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March 27, 2024 4 minutes to read ∙ 800 words

Failing to File IRS Form 8300 Can Turn a $10,000 Windfall into a Ticket to Prison

Allison D.H. Soares and Lauren Suarez

Imagine, there you are, a young entrepreneur making your way through the economic circus that is running a business, and someone pays you $10,000 or more in cash for services rendered. You stop and think: Should you (1) throw the money up in the air and swim in it, (2) pour glue on yourself and roll in it, or (3) fill out and submit an Internal Revenue Service (IRS) Form 8300 immediately and send the payor an annual statement? There was a hidden answer D that was all of the above, but we wanted to see the people’s votes. One of the most underrated and undiscussed IRS forms is Form 8300. Many business owners are confused about their need to report cash payments over $10,000 given to a trade or business from a single entity or an individual. It’s not a common filing, but it’s one that’s critical for many companies and individuals and that, if overlooked, can cause orange jumpsuit–type problems.

Who Must Fill Out Form 830

According to the IRS, 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. This cash transaction can either be a one-time transaction or multiple transactions over a 12-month period. Cash also includes traveler’s checks, bank drafts, physical cash, and money orders with a face value of $10,000 or less. If the value of those cash instruments tied to a financial institution is more than $10,000, the financial institution reports on your behalf. The purpose of the form is to provide information to the IRS and the Financial Crimes Enforcement Network (FinCEN) in their efforts to combat money laundering within and outside of the United States. Money is “laundered” to conceal illegal activity, including crimes such as drug trafficking, tax evasion, and terrorist financing. It should also be noted that as of December 2023, Form 8300 does not include digital assets within the definition of cash and related payments, but due to the passing of the Infrastructure Investment and Jobs Act of 2021, it may only be a matter of time before a cryptocurrency transaction of $10,000 or more may become reportable on Form 8300, especially given how under-regulated some crypto platforms are at a time when the U.S. government continues to fight money laundering.

Those who must file a Form 8300 include an individual, company, corporation, partnership, association, trust, or estate. These may include dealers/sellers of jewelry, boats, aircraft, furniture, art, and automobiles. These may also include travel agencies, insurance companies, attorneys, and real estate brokers. As professionals, we have also seen this form pop up when international travelers come into the United States with large amounts of cash for certain transactions. This causes a double reporting requirement for those individuals who cross an international border with that kind of luggage.

The form must be filed 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). Additionally, Form 8300 must be filed within 15 days after the date the cash transaction occurred by the individual or business receiving the funds.

Filing Form 8300

Effective January 1, 2024, individuals and business owners must electronically file Form 8300 if they e-file other information returns, such as Form 1099 series and Form W-2. You must e-file your Form 8300 if you’re required to file at least ten information returns of one or more types other than Form 8300 during a calendar year. If you do not meet these requirements for electronic filings, you are required to mail in the form and related information.

You also need to provide a written statement to each party whose name you include on 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.

Penalties

If you do not send the written statement to each of these persons, you, as the business owner, will be subject to penalties, which are usually around $290 per form. Further, if false Forms 8300 are found to be filed, a person can incur up to $100,000 in penalties and three years in federal prison. Think of all the much more fun things one could do with that time and money by just timely and correctly filing Form 8300 or required transactions.

If these Forms are not timely filed or the annual statement submitted, and the transaction is brought to the attention of the IRS via a different route, the IRS can open a Form 8300 audit on your business or that transaction. Ultimately, during an IRS Form 8300 audit, the government is looking to determine whether, under Internal Revenue Code (IRC) 7203, there was a willful failure to file, a willful failure to make a complete and accurate filing, etc. As with any audit, the IRS does understand that individuals and entities make mistakes, and some audits merely end in a fine. However, this can be a painful route that leads to those high penalties and a fun vacation to federal prison.

Further, you are required and expected to keep your Form 8300 files for five years in case you are audited or any information related to those transactions with certain individuals or entities is requested by the IRS, so make sure you shred or stuff those documents away into the drawer of forgotten things.

Plan for the Best (to Avoid the Worst)

Most of us are just patiently waiting for someone to bring us $10,000 or more in cash, and should your lucky day arrive, we highly recommend that you discuss the matter with a tax professional before being audited or accused of illegal money laundering while trying to buy that Rolex.

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Allison D.H. Soares

Vanst Law LLP

Allison D.H. Soares ([email protected]), a partner at Vanst Law LLP, is a tax attorney who helps individuals and businesses with tax problems, including audits, collections, and international compliance. She has represented hundreds of clients before the Internal Revenue Service (IRS), Franchise Tax Board (FTB), Employment Development Department (EDD), and California Department of Tax and Fee Administration (CDTFA). She is also an adjunct professor at San Diego State University.

Lauren Suarez

Of Counsel, RJS Law Firm

Lauren Suarez ([email protected]), of counsel with RJS Law Firm, is a San Diego native with a passion for tax. She has worked on both the tax controversy side and the tax preparation side for businesses and individuals and has advised clients on various domestic and international tax planning, preparation, and controversy issues related to the Internal Revenue Service (IRS), Franchise Tax Board (FTB), Employment Development Department (EDD), and California Department of Tax and Fee Administration (CDTFA).

Published in GPSolo eReport, Volume 13, Number 8, March 2024 . © 2024 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association or the Solo, Small Firm and General Practice Division.