IRS Reporting Requirents for Cash Payments over $10,000
The IRS is currently conducting a nationwide program involving unannounced visits to businesses to check on compliance with cash reporting requirements.
What is "Cash"?For reporting purposes, cash includes U.S. currency and coin, and foreign currency and coin. Cashier's checks, bank drafts, traveler's checks, and money orders having a face amount of not more than $10,000 are also considered to be cash (wholesalers, however, are subject to a less stringent definition of "cash"). The combination of these items must be $10,000 or more before a transaction needs to be reported. Personal checks are not considered cash.
What needs to be reported?Persons engaged in a trade or business who receive more than$10,000 in cash in one transaction (or a series of related transactions) need to file Form 8300 with the IRS within 15 days of the transaction. The following information is disclosed on Form 8300:• The name, address, and social security number of the payor,• The amount of cash received,• The date received, and• The nature of the transaction. The bank has to report certain cash deposits it receives by filing Form 4789, Currency Transaction Report. This is not to be confused with the Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, which is what the business itself files to report to the IRS when it receives cash payments of more than $10,000.
What are the penalties for noncompliance?The federal penalty for failure to report or for filing an incomplete return is $50 per transaction. If an incomplete return is subsequently corrected, the penalty reduces to $15 to $30 per return, depending on when the correction is made. The maximum amount that can be imposed upon a person in any one calendar year ranges from $25,000 to $250,000. You could also be subject to California penalties, as well.
If there is an intentional disregard of the filing requirement, the penalty is the greater of $25,000 or the amount of cash received, up to a maximum of $100,000 per transaction with no annual maximum. And if there is a willful failure to file the return of supply the required information, you could be subject to federal prosecution which carries with it the possibility of a fine and imprisonment.
Are you next?The IRS has stepped-up its enforcement activities for cash reporting because it knows that taxpayers are not complying with cash reporting requirements.
The reporting requirements were originally instituted in 1985 to assist the IRS in discovering unreported income. The emphasis has moved from uncovering illegal activities to exposing the growing underground economy.
It is essential that businesses dealing with cash payments become familiar with these requirements.
What is "Cash"?For reporting purposes, cash includes U.S. currency and coin, and foreign currency and coin. Cashier's checks, bank drafts, traveler's checks, and money orders having a face amount of not more than $10,000 are also considered to be cash (wholesalers, however, are subject to a less stringent definition of "cash"). The combination of these items must be $10,000 or more before a transaction needs to be reported. Personal checks are not considered cash.
What needs to be reported?Persons engaged in a trade or business who receive more than$10,000 in cash in one transaction (or a series of related transactions) need to file Form 8300 with the IRS within 15 days of the transaction. The following information is disclosed on Form 8300:• The name, address, and social security number of the payor,• The amount of cash received,• The date received, and• The nature of the transaction. The bank has to report certain cash deposits it receives by filing Form 4789, Currency Transaction Report. This is not to be confused with the Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, which is what the business itself files to report to the IRS when it receives cash payments of more than $10,000.
What are the penalties for noncompliance?The federal penalty for failure to report or for filing an incomplete return is $50 per transaction. If an incomplete return is subsequently corrected, the penalty reduces to $15 to $30 per return, depending on when the correction is made. The maximum amount that can be imposed upon a person in any one calendar year ranges from $25,000 to $250,000. You could also be subject to California penalties, as well.
If there is an intentional disregard of the filing requirement, the penalty is the greater of $25,000 or the amount of cash received, up to a maximum of $100,000 per transaction with no annual maximum. And if there is a willful failure to file the return of supply the required information, you could be subject to federal prosecution which carries with it the possibility of a fine and imprisonment.
Are you next?The IRS has stepped-up its enforcement activities for cash reporting because it knows that taxpayers are not complying with cash reporting requirements.
The reporting requirements were originally instituted in 1985 to assist the IRS in discovering unreported income. The emphasis has moved from uncovering illegal activities to exposing the growing underground economy.
It is essential that businesses dealing with cash payments become familiar with these requirements.
There are other tax-cutting strategies in addition to those mentioned here. If you would like assistance in selecting tax-saving strategies that make the most sense in your situation, contact us today!