Why It’s Important to Report Cash Payments over $10,000

January 2020 | Article

If you operate a trade or business, being paid in cash for your services or merchandise is still a rather universal form of payment, even as newer electronic forms of payment are replacing cash transactions. But if your trade or business deals with larger dollar items, taking the time to understand and make the required reporting for any cash transaction, or related multiple transactions, of more than $10,000 received in your trade or business activities will save you a whole lot of trouble—and could prevent potential high dollar penalties.

The Importance of Reporting Cash Payments
Each person engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash and/or certain negotiable instruments in one transaction or in two or more related transactions must file Form 8300 with the Internal Revenue Service. This form must be filed by the 15 day after receipt of the payment that causes the aggregate amount to exceed $10,000 in cash. If the filing date falls on a Saturday, Sunday or legal holiday, file the form on the next business day.

Related transactions include:

  • Any covered transactions conducted between the payer (or its agent) and the recipient in a 24-hour period.
  • Transactions conducted over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is part of a series.

A written statement is required to be given to the person or persons listed on a Form 8300 by January 31 of the following year (same due date as 1099 and W-2). The statement needs to contain the name, telephone number and address of the information contact for the business that completed Form 8300 along with the aggregate amount of the reportable transaction and that the information was furnished to the Internal Revenue Service. In addition, Form 8300 may be voluntarily filed for any suspicious transaction even if the amount does not exceed $10,000.

Covered Negotiable Instruments
Covered negotiable instruments include cashier’s checks, bank drafts, travelers’ checks or money orders of $10,000 or less where the total of these items and cash exceed $10,000.

Form 8300 may also be filed voluntarily for:

  • Any transaction in which the recipient of cash knows that the instrument is being used in an attempt to avoid reporting the transaction or any suspicious transaction.
  • A transaction where U.S. and foreign coin and currency were received.
  • Clerks of federal or state courts must file Form 8300 if more than $10,000 in cash is received as bail for an individual(s) charged with certain criminal offenses.
  • Casinos must file Form 8300 for nongaming activities (restaurants, shops, etc.).

However, cash does not include a check drawn on the payer’s own account, such as a personal check, regardless of amount.

Designated transactions are retail sales (or the receipt of funds by a broker or other intermediary in connection with a retail sale) of a consumer durable asset, a collectible, or a travel or entertainment activity.

Consumer durable assets are tangible personal property that, under ordinary use, can reasonably be expected to last at least one year and have a sales price of more than $10,000. Real estate transactions are not included in the definition of consumer durable assets.

How This Applies to Your Organization
Example 1 from IRS Publication 1544 provides a very simple application of the reporting rules, summarized as follows: Small Town Cars sells a new car to Customer 1 for $18,000. Customer 1 pays Small Town Cars $18,000 in cash on January 6. Pat, the sales manager for Small Town Cars, knows the Form 8300 rules and asks Customer 1 for the required personal identification information to complete Form 8300. Small Town Cars must file Form 8300 with the IRS by January 21. In addition, Small Town Cars must send Customer 1 the appropriate information reporting form by the due date in the year following the year of the transaction reported on Form 8300.

Transactions excluded from the reporting requirements are proceeds received by a financial institution required to file Form 104, by a casino exempt from filing or required to file Form 103, by an agent who receives the cash from a principal, if the agent uses all of the cash within 15 days in a second transaction that is reportable on Form 8300, or Form 104, and discloses all information necessary to complete Part II of Form 8300 or Form 104 as the recipient in a transaction occurring entirely outside the United States, or in a transaction that is not in the course of a person’s trade or business.

A copy of the Form 8300 must be retained with the business for five years from the date it was filed.

A key component of business accounting is document retention. Check out our insight for best practices on document retention.

When Related Transactions Are Combined
Where separate payments of cash and certain negotiable instruments are under $10,000, but are part of one or more related transactions, which taken together would total more than $10,000, the filing of Form 8300 is required. The Form 8300 must be filed within 15 days of the payment that caused the aggregate to be over $10,000. Information that needs to be reported about the person who made a cash payment of over $10,000 includes:

  1. First name, middle initial and last name
  2. Taxpayer identification number (penalties for an incorrect or missing TIN can be assessed)
  3. Complete address
  4. Occupation, profession, or business
  5. Date of birth
  6. Method used to verify the identification of the customer (driver’s license, credit card, passport, etc.)
  7. If the transaction was being conducted on behalf of someone else, the above information will also be needed for the person benefiting from the transaction
  8. A description of the transaction

For individuals, the taxpayer identification number is the person's social security number, even if they have an employer identification number as a sole proprietor business. In the case of corporations, partnerships and other entities, the taxpayer identification number is their employer identification number. For certain nonresident aliens who are not eligible to get a social security number, the taxpayer identification number is the individual taxpayer identification number issued to them by the Internal Revenue Service.

Penalties Do Apply
Penalties for non-compliance of these reporting rules are up to 5 years of imprisonment and fines up to $250,000 ($500,000 for corporations). A minimum penalty of $25,000 may be imposed if the failure to file a correct Form 8300 is due to an intentional or willful disregard of the cash reporting requirements.

Need More Information?
IRS Publication 1544 contains more information on the reporting of cash payments over $10,000. Also, go to www.irs.gov/form8300 for the latest information and any legislation enacted after the publication date of IRS Publication 1544. Electronic filing may be available using FinCen’s Bank Secrecy Act (BSA) Electronic Filing System. To get more information, visit the BSA E-Filing system at https://bsaefiling.fincen.treas.gov/main.html.

Form 8300 is filed with:

Internal Revenue Service
Detroit Computing Center
P. O. Box 32621
Detroit, MI 48232

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