A Refresher About Cash Reporting

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If you are hiding cash from your friend, children, or neighbors you probably just leave it in the bank so no one can snatch it. But some people for reasons that may or may not be honorable, try to transact in cash and don’t want it reported to the government. For those who have less than honorable reasons for secrecy, the IRS has form 8300 to report these transactions, and you must comply with the reporting requirements as a business owner. No, this is not new news, but it is worth repeating because of the severity of this. Remember, the whole intent is to catch money laundering schemes which is a criminal matter; you don’t want to be found out of compliance.

Do dealers really get in trouble for this?

YES!!!!

BALE CHEVROLET COMPANY, APPELLANT v. UNITED STATES OF AMERICA, APPELLEE.

You can read about this case at http://caselaw.findlaw.com/us-8th-circuit/1537063.html. Basically after a long and drawn out court case it was finally decided (fully) in 2010 for a case started in 2009 and pertained to the 2000 tax year. Believe me; you do not want to go through what Bale Chevrolet went through.

The government basically established that they only have to have a reasonable justification to assess penalties for intentional disregard. In the case of Bale, the government dropped the $100,000 penalty, but would not pay for the legal fees because the IRS had reasonable justification for assessing the penalties.

There are many other cases where the penalties are not dropped, but my point is that if you aren’t diligent in your policies, procedures, and execution of them regarding this reporting requirement you may still be incurring a substantial cost for defending yourself.

 Who has to file a form 8300?

1. Any dealer who receives more than $10,000 in a transaction.
2. Any dealer who receives a series of payments totaling more than $10,000.
3. Any dealer who “Suspects” that someone is trying to circumvent the reporting requirements..

What is cash?

1. U.S. and foreign coin and currency received in any transaction.
2. A cashier’s check, money order, bank draft, or traveler’s check having a face amount of $10,000 or less that is received in a designated reporting transaction (sale of vehicles is a designated reporting transaction) or that is received in any transaction in which the recipient knows that the instrument is being used in an attempt to avoid the reporting of the transaction.

What if you don’t report it?

First of all, these are fairly straightforward rules for dealers to follow, and when in doubt, just file one. It does not cost anyone anything other than a little time and a postage stamp. The minimum penalty for failing to comply is $25,000.

Real Example: While doing year end work at a client, a customer has $2,000 in currency and 3 cashier checks totaling $7,000. The total of all is $9,000. The customer made a comment stating that he did this so it wouldn’t be reported. My client informed him at that point that they had to file one regardless of the amount.

Compliance reminder:

You must give a written or electronic statement to each person named on a required Form 8300 on or before January 31 of the year following the calendar year in which the cash is received. The statement must show the name, telephone number, and address of the information contact for the business, the aggregate amount of reportable cash received, and that the information was furnished to the IRS. Keep a copy of the statement for your records. I recommend doing this via certified mail so you have a receipt for your records.

Where to get the Form?

You can download the most current of form 8300 at the IRS website http://www.irs.gov/pub/irs-pdf/f8300.pdf  . Also there are specific instructions you need to read and follow so that the form is properly filed

If you have any questions, please feel free to contact us at any of our four locations.

John E. Donaldson, CPA
Potter & Company, P.A.
www.gotopotter.com/dealerships
704-926-3300