dealer Group.

  3. The examiner should become familiar with the common business practices of the trade or business.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Form 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Form 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Forms 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct. For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or other official document?

    10. Procedures used by the business to notify transactors;

    11. How cash flows from parts and service departments into business accounts;

    12. The entity’s membership in various trade associations; and,

    13. Related entities.

  3. The interview and inspection of records must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could constitute the opening of an income tax examination.

  4. Additional questions relating to knowledge and intent are in IRM 4.26.11.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine if:

    1. Transactions exist that involved the receipt of reportable cash in excess of $10,000;

    2. There were consecutive or related reportable transactions in excess of $10,000; and,

    3. Forms 8300 were filed on such transactions.

  2. The examiner should be alert to identify transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Three payments are the norm in this industry (a deposit or down payment, the amount of loan proceeds and any balance remaining due.) The examiner should consider this in setting the scope of the compliance review.

  4. Adjust pre-plan to include information gained from the interview and the random sample.

  5. When recording potential cash transactions it is important to note:

    • The date funds were received;

    • The amount;

    • The date funds were deposited;

    • The name of the transactor;

    • The receipt number; and,

    • Account number and account owner (if different from transactor).

  6. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any other supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  7. Customer files are not always kept by calendar year. Often, files are kept alphabetically by customer.

  8. There may be a need, on a case by case basis, to interview customers to obtain all the facts needed to develop the issues.

  9. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  10. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  11. For additional information, refer to IRM 4.26.11 .

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Forms 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transaction not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Forms 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure any delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions.

    2. Using several individuals at one or more locations to conduct a transaction.

    3. Using aliases when conducting transactions.

    4. Conducting numerous transactions at the same location at different times during one day.

    5. Using a combination of currency and monetary instruments to conduct transactions.

    6. Making a large down payment/deposit and returning several days later to cancel the deal and requesting a refund by check.

    7. Presenting an NSF or Hold check and later redeeming with currency.

    8. Purchasing several vehicles within a twelve-month period, each time "trading up" and transacting just under $10,000 in cash/monetary instruments.

    9. Making a side agreement with the business to inflate the value of a trade-in and later repurchase the trade-in.

  4. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques

  1. Retail vehicle dealers make frequent bank deposits. These deposits often include cash amounts greater than $10,000 from various sources. These cash deposits are reported on a CTR by the financial institution. Many times there are no corresponding Forms 8300 reported on the CBRS. Numerous sources of currency and monetary instruments require a greater scope and depth during the compliance review.

  2. Special attention should be given to voided receipts. They may be indicative of structuring.

  3. Identify related party transactions where an otherwise reportable transaction is split to avoid reporting. An example is a husband and wife making separate purchases to keep the total amount of the sale under $10,000.

  4. Identify relationships within and between businesses.

  5. Be aware of add-on accessories to vehicles discussed at the time of the initial purchase, but not scheduled or transacted until a later date. This is considered a related transaction.

  6. Large boats or yachts must be registered with the Coast Guard.

  7. Airplanes must be registered with the Federal Aeronautics Administration (FAA).

  8. Test dealer records by pulling a sample of deal jackets and reviewing them to insure that the process described in the interview is accurate.

  9. Where a dealership self-finances its inventory, the examiner should test that all transactions are included in the accounting records by tracing a sample of current inventory back through the accounting records.

Wholesale Distributors Overview

  1. Wholesale distributors, including beverage and tobacco firms, sell large quantities of products to other wholesalers and retailers. Transactions can involve large amounts of cash.

  2. Full and partial payments are frequently made, providing truck drivers the cash necessary to keep the products moving. These drivers may be employed by the wholesaler or by the customer. The cash received may be applied to specific invoices or it may be applied on account, usually on a first-in, first-out basis. Drivers may collect cash payments and make daily deposits. A full understanding of company procedure for collecting payments is necessary.

Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file a Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. Wholesalers are not required to report the receipt of a monetary instrument unless the wholesaler knows that a monetary instrument is being used in an attempt to avoid the reporting of the transaction under IRC § 6050I.

