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Reporting cash receipts over $10,000
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Since 1985, Sec. 6050I has required that persons who, in their trade or business, receive more than $10,000 in cash in a transaction or a series of two or more related transactions file an information return reporting this to the IRS. This same information reporting requirement is mirrored in Section 5331 of the Bank Secrecy Act of 1970. The form that is used to satisfy both reporting requirements is Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.
The original intent behind these statutes was to enable the IRS and Treasury’s Financial Crimes Enforcement Network (FinCEN) to detect and pursue money-laundering schemes. Cash monies received from illegal enterprises are often used to purchase high-dollar tangible goods, commodities, and real estate investment properties. However, besides helping to track down money laundering, the requirements imposed by these statutes also provide an avenue for identifying individuals and businesses using cash income that has not been reported for income tax. Tax owed on this unreported cash income is potentially a significant piece of the “tax gap” — the difference between the tax owed in a year and the amount that is actually paid.1
Cash economy transactions are at high risk of not being reported, and estimates are that the cash economy comprises as much as 35% of the tax gap.2 IRS Commissioner Charles Rettig has made a point of highlighting the expansion of the tax gap in his effort to seek funding for more enforcement resources.3 Coincidentally, the IRS has recently reminded businesses of their Form 8300 reporting obligations. IRS news releases and accompanying fact sheets in 2019 4 and 2020 5 and again in 2021 6 summarize the requirements for reporting large cash transactions. It is also worth noting that the current commissioner is very familiar with the reporting requirements of Form 8300, having once published an article about it.7
Many traditional cash-intensive businesses are well versed in these reporting requirements, including dealers in automobiles, recreational vehicles, boats, and jewelry, as well as pawnbrokers, bail bondsmen, attorneys, insurance companies, and travel agencies. Within the last decade, cannabis businesses have become acutely aware of the Form 8300 reporting requirements. However, many other businesses may, under certain circumstances, be subject to these reporting requirements. For example, if a landlord accepts cash payments for a lease of property, or if a contractor or retail business accepts cash in a lump sum or in installment payments for goods or services, a Form 8300 filing may be required.
CPAs should be cognizant of the general requirements for reporting large cash transactions, even if they are not typically the preparers or filers of the Form 8300. Practitioners who are aware that their clients accept (even infrequently) cash payments from customers for goods or services should consider alerting or reminding such clients of the reporting requirements. In addition, practitioners should alert their clients who accept cryptocurrencies or other digital assets as payment for transactions. The Infrastructure Investment and Jobs Act,8 signed into law on Nov. 15, 2021, modifies Sec. 6050I to include digital assets, including cryptocurrencies, in the definition of cash for purposes of Form 8300. This modification applies for return filings and customer statements furnished after Dec. 31, 2023.
Once a reporting requirement is triggered, there is a 15-day window to file the Form 8300, as well as a requirement to provide a subsequent customer notice. There is a small civil penalty for each return not filed and for a failure to furnish the customer notice; such penalties can be reduced through corrective measures. However, intentionally disregarding the filing requirement, or structuring transactions to avoid the filing requirements, can trigger penalties that are exponentially larger.
The discussion below reviews the IRS’s Form 8300 reporting requirements, focusing on practical examples of reporting situations, as well as situations where reporting is not required. In addition, the discussion reviews several court decisions that have examined the IRS’s imposition of penalties for reporting failures and sets forth some recommendations and guidelines for practitioners when advising clients with Form 8300 reporting obligations.
Who must file?
In general, any person who, in the course of a trade or business, receives cash in excess of $10,000 in one transaction or multiple related transactions must file an information return with the IRS (Form 8300) with respect to the cash received.9
A “person” includes an individual, trust, estate, partnership, association, company, or corporation.10 A person does not include a governmental unit, which includes the U.S. government, states, political subdivisions of states, and integral parts of states and political subdivisions.11 “Trade or business” has the same meaning as in Sec. 162.12
Tax-exempt organizations, including employee benefit plans, are considered persons.13 Charitable organizations are not required to report cash charitable contributions on Form 8300, as they are not receiving the cash in the course of a trade or business.14 However, charitable organizations must report noncharitable cash payments received, such as cash received for real or personal property rentals or sales of property or goods from an unrelated trade or business activity.
