Generally, if you’re in a trade or business and receive more than $10,000 in cash in a single transaction or in related transactions, you must file Form 8300.
The Form 8300, Report of Cash Payments Over $10,000 in a Trade or Business, provides valuable information to the Internal Revenue Service and the Financial Crimes Enforcement Network (FinCEN) in their efforts to combat money laundering and tax evasion.
Transactions that require Form 8300 include, but are not limited to:
- Escrow arrangement contributions
- Pre-existing debt payments
- Negotiable instrument purchases
- Reimbursement of expenses
- Making or repaying a loan
- Sale of goods or services
- Sale of real property
- Sale of intangible property
- Rental of real or personal property
- Exchange of cash for other cash
- Custodial trust contributions
The information contained in the form assists law enforcement in its anti-money laundering efforts.
Who Must File
A “person” who must file Form 8300 includes an individual, company, corporation, partnership, association, trust or estate.
You must file Form 8300 with the IRS if any part of the transaction occurs within any of the 50 states, the District of Columbia or a U.S. possession or territory (American Samoa, The Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico and the U.S. Virgin Islands).
When to File
You must file Form 8300 by the 15th day after the date the cash transaction occurred.
Besides filing Form 8300, you also need to provide a written statement to each party whose name you included on the Form 8300 by January 31 of the year following the reportable transaction. This statement must include the name, address, contact person and telephone number of your business and the aggregate amount of reportable cash. The statement must also indicate that you provided this information to the IRS.
Civil and criminal penalties may apply if you fail to file Form 8300 and provide a written statement to each person named on Form 8300. The IRS adjusts penalty amounts annually for inflation.
Form 8300 Penalties: For returns due to be filed during calendar year 2020:
The IRS adjusts the penalty amounts annually for inflation. The following are the penalties rates for Forms 8300 due during the 2020 calendar year, on or after January 1, 2020.
Civil penalties and applicable rules are:
- The penalty for negligent failure to timely file, to include all required information or to include correct information is $270 per return, not to exceed $3,339,000 per calendar year. IRC Section 6721(a)(1).
- For persons with average annual gross receipts of not more than $5,000,000, the ceiling is $1,113,000. The penalty applies to each return. IRC Section 6721(d)(1)(A).
- If any failure to file under IRC Section 6721(a) is corrected on or before the 30th day after the required filing date, the penalty is reduced to $50 in lieu of $270 and the maximum amount imposed shall not exceed $556,500 per calendar year. IRC Section 6721(b)(1). The ceiling is $194,500 for persons with average annual gross receipts of not more than $5,000,000. IRC Section 6721(d)(1)(B).
- The penalty for intentional disregard of the requirement to timely file or to include all required information, or to include correct information is the greater of: (1) $27,820 or (2) the amount of cash received in the transaction, not to exceed $111,000 (with no calendar year limitation applicable). The penalty applies to each failure. IRC Section 6721(e)(2)(C).
- The penalty for negligent failure to furnish a timely, complete, and correct notice to the person(s) required to be identified on the Form 8300 is $270 per statement, not to exceed $3,339,000 per calendar year. IRC Section 6722(a)(1). For persons with average annual gross receipts of not more than $5,000,000 the ceiling is $1,113,000. IRC Section 6722(d)(1)(A).
- If any failure to furnish described in IRC 6722(a) is corrected within 30 days, the penalty is $50 in lieu of $270, and the ceiling is $556,000. IRC 6722(b)(1). For persons with gross receipts of not more than $5,000,000 the ceiling is $194,000. IRC 6722(d)(1)(B).
- If any failure described in subsection (a)(2) is corrected after the 30th day referred to in paragraph (1) but on or before August 1 of the calendar year in which the required filing date occurs the penalty is $110 in lieu of $270, and the ceiling is $1,669,500. IRC 6722(b)(2). For persons with gross receipts of not more than $5,000,000 the ceiling is $556,500. IRC 6722(d)(1)(C).
- Intentional disregard of the requirement to furnish timely, correct, and complete notices is $550 per failure or, if greater, 10 percent of the aggregate amounts of the items required to be reported correctly (with no calendar year limitation applicable). IRC Section 6722(e)(2)(A).
A person may be subject to criminal penalties for:
- Willfully failing to file a Form 8300,
- Willfully filing a false or fraudulent Form 8300,
- Stopping, or trying to stop, a Form 8300 from being filed, or
- Setting up, helping to set up, or trying to set up a transaction in a way that would make it seem unnecessary to file Form 8300.
Any person required to file Form 8300 who willfully fails to file, fails to file timely, or fails to include complete and correct information is subject to criminal sanctions as a felony under IRC Section 7203. Sanctions 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.
Any person who willfully files a Form 8300 which is false with regard to a material matter may be fined up to $100,000 ($500,000 in the case of a corporation), and/or imprisoned up to three years, plus the costs of prosecution. IRC Section 7206(1)
The penalties for failure to file may also apply to any person (including a payer) who attempts to interfere with or prevent the seller (or business) from filing a correct Form 8300. This includes any attempt to structure the transaction in a way that would make it seem unnecessary to file Form 8300. “Structuring” means breaking up a large cash transaction into small cash transactions to disguise the true amount of cash involved in the transaction.
The IRS conducts audits of IRS form 8300. If you have received a form 8300 penalty assessment, you may need to submit an IRS appeal protest letter to appeal the proposed assessment. If you have received an audit letter, contact a tax lawyer to review the best possible strategy going forward.