  4. For additional information on law and any statutory exceptions, see IRM 4.26.10.

Records Commonly Found

  1. Records most commonly found include:

    • Cash receipts journals

    • Customer correspondence relating to orders, billings, and payments

    • Daily and monthly drivers reports

    • Drivers route receipt books

    • Duplicate deposit slips

    • Financial statements, balance sheets, and loan applications or agreements that would relate to deposits or withdrawals from bank accounts

    • Invoices on cash sales

    • Monthly checking and savings account statements

    • Records of transfer of funds by wire or collection especially between accounts

    • Sales journal, accounts receivable records, notes receivables

Terminology

  1. Wholesale Distributor - A trade or business engaged in the sale of goods from one business to another. A wholesaler may act as a go-between broker to the transaction, may purchase goods for resale to other businesses, or may produce or distribute a product under a license.

  2. Driver’s Report - Shows customer name and address, quantity delivered, and form of payment. Some drivers make daily bank deposits before returning to the warehouse. A copy of deposit slips is generally attached to the daily report.

  3. Driver’s Route Receipt Books - Invoice receipt books holding copies of the daily receipts written by the drivers.

  4. E-Commerce - Sale or trading of goods and services using the Internet.

Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

Pre- Plan
  1. Prior to a Form 8300 compliance review the examiner should:

    • Review the CBRS for cash activity;

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should become familiar with the common practices of the business.

Initial Contact
  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customers of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring.

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

Interview
  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Form 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Forms 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or other official document?

    10. Procedures used by the business to notify transactors;

    11. The entity’s membership in various types of trade associations; and,

    12. Related entities.

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could constitute the opening of an income tax examination.

  4. Additional questions relating to knowledge and intent are in IRM 4.26.11.

  5. The examiner should advise the trade or business that we may use the information from their records for any tax matter permitted by the Internal Revenue Code.

Review of Records
  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transactions involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Forms 8300 were filed on such transactions.

  2. The examiner should be alert to identify transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appear to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Adjust pre-plan to include information gained from the interview and the random sample.

  4. When recording potential cash transactions it is important to note:

    • The date funds were received;

    • The amount;

    • The date funds were deposited;

    • The name of the transactor,

    • The receipt number; and,

    • Account number and account owner (if different from transactor).

  5. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any other supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  6. There may be a need, on a case by case basis, to interview the customers to obtain all the facts as required to develop the issues.

  7. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  8. Depending on the findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  9. For additional information refer to RM 4.26.11.

Closing
  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Forms 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transaction not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. A wholesaler may become involved in money laundering, knowingly or unknowingly, as a result of:

    • A desire by a customer to conceal the existence of taxable income. The wholesaler may be motivated to assist in order to keep the customer’s business. Or, the customer will disguise transactions so the wholesaler will not recognize a reportable transaction.

    • A desire of a customer or possibly the wholesaler to use the wholesale activity to place funds derived from illegal sources into the legitimate economy.

  3. Money laundering techniques, which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  4. Money laundering techniques, which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions.

    2. Using several individuals at one or more locations to conduct a transaction.

    3. Using aliases when conducting transactions.

    4. Conducting numerous transactions at the same location at different times during one day.

    5. Using a combination of currency and monetary instruments to conduct transactions.

  5. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

Form 8300 Review Techniques

  1. Sample and reconcile the daily driver’s receipts to the daily summary report. Then trace the daily summary amounts to the bank deposits. If your sample verifies that all funds are deposited into the bank, you can then use the bank deposit slips to trace any large currency deposits back through the records to their source to determine any reportable transactions.

  2. Review the drivers receipt books for cash payments on deliveries in excess of $10,000. Also look for multiple deliveries paid at one location, and paid in cash.

  3. If the wholesaler also owns retail outlets, a separate review should be done. See IRM 4.26.12.9for review techniques.

  4. A review of the accounts receivable should be made. If the customer is billed on a monthly or other periodic basis it may reveal transactions over $10,000.

Organizational Structure of a Gambling Casino

This is an Image: 35437001.gif

Please click here for the text description of the image.

Computerized Casino Management System

This is an Image: 35437002.gif

Please click here for the text description of the image.

References for the Construction Industry

This is an Image: 35437003.gif

Please click here for the text description of the image.