Persons include those that collect cash for the account of another (such as the collection of accounts receivable).15 Persons can include agents; agents receiving cash in excess of $10,000 on behalf of a principal must report receipt of the cash.16 This includes receipt of cash deposited into the account of the agent or the account of the principal, or even if the agent delivers the cash directly to the principal.17 There is a limited exception where the cash is used by the agent within 15 days in a second transaction and the agent discloses the name of the principal to the ultimate recipient of the cash.18
What transactions are covered?
A “transaction” is the underlying event giving rise to the transfer of cash, and the regulations give broad examples of transactions: a sale of goods or services; sales of real property or intangible property; rentals of real or personal property; exchanges of cash for other cash; contributions to trust or escrow arrangements; payments of preexisting debts; conversions of cash to negotiable instruments; reimbursement of expenses; and repayment of loans.19
A transaction cannot be separated into multiple transactions to avoid reporting — these are considered “related transactions.” Related transactions involve multiple payments that are all related to the same underlying event resulting in the initial transfer of cash.20 They include (1) any transaction between a payer and a recipient of cash in a 24-hour period, or (2) any such transactions during a period in excess of 24 hours if the cash recipient knows or has reason to know that each transaction is one of a series of connected transactions.21
Example 1: In the afternoon, an individual purchased a table at a retail furniture business for $8,000 cash. The next morning, the individual returns to the same establishment and purchases a painting for $2,500 cash. Although the purchases involve different goods and occur on different days, the purchases occur within a 24-hour period and are considered related transactions; therefore, the total amount ($10,500) must be reported.
Example 2: A doctor charges $11,000 for medical treatments to an individual. The individual pays $6,000 cash after the treatment, then pays the balance in two installments: $3,000 in cash one month later and the final $2,000 cash payment in the following month. The aggregate amount of cash paid represents a single transaction, the provision of medical services, that must be reported by the doctor on Form 8300.
Example 3: A customer purchases a piece of factory equipment for $9,500 cash and 10 months later purchases replacement parts, accessories, and equipment services for $1,500 cash. If the additional transactions were not a part of the original $9,500 sales contract and the customer has no legal obligation for the additional purchases, this is not a reportable transaction.
There are limited exceptions to the reporting requirements. They include financial institutions22 and casinos with gross annual gaming revenue of more than $1 million.23 In addition, transactions that are not related to a trade or business (e.g., a sale of a personal automobile or boat for more than $10,000 cash) need not be reported.24 Transactions in which the entire transaction, including the receipt of cash, occurs outside of the United States need not be reported.25 However, if any part of the entire transaction occurs in Puerto Rico, or a possession or territory of the United States and the cash recipient is subject to the jurisdiction of the IRS, then the cash recipient must file a Form 8300.26 Although not excepted from reporting, there are specific reporting requirements for criminal court clerks receiving more than $10,000 in bail.27
What is (and is not) considered ‘cash’?
Under its most narrow definition, “cash” includes coin and currency of the United States, as well as foreign currency.28 Cash does not include such items as personal checks, wire transfers, credit card payments, ATM or debit card payments, or ACH (Automated Clearing House) payments. In addition, financial instruments such as cashier’s checks or bank checks, bank drafts, traveler’s checks, and money orders with face amounts *in excess of* $10,000 are not cash; financial institutions have a separate reporting obligation in this area that is outside the scope of the present discussion.29
Under certain circumstances, the definition of cash is expanded to include the previously noted financial instruments in amounts which are not in excess of $10,000. If such financial instruments are received in either a “designated reporting transaction,” or in a transaction in which the recipient knows that such instrument is being used in an attempt to avoid the filing of a Form 8300, then such instruments are considered cash.30
A designated reporting transaction is the retail sale (including through a broker or intermediary) of a consumer durable, a collectible, or a travel or entertainment activity.31 A consumer durable is an item of tangible personal property suitable for personal use that is expected to last for at least one year, with a sales price greater than $10,000.32 Standard examples include cars, boats, and recreational vehicles. A collectible includes art, rugs, antiques, metals, gems, stamps, coins, alcoholic beverages, and other tangible personal property specified by the IRS as a collectible.33 A travel or entertainment activity is an item of travel or entertainment that relates to a single trip or event where the sales price of the item and all other items pertaining to the same trip or event that are sold in the same transaction exceeds $10,000.34
Example 4: An individual purchases a large-screen television from a consumer electronics dealer for $11,000 and pays for the item with cash of $5,000 and a cashier’s check for $6,000. The television is a consumer durable, and thus the cashier’s check is considered cash. The transaction must be reported by the dealer.
