If you receive cash payments of $10,000 or more in the course of your business, you must file Form 8300 with the IRS. If you don’t file Form 8300 then you face up to 5 years in federal prison and a fine of up to $250,000, plus a civil penalty of the greater of $25,000 or the amount cash you received. Many businesses are hesitant to file Form 8300 with the IRS because you have to ask your customers for their government ID and you have to ask them for their Social Security Number. But the consequences of not filing are severe. After a few examples, I will briefly explain the law on filing Form 8300.
Examples of Failing to Form 8300
The US DOJ Tax Division’s website is full of press releases about convictions of taxpayers who failed to file Form 8300 for receiving $10,000 in cash from their customers and clients. The people who most often run afoul of failing to file Form 8300 are jewelry dealers, vehicle dealers, and attorneys. A few examples:
Cigarette Boat to Federal Prison
60 year old James Allen McKean owned and operated International Boating Center, Inc. (IBC), in Mabank, Texas. IBC was primarily in the business of selling big, fast, cigarette boats. He sold a boat for $121,112.50, with $2,100 on a credit card and the remainder in cash. McKean did not file a Form 8300 reporting that he had received more than $10,000 in a single transaction. He pled guilty to one count of failing to file Form 8300, and he faced an up to 5 year federal prison term and a fine of $250,000.
Attorney Hoarding Green
62 year old attorney Frank Fabbri of St. Louis, Missouri, represented Edward Trober on charges of possession with intent to distribute 1,000 kilograms of marijuana. Trober had his friends and family send all of his hidden drug proceeds to Fabbri so that Fabbri could turn the money over to the US Attorney’s Office. Fabbri was instructed by the DEA and the IRS CID to fill out Form 8300 for any csh payments he received in excess of $10,000. Fabbri gave the US Attorney’s Office $73,000. On reviewing his records, the US Attorney’s Office determined that $36,000 in cash was given from Trober to Fabbri, and Fabbri did not file a Form 8300. Fabbri pled guilty to failing to file Form 8300, and he was sentenced to 18 months in federal prison and a $40,000 fine.
The Legal Aspects of Form 8300
Form 8300 is a form that is jointly developed and enforced by the IRS and FinCEN. The consequences of not filing Form 8300 are a lengthy stay at a federal prison and a large fine.
Who Must File Form 8300?
Any person who, in their trade or business, receives $10,000 or more in cash in a single transaction or in related transactions must file Form 8300 to report cash paid to them if the cash paid is:
- Over $10,000,
- Received as:
- One lump sum of over $10,000,
- Installment payments that cause the total cash received within 1 year of the initial payment to total more than $10,000, or
- Other previously unreportable payments that cause the total cash received within a 12-month period to total more than $10,000,
- Received in the course of your trade or business,
- Received from the same buyer (or agent), and
- Received in a single transaction or in related transactions.
A person includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate.
Cash is defined as:
- The coins and currency of the United States (and any other country), or
- A cashier’s check, bank draft, traveler’s check, or money order you receive, if it has a face amount of $10,000 or less and you receive it in:
- A “designated reporting transaction”, or
- Any transaction in which you know the payer is trying to avoid the reporting of the transaction on Form 8300.
A transaction occurs when:
- Goods, services, or property are sold;
- Property is rented;
- Cash is exchanged for other cash;
- A contribution is made to a trust or escrow account;
- A loan is made or repaid; or
- Cash is converted to a negotiable instrument, such as a check or a bond.
Related transactions are:
- Transactions that occur between the seller and the buyer within a 24 hour period; and
- Transactions that the seller knows or has reason to know are part of a series of connected transactions.
A designated reporting transaction is the retail sale of any of the following:
- A consumer durable, such as an automobile or boat. A consumer durable is property, other than land or buildings, that:
- Is suitable for personal use,
- Can reasonably be expected to last at least 1 year under ordinary use,
- Has a sales price of more than $10,000, and
- Can be seen or touched (tangible property).
- A collectible (for example, a work of art, rug, antique, metal, gem, stamp, or coin).
- Travel or entertainment, if the total sales price of all items sold for the same trip or entertainment event in one transaction (or related transactions) is more than $10,000.
The scenarios under which you may or may not have to file a Form 8300 are virtually innumerable. A single blog post is not sufficient to cover the scope of exceptions and nuances to the rules. I wanted to give you the basics, and then run you through the two main problems of actually filling out the form.
Tricky Form Requirements for Business
While knowing whether you have to fill out a Form 8300 can be tricky business, actually filling out the form is fairly straightforward from the seller’s perspective. However, your customers might have some issues with the questions you ask them while filling out the form.
First, you must ask your customers for whom you must file a Form 8300 for their government issued identifications. This is so you can write down their address.
Second, you must ask your customers for whom you must file a Form 8300 for their Tax Identification Number. If they won’t give it to you, then you either need to turn them away as customers, or you must comply with the reasonable cause provisions of Treasury Regulation section 301.6724-1.
The IRS and other federal agencies use undercover agents in sting operations to build these cases against business people, including jewelry stores, car dealerships, and attorneys. If you believe that you’re under investigation for failing to file Form 8300 or if you’d like to develop a compliance program, you can contact our office at (408) 459-8427 or firstname.lastname@example.org.