Form 8300 Audits on the Rise

‘Tis the season for Form 8300 compliance audits! Expect the IRS to have their hands full during the months of June and July conducting audits that deal specifically with the preparation and filing of IRS/FinCEN Form 8300, Report of Cash Payments Over $10,000 in a Trade or Business. Local IRS offices will contact a dealership by mail requesting that it makes available certain records including cash receipts, journals, bank deposit slips, and copies of Form 8300 that have been filed for a particular year under audit. Upon an audit, at the initial meeting, the agent will interview the taxpayer to better understand the various internal controls in place surrounding the Form 8300 process and also to gain a better understanding of the taxpayers business.

What Does Form 8300 Mean

Cash includes the coins and currency of the United States and foreign currency, and may also include cashier’s checks, bank drafts, traveler’s checks and money orders with a face value of $10,000 or less in a designated reported transaction. Dealerships are one of the biggest targets by the IRS for Form 8300 compliance as the sale of an automobile typically fits the criteria of a designated reported transaction. For purposes of Form 8300 reporting, cash does not include personal checks drawn on the account of the writer, or a cashier’s check, bank draft, traveler’s check or money order with a face value of more than $10,000.

Due to the various complexities associated with the reporting requirements for Form 8300, this is low hanging fruit for the IRS and penalties can very easily be assessed for noncompliance. Penalties for negligent failure to timely file, to include all required information or to include correct information is $100 per return. If any failure to file is corrected on or before the 30^th day after the required filing date, the penalty is reduced to $30 per return in lieu of $100 per return. Intentional disregard of the requirement to timely file or to include all required information could amount to a minimum of $25,000 per failure.

There are many nuisances with regard to Form 8300 reportable transactions so it is imperative to have a solid understanding of requirements to file, how to file and when to file. Dealerships should develop a written policy that explains how cash transactions over $10,000 will be handled and all affected employees should be made aware of their responsibilities set forth in the policy. Training and education of staff is paramount to help ensure full compliance. Withum offers various training sessions to provide the necessary tools needed to navigate the various caveats of Form 8300 reporting.

Tips to Avoid Form 8300 Penalties:

• File electronically to avoid the “snail mail” issue – the IRS marks Form 8300 received when they process the form, not when it’s received in house
• If mailing, mail via certified mail return receipt so that there is proof of mailing
• Run weekly reports via DMS to ensure reporting multiple payments don’t “slip through the cracks”
• Run an annual report to ensure all notification statements were properly sent by January 31^st and update/send additional if necessary
• Only file if amount(s) is OVER $10,000; do not file if $10,000 or less

Author: Nicole DeRosa, CPA, MAcc | [email protected]