Example 5: An individual purchases a Persian rug from a dealer for $14,000 and pays with cash of $3,000 and a cashier’s check for $11,000. The Persian rug is a collectible; however, the cashier’s check is not considered cash (it is greater than $10,000), and thus the dealer has not received more than $10,000 cash in the transaction. The dealer has no reporting obligation.
Example 6: An individual in the towing industry buys a used tow truck from a dealer for $17,000. The individual pays with $9,500 cash and a cashier’s check for $7,500. The tow truck is not considered a consumer durable, and thus the cashier’s check is not considered cash. The dealer has not received more than $10,000 cash in the transaction and has no reporting obligation.
Example 7: A customer leases office space for six months and pays a $1,500 security deposit with a money order at the start of the lease and makes six cash payments of $1,500 in advance on the first day of each month thereafter. This transaction does not involve a consumer durable, and thus the expanded definition of cash does not apply. The money order deposit is not considered cash; the lessor has not received more than $10,000 cash and does not have a reporting obligation.
There are exceptions to the expanded definition of cash that applies in designated reporting transactions, specifically for certain types of loans, installment sales, and down payment plans. Cashier’s checks, bank drafts, traveler’s checks, or money orders are not considered cash if:
- They are proceeds of a loan from a bank;35
- They are received in payment on a promissory note or installment sales contract (including a lease treated as a sale for federal income tax purposes) so long as notes or contracts with substantially similar terms are used in the ordinary course of the recipient’s trade or business, and the total amount of payments that are received on or before the 60th day after the date of sale do not exceed 50% of the purchase price;36 or
- They are received in a payment plan requiring one or more payments and the payment of the balance by a date no later than the date of sale, so long as the recipient uses such payment plans with substantially similar terms in the ordinary course of the recipient’s trade or business, and such instruments are received more than 60 days prior to the date of the sale.37
There is one final development with respect to the definition of cash. Cryptoassets, or virtual currencies, were not considered coin and currency under the original definition of cash. However, the Infrastructure Investment and Jobs Act amended Sec. 6050I to provide that cash now includes any digital asset.38 A digital asset is “any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology …”39 These amendments apply to Forms 8300 required to be filed, as well as payee statements that must be furnished, after Dec. 31, 2023.40
Reporting under Form 8300
Once a person receives more than $10,000 cash, reporting on Form 8300 is required within 15 days.41 If one payment is made and requires reporting, and a customer makes additional payments within the 15-day period, all such payments can be aggregated and reported on the one filing.42 For installment payments, the first payment (assuming it does not exceed $10,000) and any later payments made within one year of the first payment must be added, and when the total cash payments exceed $10,000, reporting is required within 15 days.43 Once a Form 8300 is filed, a new count of cash payments begins, and when or if the subsequent cash payments exceed $10,000 within a one-year period, reporting is again required.44
Example 8: A lessee rents equipment on Jan. 1 and pays a $2,100 cash deposit as well as the initial lease payment of $2,100 cash on Jan. 1. The lease is a 12-month lease with payments due on the first day of each month. Assuming the lessee makes all payments in cash, total cash received under the lease will first exceed $10,000 on April 1, and thus a Form 8300 must be filed by the lessor within 15 days thereafter. The next series of cash lease payments from May 1 through Sept. 1 will then require another Form 8300 filing by the lessor within 15 days of the Sept. 1 payment. The remaining three payments on the lease (October through December) will not require a report.
Form 8300 requires detailed information regarding the cash transaction. Part I requires information that discloses the identity of the cash payer. The filer must request the payer’s taxpayer identification number (TIN) and provide the number on the form. Additionally, the filer must verify the name and address of the payer by examining documentation that is normally accepted as means of identification when cashing checks (driver’s license, passport, alien registration card, or other official document)45 and must record the documentation on the form.
Part II requires information if the transaction is being conducted on behalf of more than one person, including the name, address, and TIN of the person for whom the transaction is being conducted. Part III requires information regarding the transaction, including the amount of cash received (and the amount in $100 bills or higher), as well as the amounts received in currency or financial instruments. Finally, Part IV requests information regarding the business that received the cash.
