Everyone’s Adopting This New Secret To Stronger Cybersecurity…Read more
KEY POINTS FROM THE ARTICLE
The law requires a person to provide the Treasury with information about any large cash payments they receive in a trade or business. Just like taxpayers need to report their earnings and pay taxes voluntarily by filling Form W-2 and Form 1099, a person who receives a cash transaction of more than $10,000 must report that by filing Form 8300. In short, IRS does not deal only with tax payments but large cash payments too. People are required to file Form 8300 to help law enforcement combat criminal activities such as drug dealing, tax evasion, terrorist funding, and money laundering.
If your business handles such large transactions, then you should know the special reporting regulations the IRS imposes on these payments. Failure to follow the regulations can lead to huge penalties and even criminal prosecution.
Read on to learn more about how IT systems can help business professionals stay on top of the cash payment rule and ensure they comply.
Many businesses, including car and boat dealerships, art galleries, loan sharks, jewelers, or any other business involved in selling goods or services, receive huge cash payments. Similarly, non-profit businesses such as hospitals and colleges deal with large cash transactions. Federal law requires these businesses to report whenever they receive a cash payment above $10,000.
They have to fill out Form 8300 to meet the reporting requirement. This Form requires the payor’s details, including name, address, tax identification number, etc. The law further requires businesses to file the Form within 15 days after receiving the cash. In addition to a lump sum payment of more than $10,000, businesses must be alert to cash installment payments that total to more than $10,000. For example, if someone comes to purchase a product worth $14,000 but gives the cash in a series of, let’s say, $5,000, $4,000, and $5,000 after a duration of two weeks, you must complete Form 8300 since the total amount exceeds $10,000.
It is worth noting that cash, in this case, does not imply only US dollars and cents. It includes foreign currency. It can also include bank drafts, money orders, traveler checks, and cashier’s checks. However, checks drawn from an individual’s personal account are excluded.
While it is not a crime to make cash payments, IRS wants to monitor huge cash payments since individuals who pay large sums of cash are often those involved in criminal activities such as tax evasion or drug dealing.
One can file Form 8300 either by:
Complete a paper copy and mail it to the following address:
Internal Revenue Service, Detroit
Computing Center, PO Box 32621,
Detroit, Ml 48232
You can also file Form 8300 online through the FinCEN’s Electronic Filing system, accessible via the IRS site.
The IRS can penalize you up to $100,000 if you fail to file a correct Form 8300 by the deadline. Intentional failure to file or filing a false Form 8300 may lead to a fine of up to $250,000 for individuals or $500,000 for corporations. Therefore, it is not all about filing the Form by the deadline but ensuring the information provided is accurate and complete.
However, that may not be enough to discourage filing false reports, and the government may punish the person with a jail sentence of up to five years.
One must keep careful records, including the time and the information filed. The IRS conducts audits as they do with other tax forms; thus, not having sufficient records may subject a business or an individual to severe penalties.
Below are ways to stay on top of the cash payment rule and avoid the penalties of failing to file or giving inaccurate information when completing Form 8300.
Running a business is a busy job, and sometimes you may find yourself postponing filing Form 8300. But that is an easy way to end up with unwanted penalties. Consider filing within the first days of the 15-day timeline after receiving the payment; otherwise, time flies and the 16th day may find you yet to file the form.
While completing a paper copy and mailing it is an accepted method, it is easier to provide inaccurate and incomplete information that would lead to penalties. The IRS introduced an online system where businesses can File Form 8300. This is much more efficient and accurate.
The IRS authorizes businesses to keep a record of all transactions they made in the past five years. Consider having a folder to store all printed Forms. The IRS is careful in keeping documents, but there is still a chance that some records may get lost. Luckily, copies of those transactions can vindicate you.
IT systems can help businesses stay abreast of the cash payment rule. The systems offer the following solutions:
IT systems help businesses prepare and report large cash payments more accurately and efficiently. They may also help carry out similar functions for invoicing purposes. As a business professional, accurate and efficient management of compliance activities is at the core of your responsibility. IT systems play an integral and critical part in ensuring your success.
IT systems give greater insights into the accuracy of your cash payment-related data helping you to identify inconsistencies or errors in cash payment reporting. For instance, software solutions may enable you to conduct complex data analytics to identify errors in your cash reporting.
Another way IT systems can help report cash payments is by ensuring the right information is available. The solutions can help manage workflow within the cash payment reporting function. They focus on facilitating and optimizing the reporting process. For instance, IT solutions can store your cash payment in a centralized location to ensure they are easily accessible.
The IRS requires filing for Form 8300 within 15 days from the date of receiving a cash payment of over $10,000. If a business performs many transactions with such amounts, it means there is a lot of filing required. This comes with the burden of ensuring the information provided is accurate and complete to avoid penalties. Fortunately, IT systems can help businesses abide by the cash payment rule and ensure they stay in the IRS’ good graces.
However, to get a robust system, businesses should work with an experienced IT company. And that’s where we come in. Radius Executive IT solutions have proven approaches and strategies to help businesses with all their IT needs. Contact us to learn about our solutions.
