by Leonard A. Bellavia, Esq.
The Internal Revenue Service recently updated Form 8300 (the “Report of Cash Payments Over $10,000 Received in Trade or Business”). You can download a pdf version of the new Form 8300 at http://www.irs.gov/pub/irs-pdf/f8300.pdf . Please take this opportunity to review your business’s cash reporting process and make any corrections as necessary. Here are some things to remember when reporting cash payments to the IRS:
- Report cash down payments on retail installment sale contracts and lease agreements: Many people incorrectly believe that a business does not have to report cash down payments made as part of a retail installment purchase or lease. The IRS penalizes many businesses for not reporting cash amounts above the reporting threshold used as down payments in finance deals. Avoid these penalties by reporting cash and cash equivalent amounts above the reporting threshold used as down payments on installment purchases and leases.
- Add up the cash equivalents and report: Businesses often ask if they have to report consumers that use a combination of cash and cash equivalents, or a variety of cash equivalents, that, when combined, exceeds $10,000. The answer is that you should report these transactions. Remember, the IRS considers things like cashier’s checks, traveler’s checks and money orders equivalent to cash. So, if you have a combination of cash and cash equivalents, or no cash but an assortment of cash equivalents, that exceed $10,000, report this transaction to the IRS.
- Your accounting office should not be only department responsible for compliance: The accounting office will need the help of your sales staff to report cash and cash equivalents on the Form 8300. For example, the Form 8300 asks the identity of a person in addition to the buyer who provides cash. The accounting office may not have this information if it is not gathered by the sales staff at the time of the sale.
- Don’t delay in notifying consumers that you filed a Form 8300 with the IRS: While the law allows businesses to wait until next January to notify consumers of the Form 8300 filing, you should try to notify the consumer sooner. The earlier you send the notification, the earlier you may be alerted to suspicious activity by the consumer, like providing the wrong mailing address to your staff.
- $10,000 doesn’t buy as much as it used to: The amount you are required to report does not buy as much as it used to. Now it is a nice down payment on a much more expensive product. The risk is that your staff may become complacent on reporting because transactions in excess of $10,000 happen daily at many businesses. Check with your CRM provider to see what reporting you can create that identifies consumers that you should report so you can create another safeguard against employees failing to report these transactions.
- Know all of your customers, not just the ones that trigger reporting on a Form 8300: The United States Criminal Code, and most state criminal codes, prohibits transactions where the business knows, or should know, that funds used in the sale came from criminal activity. Report suspicious activity to the authorities even when you do not make the deal.
If you have any questions, or need help with checking your processes, our firm is here to assist you. Please call us at 631-224-7000.