The Form 8300 can be filed by mail or filed electronically using FinCEN’s BSA (Bank Secrecy Act) E-Filing System.
Record retention and statute of limitation
Copies of Forms 8300 must be retained by the filer for five years from the date of filing.46 The statute of limitation for the Form 8300 is three years from the date of filing,47 with no statute of limitation for returns that are never filed.48
Suspicious transactions
If the requisite cash transaction occurs, a Form 8300 filing is mandatory. However, under certain circumstances, a business can file a Form 8300 voluntarily. If a business is suspicious about a transaction, including transactions that are $10,000 or less, the transactions can be voluntarily reported on Form 8300. Examples include:
- A person is trying to prevent a business from filing a Form 8300;
- A person is trying to cause a business to file a false or incomplete Form 8300; or
- A person is potentially engaged in illegal activity.49
Such transactions may be reported by checking the “suspicious transaction” box (box 1b) on the top line of Form 8300. In addition, businesses can contact the IRS Criminal Investigation Division Hotline or the local IRS Criminal Investigation unit.
Payee statements
When a business files a Form 8300, the business must additionally provide an annual single written notice to each person named in the Form 8300.50 The notice must include the following information:
- The name, address, and telephone number of the person filing the return;
- The total amount of reportable cash received by the business during the calendar year in all cash transactions relating to the person being notified; and
- A statement that the information contained in the notice is being reported to the IRS.51
The statement must be furnished to the person on or before Jan. 31 of the year following the year in which the cash is received.52 If there is only one Form 8300 filed during the year, a copy of the Form 8300 furnished to the person can suffice as a notice.53 However, if there is more than one transaction, the information for all Forms 8300 must be aggregated on one year-end statement with all required information.54 Providing copies of the Form 8300 to the cash payer at the time of sale or sending multiple copies at year end does not satisfy the notice requirement.55
If a business voluntarily files a Form 8300 to report a suspicious transaction, the business does not deliver an annual notice to the payer.56 Further, a business is prohibited from notifying the payer that the suspicious transaction box was checked.57
The IRS’s position is that there is no statute of limitation for a failure to furnish or include all required information in a payee statement.58
Penalties for noncompliance
Secs. 6721 and 6722 initially provide fairly innocuous civil penalties for negligent failure to comply with both the filing requirements and the customer notice requirements. The penalties are adjusted annually for inflation. The penalty amount for failures to timely file or to include all required information on the form or include correct information (for 2021) is $280 per return.59 An identical penalty can be assessed for failures to furnish a timely, complete, and correct payee notice.60 For failures that are corrected within 30 days after the required filing date, the penalty is reduced to $50 per return.61 An identical penalty reduction applies to payee notices corrected within 30 days after Jan. 31.62 If the failures are corrected after 30 days, but on or before Aug. 1, the penalty is $110 in lieu of $280.63
However, these sections also provide for greatly enhanced penalties for intentional disregard of the filing or notification requirements. If the failure to file (or to include all required information or include correct information) is due to intentional disregard, the penalty for 2021, applied to *each failure*, is the greater of (1) $28,550, or (2) the amount of cash received in the transaction, not to exceed $114,000.64 For intentional disregard of the payee notification requirements, the penalty is the greater of (1) $570 per failure, or (2) 10% of the aggregate amounts of the items required to be reported correctly.
A failure is due to intentional disregard if it is a knowing or willful failure to timely file, or to include correct information. The determination depends on the facts and circumstances of each case.65 The regulations additionally provide a list of nonexclusive circumstances to consider when determining whether a failure is intentional, including (1) whether the failure is a pattern of conduct involving repeated failures to file or include the correct information; (2) whether the correction was promptly made after discovery; (3) whether the correction was made within 30 days after the date requested by the IRS; and (4) whether the amount of the penalties is less than the cost of complying.66
The IRS has, in several cases, sought to assess the intentional disregard penalties for repeated failures to file or failures to include all required information. The typical fact pattern involves a Sec. 6050I compliance audit that uncovers one or more failures to file, to deliver payee notices, or to properly complete a Form 8300 (e.g., missing TINs).67 The IRS assesses negligence penalties and potentially requires the taxpayer to sign a statement acknowledging the taxpayer’s requirement to file a Form 8300. Similar failures are uncovered in a subsequent examination, and the IRS then assesses intentional disregard penalties.
