Kelly J. Bullis: Handling large cash transactions
November 6, 2016
Hoopty-doopty-doooo! Did you know the IRS is watching for large cash transactions? They're working hard to stop illegal activity (such as money laundering by various criminals involved in tax evasion, terrorist financing, drug dealing, etc.), which usually involves a lot of cash.
But wait a minute, aren't there legitimate large cash deposits from businesses such as retail stores, ATM vendors, check cashing firms, bars, banks, casinos, etc.? Of course, and those businesses have learned a simple required step to avoid any surprise visits from the IRS or DEA agents.
It's called, Form 8300. According to the IRS, "The general rule is that you must file Form 8300 … if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions."
So what if you don't think you're required to file, but you have to make a deposit of more than $10,000 in cash with your bank? The bank will ask for information from you so they can report the transaction on their own form 8300. (Remember, your deposit constitutes the definition the IRS uses, "receives more than $10,000 in cash from one buyer as a result of a single transaction …")
But wait, it gets worse. If you deliberately break up your deposit with the bank into two or more smaller deposits of less than $10,000, you just broke the law … BIG TIME! It's called "structuring" (Title 31 Sec 5324) and the potential punishment could be a fine or up to five years in prison or both. There are stories of folks talking out of one side of their mouth "coaching" a friend on how to structure a large cash deposit to come in under $10,000. Beware! Both the "coach" and the person actually making the deposit are breaking the law.
So, if you're needing to report a large cash transaction of more than $10,000 or just make a large cash deposit of more than $10,000, the best option is to follow the law and report it properly on form 8300. It's actually no big deal. The key is you must gather information from the person giving you the large cash payment or provide it to the entity you're making a large deposit of cash with (name, Social Security number, address, date of birth, occupation, and one form of ID such as a driver's license). The worst that might happen is the IRS or DEA might make some inquiries with you directly about the party that gave you all that cash or where you got all the cash. If you're normally making such large deposits at the bank, you're usually left alone (after an initial investigation that you might not even be aware of) since it's a normal business practice for you.
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These days, it's not "normal" for somebody to pay for a large purchase entirely with cash. Our society is quickly moving away from cash as a normal way of doing business, instead, we use debit and credit cards almost everywhere. FYI, if your business is paying too much in merchant processing fees to accept card payments, shop around. There are good deals out there to be found.
Did you hear? Proverbs 6:6a says, "Deliver yourself like a gazelle from the hand of the hunter …"
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. He's on the web at BullisAndCo.com and also on Facebook.