As the collection arm of the Treasury Department, the IRS collects funds that are due and payable to the US government. To that end, taxpayers are required to report their taxable income and pay taxes on that income. This system is known as voluntary compliance.
Voluntary Compliance: Trust, but Verify
Uncle Sam doesn’t just take taxpayers’ word on the reporting of taxable income. Form W-2 records income earned as wages while various versions of Form 1099 provide the IRS with records of non-wage income. Information from these forms helps to ensure that the Treasury Department has an accurate record of payments and revenues received by taxpayers.
But many businesses deal in transactions that involve large sums of cash. Car and boat dealerships, art galleries, antique and collectibles merchants are just a few examples. Nonprofit institutions such as hospitals and colleges also deal with large cash transactions such as tuition payments.
Form 8300 is designed to provide the Treasury Department about information pertaining to these large cash transactions. In 2011, nearly 200,000 paper submissions of Form 8300 were filed with the Treasury department. Since 2012, the IRS has made e-filing available for Form 8300 free of charge.
Form 8300: Report of Cash Payments Over $10,000 Received in a Trade or Business
Federal law requires individuals or businesses receiving more than $10,000 in a single cash transaction or in two or more related transactions within a 12-month period to file Form 8300 within 15 days of receipt. Transactions must be received in the course of business from a single payer or agent. Businesses and individuals may also voluntarily file Form 8300 concerning suspicious transactions of any amount. (IRS.gov)
Information from Form 8300 is added to the Financial Crimes Enforcement Network (FinCEN) database. The information is then cross-referenced with other FinCEN information such as Suspicious Activity Reports and Currency Transaction. The Treasury Department uses information from these cross-reference reports to create traceable money trails that expose criminal activities. (FinCEN)
Form 8300 provides the IRS and FinCEN with a tangible record of large cash transactions. FinCEN has its own ideas about what constitutes cash and what does not – and how individual or related transactions are determined.
What Is and Is Not Cash?
On its face, the definition of cash is obvious: currency, either domestic or foreign. But wire transfers, which are readily accessed as cash, do not count as cash and don’t need to be reported on Form 8300. On the other hand, for the purposes of Form 8300 any of the following DO count as cash and transactions for more than $10,000 in any of these forms must be reported.
- Travelers’ Checks
- Cashier’s Checks
- Bank Drafts
- Money Orders
What Counts as a Transaction?
Some exchanges, such as sale or rental of tangible goods or intangible property that exceed $10,000, are obvious forms of transactions. Cash exchanges, contributions to trust or escrow funds, loan repayments and conversions from cash to checks or bonds that exceed $10,000 also count. The IRS also considers transactions that take place within a single 24-hour period to be related transactions for the purposes of filing Form 8300.
Tax-exempt charitable organizations need not report cash donations or sales proceeds that are related to their tax-exempt status of more than $10,000, but cash in excess of $10,000 received from business transactions does. An example would be a college receiving a large donation to its endowment or a hospital that receives funds to construct a children’s ward. But the same college would have to report receiving more than $10,000 in cash for tuition. The hospital would likewise be required to report receiving more than $10,000 in cash for providing emergency room care on Form 8300.
Penalties for Failure to File Form 830e0
The penalty for failure to file Form 8300 in a timely fashion is $100 per occurrence. For businesses with annual gross receipts of $5 million or less, the annual aggregate limitation is $500,000. If the deficiency is corrected within 30 days, the annual aggregate limitation for businesses with annual gross receipts of $5 million or less is reduced to $75,000. The total annual limit for businesses with annual gross receipts of more than $5 million is $1.5 million.
Deliberately failing to file the form carries a much higher financial cost. The IRS imposes a penalty of $25,000 or the actual amount of the transaction up to $100,000 for each occurrence, whichever is greater. There is no annual limit for intentionally failing to file form 8300.
Failure to Furnish Full Information
The IRS requires taxpayers to include the names and Taxpayer Identification Numbers (TIN) for each person involved in cash transactions over $10,000 on Form 8300. If individuals refuse to provide their TIN, taxpayers should file Form 8300, along with a statement detailing attempts to obtain the required information. Taxpayers should also retain records that verify when and how attempts to get the required information were made, and be prepared to provide copies of those records to the IRS.
Failure to furnish the names of individuals who are required to be included on Form 8300 carries penalties of $100 per violation. Annual aggregate limit for penalties are $500,000 for businesses with annual gross receipts of $5 million or less. Penalties for businesses with more than $5 million in annual gross receipts have an aggregate annual limit of $1.5 million.
If the deficiency is corrected within 40 days, the penalty is decreased to $30 per incident. Annual aggregate limits for penalties imposed on businesses with $5 million or less in annual gross receipts that correct deficiencies within 30 days is reduced to $200,000. The annual aggregate limit for penalties imposed on larger businesses that correct deficiencies within 30 days is $250,000.
As with deliberate failure to file Form 8300, the IRS imposes harsher penalties on taxpayers who deliberately omit information. The penalty for intentional failure to furnish required information is $250 per incident or 10 percent of the aggregate annual limit of items that should have been reported, whichever is greater. There is no annual aggregate limitation on penalties.