What is Form 8300
Form 8300: While this particular IRS form is not specifically for international tax and reporting compliance, it oftentimes impacts international businesses — especially those overseas in countries where cash payments are common.
Form 8300 is an important IRS and FinCEN form for individual who own businesses, and receive payments of more than $10,000 (it does not need to be $10,000 at one specific transaction. This is especially true when foreign income is an issue.
Form 8300 Explained
Form 8300 is an IRS form which requires businesses that receive large cash payments (usually in excess of $10,000) to report the transaction to the IRS on IRS Form 8300 (Report of Cash Payments Over $10,000 Received in a Trade or Business).
Filing the 8300 with the IRS should be a pattern and practice for any business receiving large cash payments.
But, if the filer also has foreign accounts, is receiving cash deposit abroad, and especially if the business-owner is keeping the money overseas – it is crucial to remain in IRS compliance.
As provided by the IRS:
“Generally, you file Form 8300 by the 15th day after the date the cash was received. If that date falls on a Saturday, Sunday, or legal holiday, file the form on the next business day.)”
If you do receive payments in excess of $10,000, you may have very strict reporting requirements to the IRS and FinCEN. The failure to submit proper reports may lead to fines, penalties and even criminal investigations.
Common Issues for Cash Businesses
Common issues involving Form 8300 include the following:
More than $10,000
When you receive more $10,000 (and not necessarily in one transaction), you may have a Form 8300 filing and reporting requirement.
As provided by the IRS:
“The general rule is that you must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.”
24-Hour Period – Be Cautious
While the general rule is that a series of transactions with related transactions that take place within 24 hours, there is a caveat. The caveat is that when a person receives multiple payments outside of that 24 hour period but the recipient knows that each transaction is related (a series of transactions) then that payment must be reported as well.
Example: David runs his own business. He receives to cash payments involving the same transaction over one week. The Total value exceeds $10,000. David knows that the money relates to the same transaction — David must report form 8300; it does not matter that the transactions are outside the 24-hour period.
Issues involving foreign money are becoming more prevalent.
Here’s an example we see often: Scott is a purchaser/customer in Malaysia. He wants to purchase equipment from a U.S. Person for more than $20,000 dollars of equipment from a US company in a single transaction. Scott does not want to send a check. Rather, on five different days he has five different people go to five different financial institutions in Malaysia and each make a $4000 deposit.
From Scott’s perspective, the transactions cannot be held to be related, because they are different branches and is outside the 24-hour period.
Of course, there is one key fact that Scott did not take into consideration: all of the money is going into the same account, the same account number, at the same financial institution, from the same foreign country — stemming from the same transaction.
As such, it will look very conspicuous if the US is this person does not file a form 8300 and tries to make the argument that he suddenly received five different $4000 payments from various branches throughout Malaysia into his account during the same week.
Like anything involving the Internal Revenue Service, there are always exceptions.
Received Payments Abroad? Remember FBAR & FATCA
Depending on the facts and circumstances of your situation and your business, you may be able to avoid reporting by receiving the cash transaction entirely outside of the United States.
But, it is also important to note that the business and/or the owner will have other reporting requirements in accordance with the Internal Revenue Service, FATCA and FinCEN.
The most important reporting requirements usually involve the following:
An FBAR statement is a Report of Foreign Bank and Financial Accounts form.
An FBAR is required to be filed when a person or business (explained below) has an annual aggregate total of foreign accounts that exceeds $10,000 on any day throughout the year. It does not matter if all that money is in one account or if a person had 11 accounts with $1000.00 in each account. Once your overseas foreign accounts exceed $10,000, it is now time to report all of the foreign accounts.
You are required to report the maximum balance throughout the year. If you do not have the maximum balance available, you can mark the box that notes the Max balance is unavailable — or alternatively you can use the best value you have, and then note that information on the FBAR.
IRS form 8938 is a form developed to ensure individuals with Specified Foreign Financial Assets get into compliance by disclosing their foreign assets and information to the IRS. The form is “average” when it comes to complexity of IRS forms. It generally only requires an individual to identify, list, and report assets and accounts (under certain scenarios) to the IRS.
Please keep in mind that certain items that may need to be reported on other forms such as a FBAR may not need to be included on form 8938.
Likewise, certain items that you did not have to report on the FBAR, will need to be reported on form 8938.
FBAR & FATCA Penalties
The penalties for these failing to comply reporting rules are severe. And, the IRS believes you acted willfully or with reckless disregard trying to set up a payment scheme outside of the US in order to avoid reporting, but then do not report properly under the foreign account reporting rules – you could become subject to a 100% in a multiyear audit for the FBAR Alone.
In other words, be careful.
Form 8300 Penalties
As provided by the IRS: You may be subject to penalties if you fail to file a correct and complete Form 8300 on time and you cannot show that the failure was due to reasonable cause. You may also be subject to penalties if you fail to furnish timely a correct and complete statement to each person named in a required report.
A minimum penalty of $25,000 may be imposed if the failure is due to an intentional or willful disregard of the cash reporting requirements.
Penalties may also be imposed for causing, or attempting to cause, a trade or business to fail to file a required report; for causing, or attempting to cause, a trade or business to file a required report containing a material omission or misstatement of fact; or for structuring, or attempting to structure, transactions to avoid the reporting requirements.
These violations may also be subject to criminal prosecution which, upon conviction, may result in imprisonment of up to 5 years or fines of up to $250,000 for individuals and $500,000 for corporations or both.
What if I am Out of IRS Compliance?
When you have not met your prior year IRS foreign bank account compliance obligations, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
Contact our firm today for assistance.