Fortunately for taxpayers, the IRS has not enjoyed judicial success enforcing intentional disregard penalties for repeated failures. The facts in the most recent decision involving Sec. 6050I, *Mycles Cycles, Inc.*,68 follow the same pattern: The IRS assessed intentional disregard penalties following a subsequent examination that found repeated violations. The court, consistent with prior decisions, reviewed all the facts and circumstances before concluding that intentional disregard penalties were not summarily warranted.
Courts have routinely defined intentional disregard as requiring willful conduct; that is, conduct that is purposeful rather than accidental or unconscious.69 Mistakes, sloppiness, and even lax procedures or a flawed compliance system do not demonstrate voluntary or purposeful conduct rising to the level of intentional disregard.70 Most importantly, prior audit history is but one factor to consider when assessing such penalties, but it is not conclusive as to a determination of intentional disregard.71
The courts have also been strongly influenced by the severity of the intentional disregard penalties. As noted in *Purser Truck Sales, Inc.,* the penalty for an intentional disregard violation increases exponentially as compared to the negligence penalty (for 2021, a $280 negligence penalty per violation as compared to $28,260 for intentional disregard).72 The penalties are extremely harsh, and thus the courts have required a high degree of culpability, more than required for negligence or even recklessness.73
Incorrect or incomplete Forms 8300
Some further thoughts are worth adding about filing an incorrect Form 8300, including failing to include information required by the form, which, as indicated above, can subject the filer to civil and criminal penalties.74 Although some errors or omissions can be deemed inconsequential,75 several errors are never considered inconsequential: failure to obtain a TIN, failure to obtain a surname of the payer, and failure to record correct monetary amounts.76 To avoid penalties, the filer must establish reasonable cause for such failures.77 Reasonable cause can be established if the taxpayer proves that significant mitigating factors excuse the failure or the failure arose due to events beyond the taxpayer’s control.78
A failure to obtain the TIN of the person from whom the cash is received (or incorrectly recording the TIN) is a particularly sensitive issue. Customers may refuse to furnish their TIN, especially if they are aware that a Form 8300 is being filed with respect to the transaction. *This does not require that the filer refuse the cash payment;* rather, in the case of missing or incorrect TINs, reasonable cause can be established if the filer makes at least two TIN solicitations of the payer.79 The filer must make an initial solicitation, either orally or in writing, at the time of the transaction.80 If the customer still does not provide the TIN, the filer is required to make a follow-up annual solicitation on or before Dec. 31 of the year in which the transaction occurred (or by Jan. 31 of the following year for transactions occurring in December).81 The annual solicitation requires a formal request for the TIN (including sending a Form W-9, *Request for Taxpayer Identification Number and Certification,* and a return envelope for written solicitations) as well as notifying the payer that he or she is subject to a $50 penalty imposed by the IRS for not furnishing his or her TIN.82 The filer must maintain contemporaneous records showing the solicitations and provide them to the IRS upon request.83
Providing an incorrect or incomplete annual statement can also subject the business to civil and criminal penalties similar to those for incorrect or incomplete Forms 8300.84
Structuring
Sec. 6050I(f)(1) prohibits any person from causing or attempting to cause a business to fail to file a Form 8300, file a Form 8300 that contains a material omission or misstatement, or structure a transaction or assist in structuring a transaction to evade reporting requirements. This includes setting up or helping to set up a transaction so that it appears a Form 8300 is not required.85 The civil and criminal penalties for structuring are the same as those for failing to file a return or filing a false or incorrect return.86
Criminal penalties
If a person willfully violates any provision of Sec. 6050I, the violation is a felony punishable with of fine of up to $25,000 ($100,000 for a corporation) and imprisonment of up to five years, or both; this applies to a failure to file a return, a failure to furnish a customer statement, and structuring.87 Further, any person who knowingly files a false Form 8300 made under penalties of perjury can be fined up to $100,000 ($500,000 for a corporation) and imprisoned up to three years, or both.88
Practice implications
The reporting requirements for the Form 8300 can impose challenges on businesses that accept cash in their course of business, particularly those businesses that infrequently accept large cash payments and thus may not be aware of the reporting requirements. Outlined below are some recommendations for dealing with clients who may encounter cash transaction reporting obligations.
