Depending on where a person is traveling to and for what purpose, they may be required to travel with a significant amount of cash or other currency. For example, when a person is conducting business overseas in either Third World countries or more rural parts of major cities, cash is generally the only form of currency accepted.
For example, if you are currently leasing factory in rural China or Japan it comes time to make a significant payment for work performed, a credit card or check just won’t cut it. In addition, access to bank accounts in these places can be difficult as well. As a result, your are placed in the uncomfortable position of having to travel to these countries with a significant amount of cash on your person.
It is important that international travelers have an idea of what documentation is required to be filed or completed if they are placed in this position. Why? Because if you fail to comply and the the money is detected by the U.S. Government before you had a chance to explain why you did not comply, it may result in you being held at the airport or possible customs holds pending the resolution of what is just a simple matter of making cash payments for work performed – or any other innocuous circumstances requiring the transport of large amounts of cash.
Are you Required to Report this Money?
It depends on how much money you are traveling with, transporting, or receiving:
As provided by the instructions for the FinCEN (Financial Crimes Enforcement Unit) 105 form:
- (1) Each person who physically transports, mails, or ships, or causes to be physically transported, mailed, or shipped currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time from the United States to any place outside the United States or into the United States from any place outside the United States, and
- (2) Each person who receives in the United States currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time which have been transported, mailed, or shipped to the person from any place outside the United States.”
Thus, it is very important to understand that the burden is not only on the person who transports the money, but also on the person who receives the money. In reality, nobody who receives money that is transported in this fashion is going to file this instrument. It would be nearly impossible for the Internal Revenue Service or any government agency the follow-up to determine whether you received money from somebody in cash. Still, you should comply – since there are not necessarily any tax or legal reasons no to.
On the other hand, if you are the person actually traveling with the cash and you have more than $10,000 on your person then you really should be sure to complete this form to avoid any unnecessary hassle or future problems with the IRS or other government agency.
As a side note, the form is clear that you are not required to file this form if you are simply transferring money, which is more than $10,000 using ATM or online banking system. Rather, the key to this form his when someone is traveling or sending the money.
How to File a FinCEN 105
- Recipients—Each person who receives currency or other monetary instruments in the United States shall file FinCEN Form 105, within 15 days after receipt of the currency or monetary instruments, with the Customs officer in charge at any port of entry or departure or by mail with the Commissioner of Customs, Attention: Currency Transportation Reports, Washington DC 20229.
- Shippers or Mailers— lf the currency or other monetary instrument does not accompany the person entering or departing the United States, FinCEN Form 105 may be filed by mail on or before the date of entry , departure, mailing, or shipping with the Commissioner of Customs, Attention: Currency Transportation Reports, Washington DC 20229.
- Travelers—Travelers carrying currency or other monetary instruments with them shall file FinCEN Form 105 at the time of entry into the United States or at the time of departure from the United States with the Customs officer in charge at any Customs port of entry or departure. An additional report of a particular transportation, mailing, or shipping of currency or the monetary instruments is not required if a complete and truthful report has already been filed. However, no person otherwise required to file a report shall be excused from liability for failure to do so if, in fact, a complete and truthful report has not been filed. Forms may be obtained from any Bureau of Customs and Border Protection office.
Penalties for Not Filing a FinCEN 105
PENALTIES: Civil and criminal penalties, including under certain circumstances a fine of not more than $500,000 and Imprisonment of not more than ten years, are provided for failure to file a report, filing a report containing a material omission or misstatement, or filing a false or fraudulent report. In addition, the currency or monetary instrument may be subject to seizure and forfeiture. See 31 U.S.C.5321 and 31 CFR 1010.820; 31 U.S.C. 5322 and 31 CFR 1010.840; 31 U.S.C. 5317 and 31 CFR 1010.830, and U.S.C. 5332.
Exceptions to the FinCEN 105 Reporting Rule
Exceptions – Reports are not required to be filed by:
- a Federal Reserve bank,
- a bank, a foreign bank, or a broker or dealer in securities in respect to currency or other monetary instruments mailed or shipped through the postal service or by common carrier,
- a commercial bank or trust company organized under the laws of any State or of the United States with respect to overland shipments of currency or monetary instruments shipped to or received from an established customer maintaining a deposit relationship with the bank, in amounts which the bank may reasonably conclude do not exceed amounts commensurate with the customary conduct of the business, industry, or profession of the customer concerned,
- a person who is not a citizen or resident of the United States in respect to currency or other monetary instruments mailed or shipped from abroad to a bank or broker or dealer in securities through the postal service or by common carrier,
- a common carrier of passengers in respect to currency or other monetary instruments in the possession of its passengers,
- a common carrier of goods in respect to shipments of currency or monetary instruments not declared to be such by the shipper,
- a travelers’ check issuer or its agent in respect to the transportation of travelers’ checks prior to their delivery to selling agents for eventual sale to the public,
- a person with a restrictively endorsed traveler’s check that is in the collection and reconciliation process after the traveler’s check has been negotiated, nor by
- a person engaged as a business in the transportation of currency, monetary instruments and other commercial papers with respect to the transportation of currency or other monetary instruments overland between established offices of banks or brokers or dealers in securities and foreign persons.
Should You File Form FinCEN 105?
Yes. It is important to understand that ever since the United States has enacted and began enforcement of FATCA (Foreign Account Tax Compliance Act), there has been an increased awareness of international tax related issues. If the Department of Treasury and/or Internal Revenue Service or other government agency gets wind of the fact that you transported significant amount of money overseas and/or were the recipient a significant amount of money coming from overseas — the US government is going to force the fines and penalties against you.
These penalties are very high, and include both civil and criminal tax sections. If the Internal Revenue Service determines that the failure to report this money was willful, and they initiate a criminal investigation against you, you could very well find yourself bankrupt or in prison. Moreover, the Department of Treasury/Internal Revenue Service is known being one of the most brutal enforcement agencies in the world. When it comes to criminal investigations, the IRS does not investigate everyone, but for the individuals that they do investigate and subsequently file charges against — they have a near-perfect conviction record.
That is not the say you are contacted by the IRS or Department of Treasury regarding this type of issue that you are going to go to jail or prison, but the consequences are very serious. In addition, for individuals who are actually traveling with the money on their person, they have be very careful about remembering to report this money at the airport.
Otherwise, if they do not report the money but are otherwise detected by customs (and depending on the amount of cash they have on a person) it may result in some very serious consequences – which could include detainment or imprisonment. Moreover, when it comes to international reporting, authorities are beginning to use customs holds in order to detain individuals at various airports around the world.
While in detainment, a person is not actually arrested – so they may not be read their Miranda rights; often times if someone has not been read their Miranda rights they may end up speaking in situations they were not otherwise do so without the help of an attorney. Of course, when you are being detained at the airport and your international travel in jeopardy it’s hard to not want to just answer a question and get out of the situation – but it is still always recommended to contact an attorney first.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.