The Form 8300 Filing Requirement and Associated Penalties

Share This Article

The Form 8300 Filing Requirement and Associated Penalties

The IRS uses Form 8300 to detect individuals or entities that attempt to evade taxes as well as to detect money laundering and underlying criminal activities. Form 8300 requires a person that receives more than $10,000 in cash during the course of its trade or business report the receipt of such cash to the IRS and send a written statement notifying the customer that the transaction was reported. Form 8300 is a component of the monetary and currency reporting regime under the Bank Secrecy Act and the Internal Revenue Code, and plays an integral role in the country’s anti-money laundering efforts.

Here is the rule in more detail: if a person receives a cash payment in excess of $10,000 in one transaction in the course of a trade or business, then, pursuant to 26 U.S.C. § 6050I and 31 U.S.C. § 5331, that person is required to file a Form 8300 with the IRS within 15 days of the cash receipt. A person must also file Form 8300 if the person receives two or more related payments totaling over $10,000, even if no payment, standing alone, exceeds $10,000. A written statement must also be provided to each person identified on Form 8300 by January 31 of the following calendar year. The filer must maintain copies of both Form 8300 and the written statement for five years.

For Form 8300 purposes, a “person” is defined as any individual, trust, estate, partnership, association, company, or corporation. It is important to note that a person who acts as an agent and holds cash for more than 15 days for the principal is required to report the cash receipt on a Form 8300. A “transaction” subject to Form 8300 reporting includes, but is not limited to, the following:

  • A sale of goods or services;
  • A sale of real property;
  • A sale of intangible property;
  • A rental of real or personal property;
  • An exchange of currency for other currency;
  • The establishment, maintenance of, or contribution to an escrow, trust, or custodial agreement;
  • Payment of a pre-existing debt;
  • Conversion of currency to a negotiable instrument;
  • Reimbursement for expenses paid; and
  • The making or repayment of a loan.

For Form 8300 purposes, “cash” includes any U.S. coin and currency as well as foreign currency. That definition, however, is expanded in the Form 8300 context. “Cash” also includes a cashier’s check, bank draft, traveler’s check, or money order having a face amount of $10,000 or less if the instrument is used in a “Designated Reporting Transaction” or the person knows or has reason to know that the customer is attempting to avoid the filing of a Form 8300. A “Designated Reporting Transaction” is defined as any one of the following: a retail sale, a consumer durable, a collectible, or a travel or entertainment activity. Personal checks drawn on the writer’s account as well as a cashier’s check, bank draft, traveler’s check, or money order with a face value of more than $10,000 are not considered “cash” for Form 8300 purposes.

There are two important exceptions to the requirement to file a Form 8300. First, financial institutions are not required file a Form 8300 because such entities are required to file a Currency Transaction Report (“CTR”) under other provisions of the Bank Secrecy Act and its regulations. Second, transactions that occur entirely outside the United States and its territories do not require the filing of a Form 8300.

Also of note, governmental entities generally do not need to file Form 8300 except for one particular situation. A clerk of a criminal court must file a Form 8300 when cash bail of more than $10,000 is paid for an individual that was arrested for: any federal offense involving a controlled substance, racketeering, money laundering, and any substantially similar state offenses.

One major pitfall that frequently comes up in this context is “structuring.” It is a crime to “structure” one’s payments to avoid making a single exchange of cash of more than $10,000. Structuring occurs when a customer makes multiple payments in an attempt to not pay more than $10,000 at one time in order to avoid filing a Form 8300. If a person structures payments, they may be liable for both civil and criminal penalties, including up to 10 years imprisonment and severe monetary penalties.

Civil and criminal penalties may be also assessed for failing to file Form 8300. Civil penalties for a failure to file are outlined in 26 U.S.C. §§ 6721 and 6722. A failure to file results in a penalty of $250 for each occurrence so long as the failure to file was not an intentional disregard of Title 26. If the failure to file was intentional, then a penalty is assessed at the greater of $25,000 or the amount of the cash transaction not to exceed $100,000. There are also mitigating rules where a deficiency is discovered and promptly addressed, and a reasonable cause defense is available under 26 U.S.C. § 6724.

A failure to furnish correct payee statements may also result in a $250 penalty for each occurrence not to exceed $3,000,000 in one calendar year. If the failure to furnish was intentional, however, the penalty is the greater of $500 or 10% of the aggregate amount of items required to be reported correctly. Again, there are mitigating rules available where a deficiency is promptly added, and a reasonable cause defense is available.

On the criminal side, the crime of a willful failure to file a return, supply information, or pay tax is classified as a misdemeanor, and the criminal penalties under 26 U.S.C. § 7203 include a fine of up to $25,000 ($100,000 for a corporation) and/or imprisonment for up to one year.

Penalties are available under Title 31 as well. Pursuant to 31 U.S.C. § 5321, a civil penalty may be assessed for a willful violation equal to the greater of the amount involved in the transaction (limited to $100,000) or $25,000. If a person violates the structured transaction statute of 31 U.S.C. § 5324, then the civil penalty is up to the amount involved in the transaction. If there was a negligent failure to file, then a civil penalty may be assessed of up to $500 unless a pattern of negligent activity exists. In that scenario, a civil penalty of up to $50,000 may be imposed.

