Because large cash transactions are known to be involved in money laundering for illegal and underground enterprises like organized crime or drug trafficking, such large cash transactions are of interest to the IRS, FinCen as well as other federal law enforcement authorities like the FBI. For this reason, there is a law requiring any person, the definition of which includes a business for the purposes of this law, making a transaction that involves receiving over $10,000 in cash to report this transaction on a separate form filed with the IRS, Form 8300. These records have greatly helped law enforcement combat money laundering, tax evasion, drug dealing, terrorist financing, and other criminal activities. Failure to file such a record after a large cash transaction, however, can lead to draconian civil and potential criminal penalties and major federal scrutiny that the taxpayer may wish to avoid. At the Tax Law Offices of David W. Klasing, our experienced tax attorneys and CPAs are here to advise you on when and how you must file this form, the potential consequences for not filing, and how we assist you throughout the process especially if a civil or criminal controversy develops over this issue.
As noted above, anytime there is a cash transaction involving more than $10,000, the “person” who is the recipient of the money is required by the IRS to submit Form 8300 reporting the transaction. By law, a “person” is an individual, company, corporation, partnership, association, trust, or estate. Therefore, businesses, as well as individuals, must report transactions where they receive more than $10,000 by submitting Form 8300. A transaction is defined as a lump sum, two or more related payments within 24 hours, or two or more related transactions within a 12 month period. For example, a yearlong lease where rent payments total more than $10,000 would be considered a single transaction that must be reported.
The next question becomes what qualifies as “cash” under the meaning of this law. Any coins or currency of the United States or any foreign nation qualify as cash, as well as cash equivalents that include cashier’s checks (sometimes called a treasurer’s check or bank check), bank drafts, traveler’s checks or money orders. If cash equivalents and cash are combined as part of a single transaction to reach more than $10,000, the transaction must be reported.
Generally, qualifying cash transactions must be reported by filing the form within 15 days after you receive the cash, unless the 15th day falls on a weekend or holiday, in which case you have until the next business day. However, there can be some complexities with this rule, such as when it is a series of payment, rather than a lump sum. It is best to consult with a skilled Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing, who can help you understand whether your transaction must be reported, when and how to report it, and can assist you with correctly filling out and filing the form if needed.
The civil penalty for negligent, rather than intentional, failure to timely file a Form 8300, to include all required information, or to include accurate information is $270 per required form in 2020, with the amount being adjusted each year for inflation. The overall amount for the penalties cannot exceed $3,339,000. If your average annual receipts come out to $5,000,000 or less, your civil penalties will be capped at $1,113,000 for the year. If your failure to file an accurate and timely form was intentional or willful, the civil penalty will be the greater of $27,820 or the amount of cash received in the transaction, not to exceed $111,000. However, if you correct the issue within 30 days, the per form penalty is reduced from $270 to $50. This is one of the reasons it is vital to get in touch with a skilled dual licensed Tax Attorney and CPA like those at the Tax Law Offices of David W. Klasing as soon as possible after you realize your error so that we quickly get it corrected, so you qualify for the reduced penalty.
In some cases where your actions are deemed willful or intentional, you could also face criminal penalties for failure to file an accurate and timely Form 8300 as required. In these cases, it is even more important that you have a skilled Tax Attorney working to mitigate the damage and settle the case for you before it becomes a serious criminal issue. If convicted of willful failure to file Form 8300, the criminal penalties can include a fine up to $25,000 ($100,000 in the case of a corporation), and/or imprisonment up to five years, plus the costs of prosecution. If convicted of filing a false or incomplete Form 8300, penalties can include up to $100,000 ($500,000 in the case of a corporation), and/or imprisoned up to three years, plus the costs of prosecution.
Any cash transaction involving more than $10,000 must be reported to the IRS by the recipient of the money, generally within 15 days of receiving the cash. This applies to businesses as well as individuals. At the Tax Law Offices of David W. Klasing, our knowledgeable Attorneys and CPAs have years of experience assisting taxpayers in knowing when to file this form and filing it on time. For those who have failed to file a timely and accurate form, we can work to bring you back into compliance with the most minimal possible penalties. For those that are facing a penalty or criminal prosecution, we can work to do damage control. Call us today at (661) 432-1480 to set up a consultation or schedule online here.