Criminals often deal in cash, and sometimes, large amounts of it. To help combat money laundering, tax evasion, drug dealing, terrorist financing, and other criminal activities, the federal government has made it mandatory that a trade or business that receives more than $10,000 in cash in a single transaction, or in related transactions, must report it to the IRS.
If your trade or business receives the cash, you must file Form 8300, “Report of Cash Payments Over $10,000 Received in a Trade or Business”. Form 8300 is an informational report- in other words, there is no tax due with the form, it just reports the information that a person received the cash in one transaction. Note- a single transaction may not be broken down into multiple transactions just to avoid reporting. The form reports who the cash was received from, if the transaction was on behalf of someone else, how it was paid, and who received it.
That brings up three questions that seem like only the IRS would need to ask, but they are: who is a “person”, what is “cash”, and what is a “transaction”? For the purposes of this form, a person is an individual, corporation, partnership, trust, estate, association, or company; it is likely you fall into one of those categories! Cash is U.S. or foreign coins or currency, cashier’s check, money order, or traveler’s check (but not your personal check, regardless of the amount). If you use a combination of those forms to total over $10,000, it must be reported. Even if the payments are made up to 12 months apart, if they are related, and the total is over $10,000, it must be reported. Transaction means a retail sale (or the receipt of funds by a broker or other intermediary in connection with a retail sale) of a consumer durable, a collectible, or a travel or entertainment activity. That covers a lot of transactions! But, if you are a charitable organization, you get a break- you do not have to file the form for a cash gift greater than $10,000.
The form must be filed with the IRS within 15 days after the cash was received. You must keep a copy of the form for 5 years after you file it. By January 31 of the following year, you must also provide a written statement to anyone who is named on the form, to tell them you are reporting the information to the IRS. If you are supposed to file and you don’t, you may be subject to penalties up to $25,000 if you intentionally do not file the form. Note that you are not necessarily off the hook if the transaction is less than $10,000 cash- if you know that the transaction is less than $10,000 just in an attempt to thwart the reporting requirement, you still are required to file the form.
If a transaction is under $10,000, but still seems suspicious, you may still file the form; however, in this case, you do not need to inform the customer about the report. Whether it is over $10,000, or under- but suspicious, the transaction must be reported. Using Form 8300, you can help combat terrorism, money laundering, drug dealing, and other illegal activities.
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By Cliff Acheson, CPA