The criminal penalties are harsher under Title 31 than Title 26. If a person willfully violates 31 U.S.C. § 5331, then the person may be fined up to $250,000 and/or imprisoned for up to five years. However, if the violation is committed while violating another law or committed repeat of a pattern of illegal activities involving more than $100,000 in any 12-month period, then the fine ceiling is increased to $500,000 and/or imprisonment for up to ten years.

 

 

The I.R.C. statute governing Form 8300 filing provides as follow:

26 U.S. Code § 6050I.Returns relating to cash received in trade or business, etc.

(a)Cash receipts of more than $10,000 Any person

(1) who is engaged in a trade or business, and
(2) who, in the course of such trade or business, receives more than $10,000 in cash in 1 transaction (or 2 or more related transactions),
shall make the return described in subsection (b) with respect to such transaction (or related transactions) at such time as the Secretary may by regulations prescribe.
(b) Form and manner of returnsA return is described in this subsection if such return—

(1) is in such form as the Secretary may prescribe,
(2)contains—

(A) the name, address, and TIN of the person from whom the cash was received,
(B) the amount of cash received,
(C) the date and nature of the transaction, and
(D) such other information as the Secretary may prescribe.
(c)Exceptions

(1)Cash received by financial institutionsSubsection (a) shall not apply to—

(A) cash received in a transaction reported under title 31, United States Code, if the Secretary determines that reporting under this section would duplicate the reporting to the Treasury under title 31, United States Code, or
(B) cash received by any financial institution (as defined in subparagraphs (A), (B), (C), (D), (E), (F), (G), (J), (K), (R), and (S) of section 5312(a)(2) of title 31, United States Code).
(2) Transactions occurring outside the United StatesExcept to the extent provided in regulations prescribed by the Secretary, subsection (a) shall not apply to any transaction if the entire transaction occurs outside the United States.
(d)Cash includes foreign currency and certain monetary instrumentsFor purposes of this section, the term “cash” includes—

(1) foreign currency, and
(2) to the extent provided in regulations prescribed by the Secretary, any monetary instrument (whether or not in bearer form) with a face amount of not more than $10,000.
Paragraph (2) shall not apply to any check drawn on the account of the writer in a financial institution referred to in subsection (c)(1)(B).
(e) Statements to be furnished to persons with respect to whom information is requiredEvery person required to make a return under subsection (a) shall furnish to each person whose name is required to be set forth in such return a written statement showing—

(1) the name, address, and phone number of the information contact of the person required to make such return, and
(2) the aggregate amount of cash described in subsection (a) received by the person required to make such return.
The written statement required under the preceding sentence shall be furnished to the person on or before January 31 of the year following the calendar year for which the return under subsection (a) was required to be made.
(f) Structuring transactions to evade reporting requirements prohibited

(1) In generalNo person shall for the purpose of evading the return requirements of this section—

(A) cause or attempt to cause a trade or business to fail to file a return required under this section,
(B) cause or attempt to cause a trade or business to file a return required under this section that contains a material omission or misstatement of fact, or
(C) structure or assist in structuring, or attempt to structure or assist in structuring, any transaction with one or more trades or businesses.
(2) Penalties 
A person violating paragraph (1) of this subsection shall be subject to the same civil and criminal sanctions applicable to a person which fails to file or completes a false or incorrect return under this section.
(g)Cash received by criminal court clerks

(1)In general

Every clerk of a Federal or State criminal court who receives more than $10,000 in cash as bail for any individual charged with a specified criminal offenseshall make a return described in paragraph (2) (at such time as the Secretary may by regulations prescribe) with respect to the receipt of such bail.

(2)ReturnA return is described in this paragraph if such return—

(A) is in such form as the Secretary may prescribe, and
(B)contains—

(i) the name, address, and TIN of—

(I) the individual charged with the specified criminal offense, and
(II) each person posting the bail (other than a person licensed as a bail bondsman),
(ii) the amount of cash received,
(iii) the date the cash was received, and
(iv) such other information as the Secretary may prescribe.
 (3) Specified criminal offenseFor purposes of this subsection, the term “specified criminal offense” means—

(A) any Federal criminal offense involving a controlled substance,
(B) racketeering (as defined in section 1951, 1952, or 1955 of title 18, United States Code),
(C) money laundering (as defined in section 1956 or 1957 of such title), and
(D) any State criminal offense substantially similar to an offense described in subparagraph (A), (B), or (C).
(4) Information to Federal prosecutors

Each clerk required to include on a return under paragraph (1) the information described in paragraph (2)(B) with respect to an individual described in paragraph (2)(B)(i)(I) shall furnish (at such time as the Secretary may by regulations prescribe) a written statement showing such information to the United States Attorney for the jurisdiction in which such individual resides and the jurisdiction in which the specified criminal offense occurred.

(5) Information to payors of bailEach clerk required to make a return under paragraph (1) shall furnish (at such time as the Secretary may by regulations prescribe) to each person whose name is required to be set forth in such return by reason of paragraph (2)(B)(i)(II) a written statement showing—

(A) the name and address of the clerk’s office required to make the return, and
(B) the aggregate amount of cash described in paragraph (1) received by such clerk.