Any person who, in its trade or business, receives cash in the amount of more than $10,000 in a single transaction or a series of related transactions must file Form 8300, Report of Cash Payments Over $10,000, Received in a Trade or Business, with the IRS. Cash includes not only currency, but also a cashier’s check, traveler’s check, bank draft or money order. Failure to make the required filing can subject the recipient to civil or even criminal penalties.
What is Form 8300 and Who Must File
Form 8300 is a form that is required to be filed with the IRS under the Bank Secrecy Act, aiming at detecting and deterring money laundering. Generally, any person engaged in a trade or business who receives more than $10,000 in cash in the course of that trade or business in a single transaction or related transactions is required to file the form. A person includes an individual, a corporation, a partnership, a trust, an estate or any other entity (including a limited liability company).
In its recent release (IR-2015-81), reminding businesses in U.S. possessions that they are subject to Form 8300 reporting obligations, the IRS has identified the following business as an example of businesses that might need to file Form 8300 if all requirements are met: jewelry sellers, furniture sellers, boat sellers, aircraft sellers, automobile dealers, pawnbrokers, lawyers, real estate brokers, insurance companies and travel agencies.
What is Cash
Cash is defined broadly to include not only coins and currency of any country, but also – if received in a designated reporting transaction - a cashier’s check, traveler’s check, bank draft or money order if its face value is equal to or less than $10,000. If the face value of such an instrument is more than $10,000, it is not treated as cash for this purpose, because if it was purchased with currency, then the financial institution would have already filed a FinCEN 112 to report it.
A designated reporting transaction is a retail sale of any of the following:
- any property other than land or buildings that is for personal use, that can reasonably be expected to last for at least one year under ordinary usage, the sales price of which is more than $10,000 and that can be touched or seen. An example would be a car or a boat. However, a machine in a factory would not be within this category because it is ordinarily not suitable for personal use.
- a collectible, such as a work of art, rug, antique, etc.
- any activities of travel or entertainment if all items sold in connection with the activity are more than $10,000.
A personal check is not considered cash, regardless of its face amount. There are also other exceptions regarding what does not constitute cash for purposes of Form 8300.
The $10,000 filing threshold applies not only to cash received in a single transaction, but also to the aggregate amount of cash received in related transactions. Typically, any transactions between the same buyer and seller that occur within a 24-hour period are considered related. However, even if the transactions occur more than 24 hours apart, if the seller knows or has reason to know that the transactions are related, than the transactions are considered related and must be reported if the seller receives more than $10,000 in cash payments from the buyer in a 12-month period. For example, assume that the seller is a travel agent. A customer pays the travel agent $8,000 in cash for a trip. A couple of days later, the same customer pays the travel agent an extra $3,000 with a cashier’s check to add another person to the trip. These transactions are related transactions, and the travel agent should file Form 8300 because the total amount of cash received (i.e., $11,000) exceeds $10,000. Similarly, an automobile dealer that receives an initial $3500 payment in U.S. currency and $700 in U.S. currency every month thereafter in lease payments on a vehicle would have to file Form 8300 for the transaction within 15 days of receiving the tenth monthly lease payment.
Form 8300 is not required to be filed if the entire transaction occurs outside the United States. However, transactions that occur in Puerto Rico or any other possession or a territory of the United States are considered to occur in the U.S. for this purpose.
What, When and Where to File
Form 8300 must include the name, address and date of birth of the person from whom the cash is received. In addition, the form must include the person’s social security number.
The form can be filed with the mailing address identified in the form’s instructions, or it can be electronically filed with FinCEN. Generally, the form must be filed within 15 days after receipt of a payment.
In addition, the filer must provide a statement to the person whose information was included in Form 8300. The statement must be provided no later than January 31 of the year following the year when Form 8300 was filed. The statement should include the name and address of the filer’s business, the name and address of the contact person and the total amount reported on Form 8300. It must also state that the information has been reported to the IRS.
Penalties for Failure to File
Failure to file Form 8300 or to furnish the required statement can be subject to heavy penalties, and such penalties have increased over recent years. For example, if a person fails to file a required Form 8300, the person can be penalized with $100 (increased in 2010 from $50) per violation. The maximum annual limit of the penalty for businesses with gross receipt exceeding $5 million is $1,500,000 (increased from $250,000). If the gross receipt of the business does not exceed $5 million, then the annual penalty ceiling is $500,000 (increased from $100,000). Same penalties apply for failure to furnish the required statement.
If the failure to file or failure to furnish was intentional, then the penalties are more severe and could include criminal sanctions.
More information can be found in IRS Publication 1544.