Cash Transactions Over $10,000 Must Be Reported to IRS On Form 8300
If your business takes cash payments, here is a little-known disclosure form that you definitely need to know about. IRS Form 8300 must be filed upon receiving a cash payment of more than $10,000 (within 15 days of receiving the cash!).
Do you have to file? Here are the general instructions to the form:
Who must file. Each person engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file Form 8300. Any transactions conducted between a payer (or its agent) and the recipient in a 24-hour period are related transactions. Transactions are considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions.
In layman’s terms, if you receive $10,000 in cash in one transaction or in two or more related transactions (this is from one entity, not multiple people), you must file Form 8300 or face stiff penalties.
What are the penalties if you fail to file? If you simply fail to file on time, then the penalty is $100 per occurrence. If your business grosses less than $5 million, it’s capped at $500,000 per year. Here’s the good news: If you correct the failure to file within 30 days, the aggregate limit drops to $75,000.
Now the really painful news. If you deliberately fail to file, the IRS levies a penalty of $25,000 or the actual amount of the transaction, up to $100,000, for each occurrence, whichever is greater. Even worse: There is no annual limit for intentionally failing to file Form 8300.
How do you avoid this, and how can you minimize the reporting requirements? Here are some suggestions to keep you out of your local IRS auditor’s office.
1) The IRS has capabilities for you to file Form 8300 online. Go to this website, which will redirect you to the Financial Crimes Enforcement Network, where you can fill it out online. The form needs to be filled out within 15 days of receiving the cash payment.
2) This is not a recommendation — it is a regulation mandated by the IRS. Keep a folder handy and simply put the printed form in it, and then keep it safe. The IRS is very competent when it comes to keeping records, but even if they are 99.99 percent on track, that still means something could get lost in the shuffle.
3) By Jan. 31 of the following fiscal year, you must provide to the customer who gave you the cash a statement that includes the date and amount of the transaction.
4) One final important word of caution: You are prohibited from either structuring, or help structure, a financial transaction that will avoid the reporting requirement. If you do, civil and criminal penalties will be applied.
With so few people understanding these reporting rules, it is very easy to miss the filings. And because of that, it gives the IRS quite a bit of power to call out the people who miss the filings. The best way to protect yourself is to know the rules and make the disclosure form a part of your regular ongoing business process. If you need any help with the forms or knowing whether or not a filing is required for your specific circumstances, feel free to give us a call.