Alert clients as to the importance of educating their employees on cash reporting
It is important that businesses take steps to ensure that employees understand the basic federal reporting requirements for cash payments over $10,000 and understand what is considered “cash.” As noted previously, the receipt of cash generally means currency and coin, but for certain transactions (i.e., retail sales involving consumer durables, collectibles, or travel/entertainment activities) cash can include financial instruments such as certified or cashier’s checks, bank checks, or traveler’s checks. It is also important for employees to understand what is not cash for reporting purposes: personal checks; ATM, debit card, and credit card payments; wire transfers; and financial instruments with face values of more than $10,000. Also, make sure clients are aware of the pending inclusion of cryptocurrencies as cash for Form 8300 reporting purposes.
Perhaps the best way to educate staff is by providing examples, and the IRS offers multiple resources that illustrate what constitutes cash in the Form 8300 Reference Guide as well as in IRS Publication 1544. However, given the wide diversity of businesses that may be subject to the reporting requirements,89 practitioners can lend assistance by providing cash transaction examples tailored to their client’s unique industry and circumstances.
Impress upon your clients the need for adequate procedures and controls when collecting cash transaction data
Data collection and information tracking procedures are extremely important for Form 8300 compliance. Upfront information collection from the customer is essential. Collection of a Form W-9 from customers before accepting sales orders is good practice and provides the requisite TIN. Personnel involved in reporting a cash transaction are required to examine identification documentation for the additional Form 8300 information required; it is good practice to copy or scan the documentation and save it to a secure folder for future reference as necessary.
Best practices also encourage the use of point-of-sale systems that track payments received from customers and document the form of payment received. Being able to identify and segregate cash, and identify financial instruments that may be considered cash, is critical for adequate compliance. The IRS has emphasized the need for businesses to retain records that identify and distinguish the types of payments received.90 Systems will, ideally, generate reports that identify payments that require Form 8300 reporting, including payments that must be aggregated (e.g., down payments and subsequent installment payments). This is particularly important, as the Form 8300 must be filed 15 days after the $10,000 threshold is reached.
Advise against any ‘structuring’ conversations
Employees should also be cautioned that structuring transactions to avoid reporting is prohibited. Customers may object to the filing of a Form 8300. Employees must not engage in conversations with them that discuss methods of avoiding the reporting requirements, including any methods of breaking up large cash transactions into smaller ones or otherwise disguising the true amount of cash in the transaction.
Encourage checking and correcting the compliance system
If a system is in place for Form 8300 reporting, it needs to be periodically checked and reviewed for continuing compliance. This is one area where practitioners can provide significant assistance to their clients. Conducting a “mini” 8300 audit — targeted reviews of transactions for cash payments breaching the $10,000 threshold — can provide assurance that the system is working or, alternatively, provide critical assistance in identifying any shortcomings.
Two issues are particularly important with respect to identified shortcomings. First, if filings or statements have been missed, prepare and send them. Late filings can reduce penalties and begin tolling the statute of limitation. Further, facts and circumstances considered when assessing whether a failure is due to intentional disregard include whether a correction was made promptly after discovering the failure. Prompt correction of a failure suggests a mistake, not intentional conduct.91 *Second, fix the system.* Knowledge that a system is deficient, coupled with subsequent failure to adopt an adequate reporting system, can be considered evidence of intentional disregard.92
Prepare for an audit
Practitioners should advise clients to be prepared for the information the IRS will request for a Form 8300 audit. In addition to information regarding cash transactions and payment information, taxpayers can expect requests for information regarding the internal control processes for identifying reportable transactions. The IRS will also likely request information regarding Form 8300 training procedures and documents, as well as ask for the names of the individuals who identify the reportable transactions and those who prepare and review the forms and annual notices.
Vigorously contest intentional disregard penalties
If, during an examination, an IRS agent moves toward assessing penalties, particularly intentional disregard penalties, do not hesitate to engage counsel. The IRS has been willing to seek intentional disregard penalties in situations where a taxpayer has missed as few as four reportable sales transactions out of 8,000 total sales.93 The IRS has not received particularly strong judicial support for imposing these penalties. However, once penalties are assessed, it is an expensive and time-consuming process to proceed with potentially unsuccessful administrative appeals, and then have to pay the penalties and institute a refund suit in a federal district court or Court of Federal Claims.
