- 1 How to Prepare Form 8300 for Reporting Cash Payments
- 2 Who Must File Form 8300?
- 3 Form 8300 Explained
- 4 Common Form 8300 Issues for Cash Businesses
- 5 Important Form 8300 Definitions
- 6 Received Payments Abroad? Form 8300, FBAR & FATCA
- 7 FBAR & FATCA Penalties
- 8 Form 8300 Penalties
- 9 What if I am Out of Form 8300 Compliance
- 10 Golding & Golding: About Our International Tax Law Firm
How to Prepare Form 8300 for Reporting Cash Payments
How to Prepare Form 8300 for Reporting Cash Payments: When a business receives a cash payment, the Internal Revenue Service wants to know about — and they want to know sooner as opposed to later. Businesses have a very limited-time to report cash transaction(s) timely — before they are noncompliant and then potentially subject to fines and penalties. 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 — it can be a series of transactions).
Who Must File Form 8300?
As provided by the IRS:
Each person engaged in a trade or business who, in the course of that trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file Form 8300. Any transactions conducted between a payer (or its agent) and the recipient in a 24-hour period are related transactions.
Transactions are considered related even if they occur over a period of more than 24 hours if the recipient knows, or has reason to know, that each transaction is one of a series of connected transactions.
Keep a copy of each Form 8300 for 5 years from the date you file it. 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. For these purposes, a clerk includes the clerk’s office or any other office, department, division, branch, or unit of the court that is authorized to receive bail. If a person receives bail on behalf of a clerk, the clerk is treated as receiving the bail. See Item 33 under Part III, later.
If multiple payments are made in cash to satisfy bail and the initial payment does not exceed $10,000, the initial payment and subsequent payments must be aggregated and the information return must be filed by the 15th day after receipt of the payment that causes the aggregate amount to exceed $10,000 in cash. In such cases, the reporting requirement can be satisfied by sending a single written statement with the aggregate Form 8300 amounts listed relating to that payer.
Payments made to satisfy separate bail requirements are not required to be aggregated. See Treasury Regulations section 1.6050I-2. Casinos must file Form 8300 for nongaming activities (restaurants, shops, etc.). Voluntary use of Form 8300. Form 8300 may be filed voluntarily for any suspicious transaction (see Definitions, later) for use by FinCEN and the IRS, even if the amount does not exceed $10,000.
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.)”
What does this Mean?
It means if a Business receives payments in excess of $10,000, they (unless and exception applies) 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 Form 8300 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.
Form 8300 24-Hour Period Trap – 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.
Important Form 8300 Definitions
Here are some of the key Form 8300 Definitions as provided by the IRS:
The term “cash” means the following.
U.S. and foreign coin and currency received in any transaction; or
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 (defined below), 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 under either section 6050I or 31 U.S.C. 5331. Note. Cash does not include a check drawn on the payer’s own account, such as a personal check, regardless of the amount.
Designated Reporting Transaction
A retail sale (or the receipt of funds by a broker or other intermediary in connection with a retail sale) of a consumer durable, a collectible, or a travel or entertainment activity.
Any sale (whether or not the sale is for resale or for any other purpose) made in the course of a trade or business if that trade or business principally consists of making sales to ultimate consumers.
An item of tangible personal property of a type that, under ordinary usage, can reasonably be expected to remain useful for at least 1 year, and that has a sales price of more than $10,000.
Any work of art, rug, antique, metal, gem, stamp, coin, etc.
Travel or Entertainment Activity
An item of travel or entertainment that pertains to a single trip or event if the combined sales price of the item and all other items relating to the same trip or event that are sold in the same transaction (or related transactions) exceeds $10,000.
A cashier’s check, money order, bank draft, or traveler’s check is not considered received in a designated reporting transaction if it constitutes the proceeds of a bank loan or if it is received as a payment on certain promissory notes, installment sales contracts, or down payment plans. See Publication 1544 for more information.
An individual, corporation, partnership, trust, estate, association, or company.
The person receiving the cash. Each branch or other unit of a person’s trade or business is considered a separate recipient unless the branch receiving the cash (or a central office linking the branches), knows or has reason to know the identity of payers making cash payments to other branches.
Includes the purchase of property or services, the payment of debt, the exchange of cash for a negotiable instrument, and the receipt of cash to be held in escrow or trust. A single transaction may not be broken into multiple transactions to avoid reporting.
A suspicious transaction is a transaction in which it appears that a person is attempting to cause Form 8300 not to be filed, or to file a false or incomplete form.
Received Payments Abroad? Form 8300, 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 Form 8300 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.