How Do I Report Large Cash Transactions to the IRS?
Cash Transactions Over $10,000 Must Be Reported on IRS Form 8300
IRS Form 8300 is the result of the U.S. government's increased concern over money laundering after the events of 9/11. Money laundering refers to the practice of using cash to transfer funds from illegal activities to legal entities, particularly in support of terrorism.
The Patriot Act of 2001 was passed after 9/11, stretching existing laws in effect at that time to counter terrorism as well as other illegal acts.
Compliance with the Act "provides valuable information that can stop those who evade taxes and those who profit from the drug trade and other criminal activities," according to the Internal Revenue Service.
But even before 9/11, the U.S. government was concerned about money laundering. The Money Laundering Control Act was passed in 1986. Most of the legislation was aimed at banks and other financial institutions. But a provision to monitor large cash transactions was also included.
Who Must File Cash Transaction Reports?
Anyone in a trade or business who receives $10,000 or more in cash in a single transaction or multiple related transactions must report the receipt of the money to the IRS. "Business" is defined as any legal structure, including sole proprietorships and corporations. Estates, trusts, and associations are also subject to the Patriot Act.
The report form is Form 8300.
When Is Form 8300 Required?
Form 8300 - Report of Cash Payment Over $10,000 must be submitted to the IRS as notification of all cash payments received by your business in this amount or more.
Cash is defined as coins or currency. It does not include personal checks, nor does it include cashier's checks, bank drafts, traveler's checks or money orders with face amounts of $10,000 or more.
Financial institutions file FinCEN Report 112 when these instruments are purchased with currency, making Form 8300 redundant.
Form 8300 is required when they are in face amounts of less than $10,000 but the total transaction amounts to more than $10,000 and the balance is paid in cash.
These transactions often occur in certain businesses, including those that sell jewelry, furniture, watercraft, aircraft, automobiles, real estate and insurance. Pawnbrokers are likely to encounter situations necessitating Form 8300, as are attorneys and travel agencies.
Follow this checklist to determine whether you must report:
- You engaged in a single transaction of at least $10,000, or related transactions totaling $10,000 or more.
- All or some portion of the payment was made in cash.
- The payment was received in a lump sum or in installments payable within one year. If payment is made in installments toward the same transaction, use the total amount, not the amounts of individual installments.
- The money was received from the same buyer or agent.
- The money was received as part of a single transaction or related transactions, such as if you book both airfare and hotel accommodations for a single client as a travel professional and he pays for them separately.
Form 8300 Instructions
You must provide the correct Taxpayer ID number or Social Security number of the person from whom you received the cash and file Form 8300 within 15 days of receiving payment.
If the 15th day falls on a weekend or a legal holiday, you have until the next business day. You can transmit the form electronically or send the form to the IRS at the Detroit Computing Center, P.O. Box 32621, Detroit, MI 48232.
If you are suspicious about the transaction for any reason, you do not have to wait to file Form 8300. Report your concerns to the IRS Criminal Investigation Division as soon as possible.