Keeping a lid on penalties
Practitioners are not frequently involved with the Form 8300 reporting requirements, but this is one area where they can provide foresight and assistance to clients. Penalties for noncompliance start small but can escalate dramatically for subsequent reporting failures. Helping clients with education, procedures, and controls for cash reporting can provide a significant benefit and assist them in avoiding potentially steep penalties.
1. IRS, “A Closer Look: Impacting the Tax Gap,” CL-21-13 (April 23, 2021).
2. Committee on Ways and Means, U.S. House of Representatives, “Understanding the Tax Gap and Taxpayer Noncompliance,” Testimony of the Honorable J. Russell George, Treasury Inspector General for Tax Administration (May 9, 2019).
3. IRS, “A Closer Look: Impacting the Tax Gap.”
4. IRS News Release IR-2019-20 (2/21/19), referring to FS-2019-1.
5. IRS News Release IR-2020-168 (7/22/20), referring to FS-2020-11.
6. IRS News Release IR-2021-47 (2/26/21), referring to FS-2021-3.
7. Rettig, “Form 8300: Reporting Domestic Currency Transactions,” Journal
of Tax Practice & Procedure [CCH], p. 29 (December 2012–January
2013).
8. Infrastructure Investment and Jobs Act (Infrastructure Act), P.L. 117-58.
9. Sec. 6050I(a).
10. Sec. 7701(a)(1), as referred to in Regs. Sec. 1.6050I-1(a)(1)(i).
11. IRS Letter Ruling 202118003.
12. Regs. Sec. 1.6050I-1(c)(6).
13. IRS Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business) (rev. September 2014).
14. Id.
15. Regs. Sec. 1.6050I-1(a)(2).
16. Regs. Sec. 1.6050I-1(a)(3)(i).
17. Chief Counsel Advice 200840044.
18. Regs. Sec. 1.6050I-1(a)(3)(ii).
19. Regs. Sec. 1.6050I-1(c)(7)(i).
20. Id.
21. Regs. Sec. 1.6050I-1(c)(7)(ii).
22. Regs. Sec. 1.6050I-1(d)(1).
23. Regs. Sec. 1.6050I-1(d)(2).
24. Regs. Sec. 1.6050I-1(d)(3).
25. Regs. Sec. 1.6050I-1(d)(4).
26. Id.
27. Sec. 6050I(g).
28. Regs. Sec. 1.6050I-1(c)(1)(ii)(A).
29. Financial institutions must file currency transaction reports for cash purchases of cashier’s checks, treasurer’s checks, bank drafts, traveler’s checks, and money orders with face values greater than $10,000.
30. Regs. Sec. 1.6050I-1(c)(1)(ii)(B).
31. Regs. Sec. 1.6050I-1(c)(1)(iii).
32. Regs. Sec. 1.6050I-1(c)(2).
33. Regs. Sec. 1.6050I-1(c)(3).
34. Regs. Sec. 1.6050I-1(c)(4).
35. Regs. Sec. 1.6050I-1(c)(1)(iv).
36. Regs. Sec. 1.6050I-1(c)(1)(v).
37. Regs. Sec. 1.6050I-1(c)(1)(vi).
38. Infrastructure Act, §80603(b)(3), amending Sec. 6050I(d).
39. Infrastructure Act, §80603(b)(1)(B), amending Sec. 6045(g)(3).
40. Infrastructure Act, §80603(c).
41. Regs. Sec. 1.6050I-1(e)(1).
42. Id.
43. Regs. Sec. 1.6050I-1(b)(2).
44. Regs. Sec. 1.6050I-1(b)(3).
45. Form 8300 Instructions, p. 4.
46. Regs. Sec. 1.6050I-1(e)(3)(iii).
47. Sec. 6501(a).
48. Sec. 6501(c)(3).
49. IRS Form 8300 Reference Guide.
50. Regs. Sec. 1.6050I-1(f).
51. Regs. Sec. 1.6050I-1(f)(2).
52. Regs. Sec. 1.6050I-1(f)(3).
53. Internal Revenue Manual (IRM) §4.26.10.7.2(4).
54. Id.
55. Id.
56. IRS Form 8300 Reference Guide.
57. FS-2021-03.
58. IRM §4.26.10.11.1(7).
59. Sec. 6721(a)(1). Note that penalty amounts in Secs. 6721 and 6722 are adjusted annually for inflation. Actual current amounts can be found in the IRS Form 8300 Reference Guide.
