Form 8300 is a document that must be filed with the IRS when an individual or business receives a cash payment over $10,000. Businesses that deal in large cash transactions are required to report all of their dealings accurately and honestly with the IRS. One way the IRS makes sure that businesses stay honest is by requiring Form 8300. If you run a business that handles large cash deals, hiring a tax professional, whether it be a CPA or enrolled agent, should be a top priority. The IRS has little tolerance for errors and failure to file Form 8300 can result in penalties. If you don’t want to risk a major audit or investigation into your business, it may be time to hire a tax professional to help with your cash payment reports.
Form 8300 Rules
If you or your business receives a payment of $10,000 in cash (or more), the total amount must be included and you are required to file. Form 8300 must be filed for each separate transaction that exceeds the $10,000 in cash limit. However, only the recipient of the funds is required to file a Form 8300 with the IRS. Any transactions that occur between a payer and the recipient in a 24-hour period are considered related transactions. Financial exchanges that occur over a time period that exceeds 24-hours can still be considered related if the recipient knows, or has reason to know, that each transaction is on a series of connected transactions.
All transactions that are considered related and exceed $10,000 in cash payments as a whole, must be reported in a Form 8300. It doesn’t matter how many transactions a deal is broken into or how long (within a 12-month period of time) your transactions are spaced out; if the IRS considers them to be related, you can be penalized for failing to file.
It’s also important to understand what forms of currency fall under the umbrella definition of cash. According to the IRS, cash includes the coins and currency of the US or foreign countries, cashier’s checks, bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less. Cash is not defined as personal checks drawn on the account of the writer. Cashier’s checks, bank drafts, traveler’s checks, or money orders with a face value of more than $10,000 are not considered cash either.
Form 8300 Requirements
The IRS requires that you file Form 8300 within 15 days of receiving the money in a transaction. Failing to do so will accrue you or your business penalties if the IRS finds out. If you simply fail to file on time, then the penalties will be $100 for each occurrence. If your business makes less than $5 million per year, the maximum amount you can pay the IRS in penalties is $500,000 per fiscal year. However, if you correct the failure to file within 30 days, the penalty ceiling will drop to $75,000. Other important requirements include:
- The identity of the individual from whom the cash was received: This includes the individual’s name, address, and contact information.
- The person on whose behalf this transaction was conducted: If you are a business owner and one of your employees handles the transaction, you are required to give detailed information such as their name and employee ID.
- Description of the transaction and method of payment: This section will ask for the exact amount and the method used for a payment. For example, $1350 in US currency for business service provided. There will be boxes in this section that you can check to describe the details of your transaction.
- The business that received cash: This section asks the business name, address, nature of your business, employee ID, and social security number. As the authorized business owner or an employee, your signature will be required in this section.
There are more detailed requirements listed at the end of Form 8300 that you should read and understand if you plan on including items as a part of your sales and transactions. Filing this form with a tax professional who understands the laws and requirements in great detail can keep you from getting into hot water with the IRS.
What Does the IRS do with Form 8300?
As a branch of the US Treasury, the IRS is required to create and hold files that pertain to businesses. When you file a Form 8300, it will be archived with the rest of your business’s tax-related documents. Even though the IRS will keep detailed records of all of your forms and files, it’s still a good idea to maintain copies of everything you file for at least five years. Form 8300 is essentially for the IRS’s record keeping to make sure that your business is being honest about its transactional reporting.
How to File Form 8300
A report of cash payments on a Form 8300 can be filed by mail, online, or through a tax professional. After 2012, the IRS made it possible to file Form 8300 online after the increase of filings from small businesses. However, due to the complex and sensitive nature of these filings, it is always best to go through a tax professional when filing so that an audit or investigation can be avoided.
If you or your business needs to file a Form 8300 with the IRS, Community Tax has all of the tools and resources you need to make sure your IRS forms are filed error free. Our team of qualified professionals has the knowledge and expertise to assist you with all of your filing needs. Don’t get flagged by the IRS for an error that could have been prevented by a tax professional; call Community Tax today 888.684.5803.