Any business that receives more than $10,000 in the course of its business must file Form 8300 with the IRS. Intentional failure to file Form 8300 may result in a civil fine of the greater of $25,000 or the amount that was not reported. Willful failure to file Form 8300 can result in a fine of up to $250,000 and up to five years in prison. The requirement is designed to combat money laundering and terrorism. However, enforcement can be just as much about income tax invasion.
Any person is obligated to file Form 8300 when the following prerequisites are present:
- The person is engaged in a trade or business.
- In the course of such trade or business.
- The person receives more than $10,000 in cash.
- In a single transaction, or more than one related transactions.
My only trade or business is the practice of law. I am not engaged in a trade or business of selling cars. Thus, if I sell my car and receive $10,000 or more in cash, I would not have a duty to file Form 8300. I didn’t receive the cash in the course of my trade or business. That being said, when in doubt as to whether you are engaging in a particular trade or business, file the form.
Also, keep in mind that a person can be engaged in more than one trade or business.
The definition of “cash” seems to be straightforward and a matter of common sense. “Cash” is currency, bills and coins, right? Well, as with all things, the IRS makes it much more complicated. “Cash” also include certain monetary instruments with a face amount of less than $10,000, such as cashier’s check, traveler’s checks and money orders. Thus, if I receive $4,000 in bills, a $5,000 cashier’s check and a $3,000 money order in one transaction, I must file Form 8300.
Why would cashier’s checks, traveler’s checks and money orders in the amount of less than $10,000 be considered “cash?” well, financial institutions have their own reporting requirements.
They report the issuance of large but not small cashier’s checks, traveler’s checks and money orders. Reporting each and every cashier’s check, traveler’s check and money order would be overly burdensome and would create information overload. Thus, the inclusion of cashier’s check, traveler’s checks, and money orders is an attempt to track these items when they are combined in an amount that reaches the IRS attention threshold.
A transaction is any event where there is a transfer of “cash” (including those checks noted above). The IRS has provided the following examples:
- Sale of goods, services or real or intangible property.
- Rental of goods or real or personal property.
- Cash exchanged for other cash.
- Establishment, maintenance of or contribution to a trust or escrow account.
- A loan repayment.
- Conversion of cash to a negotiable instrument such as a check or a bond.
These are just examples. The rule is that any event resulting in a transfer of “cash” is a transaction.
There are two types of related transaction. First, the black and white rule is that any two transactions between the same seller and buyer, or their agents, within a 24 hour period are related transactions. Thus, if I sell you a widget at 9:00 a.m. for $5,000 cash and another at 3:00 p.m. for $6,000 cash I have to file Form 8300.
Second, a transaction will be “related” even if more than 24 hours apart, if the recipient of the cash knows, or has reason to know, that each transaction is one of a series of connected transactions. Assume that I sell you a widget for $20,000. You make a cash down-payment of $5,000. You pay the result in monthly payments in cash, each being less than $10,000. This is a related transaction. I must file Form 8300. Once again, when in doubt, file.
Nobody likes IRS scrutiny. Most people want to fly under their radar screen. Some might be tempted to structure transactions to avoid any obligation to file Form 8300. The IRS has thought of that too. The same penalties discussed above apply when any person structures, or assists in structuring a transaction for the purpose of evading the obligation to file Form 8300.
Stay out of trouble with the IRS and the U.S. Attorney by filing Form 8300 when you are required to do so.
“Four Rivers Business Journal,” August 2013