60. Sec. 6722(a)(1).
61. Sec. 6721(b)(1).
62. Sec. 6722(b)(1).
63. Sec. 6721(b)(2) and Sec. 6722(b)(2).
64. Sec. 6721(e)(2)(C).
65. Regs. Sec. 301.6721-1(f)(2).
66. Regs. Sec. 301.6721-1(f)(3).
67. See Tysinger Motor Co., Inc., 428 F. Supp. 2d 480 (E.D. Va. 2006); Purser Truck Sales, Inc., 710 F. Supp. 2d 1334 (M.D. Ga. 2008); Bale Chevrolet Co., 620 F.3d 868 (8th Cir. 2010); Mycles Cycles, Inc., No. 18-CV-314 JLS (AGS) (S.D. Cal. 9/4/19).
68. Mycles Cycles, Inc., 18-CV-314 JLS (AGS) (S.D. Cal. 9/4/19).
69. Tysinger Motor Co., Inc., 428 F. Supp. 2d 480 (E.D. Va. 2006).
70. Purser Truck Sales, Inc., 710 F. Supp. 2d 1334 (M.D. Ga. 2008).
71. Mycles Cycles, Inc., 18-CV-314 JLS (AGS) (S.D. Cal. 9/4/19), citing Purser Truck Sales and Kruse, Inc., 213 F. Supp. 2d 939 (N.D. Ind. 2002).
72. Purser Truck Sales, Inc., 710 F. Supp. 2d 1334 (M.D. Ga. 2008).
73. Id.
74. Regs. Sec. 1.6050I-1(g)(1).
75. Regs. Sec. 301.6721-1(c)(1) defines an inconsequential error as “any failure that does not prevent or hinder the Internal Revenue Service from processing the return, from correlating the information required to be shown on the return with the information shown on the payee’s tax return, or from otherwise putting the return to its intended use.”
76. Regs. Sec. 301.6721-1(c)(2).
77. Sec. 6724.
78. Regs. Sec. 301.6724-1.
79. IRM §4.26.10.10.3.1(4)b.
80. Regs. Sec. 301.6724-1(e)(1). The filer can also note, in the comments section of the Form 8300, that the filer requested the customer’s TIN but the customer refused to provide the requested information.
81. Id.
82. Regs. Sec. 301.6724-1(e)(2).
83. IRM §[4.26.10.10.3.1(6).
84. Regs. Sec. 301.6722-1.
85. Publication 1544 (rev. September 2014).
86. Sec. 6050I(f)(2).
87. Sec. 7203.
88. Sec. 7206(1).
89. IRM §4.26.12, Examination Techniques for Form 8300 Industries, lists 13 broad industry categories that potentially have Form 8300 filing requirements, and within these categories, more specific industries are noted and discussed.
90. Purser Truck Sales, Inc., 710 F. Supp. 2d 1334 (M.D. Ga. 2008).
91. DeGuerin, 214 F. Supp. 2d 726 (S.D. Tex. 2002).
92. See Bale Chevrolet Co., 620 F.3d 868 (8th Cir. 2010).
93. Tysinger Motor Co., Inc., 428 F. Supp. 2d 480 (E.D. Va. 2006). Additionally, in Purser Truck Sales, Inc., 710 F. Supp. 2d 1334 (M.D. Ga. 2008), the IRS pursued intentional disregard penalties in a situation involving five transactions out of 960 sales.
Contributors | |
| Susanne Holloway, CPA, MBA, is a professor of the practice, and Michael A. Schuldt, CPA, J.D., Ph.D., is an associate professor, both at the Perdue School of Business of Salisbury University in Salisbury, Md. For more information about this article, contact thetaxadviser@aicpa.org. |
AICPA RESOURCES
Articles
Moore, “Information Return Penalties: How to Avoid or Contest Them,” 51 The Tax Adviser 44 (January 2020)
Abel and MacKay, “Money Laundering: Combating a Global Threat,” 222-3 Journal of Accountancy 45 (September 2016)
Tax Section resources
Federal Taxpayer Penalties Guide
IRS Penalty Abatement Templates
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