IRS Form 8300 is required for all cash payments over $10,000. But what does this mean for you?
Cash transactions constitute a large portion of business activity. Businesses need to build inventory, pay for repairs, pay for maintenance and upkeep on their equipment, make monthly payments for leased property, compensate their business partners, and much more. While these transactions do pile up, even in smaller sums, it’s the very large transactions that the IRS is most interested in. That’s where IRS Form 8300 comes into play.
A business is required to file Form 8300 with the IRS whenever it receives a cash payment over $10,000. The main purpose of IRS Form 8300 is to ensure that businesses that deal in large cash transactions are as accurate and timely with their reporting as possible – while penalizing businesses that fail to accurately or timely report their larger transactions.
What is Form 8300?
Form 8300 requires a business to report on the identity of the individual from whom the cash was received, the person on whose behalf the transaction was conducted, an exact description of the transaction itself, as well as the method of payment, and the business that received it.
The IRS notes that any person engaged in a trade or business receiving more than $10,000 in cash in a single or several related transactions (within a short period) must file a Form 8300 reporting this transaction.
Form 8300 must be filed in a paper form directly to the IRS, or it must be filed electronically via FinCEN’s Bank Secrecy Act Electronic Filing System.
What Kind of Payments Should Be Included?
Form 8300 is usually filed in response to receiving any of the following with a total value of over $10,000:
- Debt payments
- Loan repayments
- Sale of:
- Goods or services
- Real estate
- Intangible goods
- Rental of real estate
- Cash exchanges
- Trust contributions
- Instrument purchases
- Escrow arrangement contributions
- Cash reimbursement
- And more.
Speaking more generally, a transaction must be reported via IRS Form 8300 if it fulfills the following criteria:
- The cash amount is over $10,000
- The cash is received in either: one lump sum, installment payments with a total value of over $10,000 within one year, or a total transaction value of over $10,000 after tallying previously unreported income
- The business receives the cash via trade with a customer or other business
- If the cash is received in multiple installments, it should be the same agent or buyer
- The cash is received either in a single transaction or what constitutes as “related transactions”
What Constitutes as a Cash Payment?
Not all forms of payment and compensation count as cash. Cash, as per the IRS, includes the following:
- The coins and currency of the United States and foreign countries
- Cashier’s checks*
- Bank drafts*
- Traveler’s checks*
- Money orders*
*For a face value of under $10,000, used in a designated reporting transaction.
On the other hand, the following does not count as cash:
- Personal checks
- Money orders, bank drafts, traveler’s checks, or cashier’s checks with a face value over $10,000
The reason that these financial instruments do not require you to file IRS Form 8300 over a certain face value is that the bank will have already done so. A financial institution issuing a money order, bank draft, traveler’s check, or cashier’s check with a face value of over $10,000 must file a FinCEN Currency Transaction Report.
Why Related Transactions Are Tallied Together
If the limit for any given transaction before you have to file a Form 8300 is $10,000, you might be tempted to just split a transaction into multiple smaller payments instead. However, Form 8300 also applies to related transactions. Attempting to bypass the need to file a Form 8300 on larger cash transactions is called structuring.
Related transactions are defined by the IRS as transactions between a payer and recipient of cash within a 24-hour period.
Furthermore, installment payments for a piece of land or machinery are tallied up over a whole year. Meaning, if the value for an entire year worth of installment payments for a given piece of equipment exceeds $10,000, the company receiving the installments must file a Form 8300.
Your Deadline for IRS Form 8300
A business receiving more than $10,000 must file a Form 8300 within 15 days after receiving the payment. If the last day falls on a weekend or holiday, then the deadline is pushed to the next business day.
What Happens if You Forget to File a Form 8300?
There are multiple different civil penalties for businesses that fail to file a Form 8300 when receiving a large lump sum of cash payment.
Section 6721 of the US Tax Code details that failure to file a Form 8300 on time can lead to a penalty of $250 per failed or false return, up to a maximum of $3,000,000 in a single calendar year, or $1,000,000 for businesses with average annual gross receipts of less than $5 million.
Correcting the mistake within 30 days of the initial deadline cuts the penalty per return down to $50.
However, if the IRS can prove that a form or information was withheld purposefully, then by way of an intentional disregard of the requirement to file in a timely manner can lead to a penalty of the greater of either: a. $25,000, or b. the value of the transaction, capped at $100,000. This penalty stacks for each failure to file purposefully.
Criminal penalties are reserved for cases of intentional obstruction and fraudulent practices, wherein a party is attempting to stop the filing of Form 8300 or intentionally filed false information. These penalties include monetary sanctions, the legal fees of the prosecution, and prison time.
Navigating the rules of the IRS and keeping up to date can be a bit of a chore. But it’s imperative to be on the tax man’s good side and avoid unnecessary penalties and fees.
A tax professional can help you prepare and file all necessary reports, returns, and forms, so you can get a better night’s sleep. Be sure to give us a call at Rush Tax Resolution, for all of your tax needs.