If you receive $10,000 or more in cash from a single buyer for a transaction in your business, you have to report that transaction to IRS and also to the Financial Crimes Enforcement Network (FinCEN). Some people may do large cash transactions to support their illegal activities. Your reporting of cash transactions provides valuable information for stopping the tax evaders.
If you are in a trade or business and receive more than $10,000 in cash into a single transaction or in several installments relating to one transaction, you have to report it by filing Form 8300 for such a transaction. You may be a jeweler, a furniture maker, a pawnbroker or a travel agency and may come across such transaction.
However if such transaction is not related to your business, you need not file this form 8300. So if you are a furniture maker and sell your vehicle for more than $10,000 in cash, you need not summit this form.
A ‘transaction’ includes sale of goods or services or property, renting of property, making or repaying loan, or converting cash into a negotiable instrument like a check on a bond. A ‘person’ includes an individual, a partnership, a trust, a corporation, a company or an association. However the exempt organizations receiving more than $10,000 as a charitable cash contribution are not required to report such transactions on Form 8300 as it is not a business transaction.
Any clerk of the Federal or state court receiving more than $10,000 in cash as bail for an individual who is charged with any Federal offence involving a controlled substance, or racketeering, money laundering or any offence similar to these, must report such transaction by filing Form 8300.
If you receive cash payments in installments during one year of the initial payment and all of such payments cross more than $10,000, you must report it to the IRS.
‘Cash’ means the coins and currency of the United States or any other country. However, if you receive cashier’s check, a bank draft, a traveler’s check, or a money order as part of the transaction supplementing cash, you must report such transaction. So for a transaction of $14,000 if you receive cash $7,000 and the cashier’s check of $7,000, this transaction must be reported to the IRS as the cashier’s check is treated as cash here. However, if the buyer gives a personal check of $7,000 instead Of cashier’s check, then such personal check is not included in cash transaction and the entire transaction need not be reported to the IRS. In another variation, if you receive $14,000 entirely in cashier’s check, then such transaction need not be reported.
If you are a travel agent and your customer asks you to book a charter airplane to take a group of people to another city, and also asks you to book for tale rooms and admission tickets, and you quote an amount of $15,000 as a package, and a customer pays you this amount in two cashier’s checks of $7,000 and $8,000, such a transaction is considered as cash transaction and it must be reported.
However, if you are a car dealer and a customer buys a new car from you at a price of to $12,000, and pays you $3,000 in cash and $9,000 by cashier’s check, telling you that the cashier’s check is the proceeds of the bank loan and includes instructions to you to have a lien put on the car as a security for the loan, such transaction is not treated as Cash and need not be reported.
You must furnish the correct Taxpayer Identification Number (TIN) of the person or persons from whom you receive cash for these transactions. If you are not aware of the TIN, you must ask for it. The TIN for an individual or a sole proprietor is the social security number of such an individual. For a non-resident alien, it is the ITIN (IRS individual taxpayer identification number). For operations or partnership, TIN is the employer identification number (EIN).
Related or suspicious transactions
You must report related transactions to the IRS. So if a client pays you as a travel agent $9,000 in cash for a trip and two days later he pays $5,000 to include another person on such trip, then these are treated as related transactions and must be reported in Form 8300 to IRS.
Similarly if you sell two products for $7,000 each to the same person in one day and the customer pays you in cash, they are treated as related transactions as the total is $14,000 which is more than $10,000.
If a transaction appears to be suspicious to you, as a sign of possible illegal activity, you may voluntarily file Form 8300. You can also call the local IRS criminal investigation division as soon as possible.
There are several civil and criminal penalties for failure to report such transactions. If you willfully fail to file Form 8300, you can be fined up to $250,000 or sentenced up to five years in prison or both.