Many small business owners are totally unaware that they are breaking the law when they accept cash payments over $10,000. What they do not know could cost them huge fines from the IRS. Under IRS rules, if a business accepts a cash payment of $10,000 or more for a single transaction, they must report it by filing a form 8300 within 15 days of the transaction. This form can be filed online or on paper. Additionally , the business is required to notify the person from whom they accepted the payment no later than January 31 of the year following the filing.
The penalties for not filing can be huge. The intentional disregard penalty for failure to report is the greater of $25,000 or the amount of cash received in such transaction not to exceed $100,000. Failure to file a timely return can run $50 to $100 per transaction. The aggregate annual limitation (ceiling) in the case of businesses with gross receipts exceeding $5 million is $1,500,000. For businesses with gross receipts not exceeding $5 million, the aggregate annual limitation is $500,000.
Breaking a transaction into two payments does not allow you to avoid filing. The IRS counts more than one payment related to one transaction as still being subject to the $10,000 limitation. For example, if a business sold a tractor and received a $7,000 cash deposit on the order, delivered the tractor some time later and received the $5,000 balance as cash, that would be counted as a $12,000 transaction and requires the filing of a form 8300 . It is not necessary to report transactions using cashiers checks or money orders, but any form of cash or coin is subject to the limitations.
If a business sells a customer an item for $9,000 cash one month and a month later the same customer buys a totally different item for cash, that is considered two separate transactions and not subject to filing. However, if the two sales happened within a 24 hour period they would be subject to the limitation. If a business leases a space to someone who pays $2,000 a month rent in cash and the total cash rent paid during a calendar year exceeds $10,000 , then that is subject to the limitation because it is all related to one transaction.
It gets rather tricky sometimes to determine when the limit has been exceeded. When in doubt consult your accountant or the IRS website for further definition, or you can call the IRS for advice. Form 8300 can be obtained online or wherever you get IRS forms. It can also be filed electronically online. Be careful to always report these transactions within 15 days. Better to be safe than sorry. Please be sure to visit our site for Money Counters
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