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Form 8300 Audits

March 7, 2017

Businesses that receive cash in excess of $10,000 need to report this on IRS Form 8300 (“Report of Cash Payments Over $10,000 Received in a Trade or Business”).

The IRS regularly conducts regional compliance audits of businesses that are required to file or are likely to have to file Form 8300. Typically a sample of retail businesses and auto dealerships in a particular area are audited to determine whether or not they are complying with the cash reporting laws. The local IRS office contacts the business by letter and requests that it make available certain records – cash receipts records, journals, ledgers, bank deposit slips, and other records based on the type of business.

For purposes of reporting, cash or cash equivalent means 1) United States and foreign currency in excess of $10,000, and 2) cashier’s checks (by whatever name they are called, including treasurer’s checks and bank checks), bank drafts, traveler’s checks or money orders having a face amount of not more than $10,000 are considered reportable when two or more (as well as cash) are presented to a business and the total amount exceeds $10,000. Under IRS regulations, personal checks, checks drawn on the account of a business, certified personal and business checks, and amounts charged to credit cards are not considered cash.

To comply and also to protect the business, businesses and dealerships should develop a written policy statement that explains how cash transactions over $10,000 are to be handled in the organization. Make sure that all affected employees (salespeople, managers and office staff) are aware of, and fully understand, their responsibilities set out in the statement. The policy should include a statement instructing salespeople not to discuss the cash reporting law with customers at any time or for any reason. All cash reporting inquiries should be referred to a designated person (i.e., the dealer, the general manager) who fully understands all aspects of the cash reporting laws. Fines for noncompliance can be quite substantial reaching $25,000 per violation.

Once a plan is put into place there should be periodic meetings with staff to make sure they fully understand and comply with the policies. Businesses should consider having their independent accountants review the procedures and filings at least once a year as a further protective measure.

Proper cash reporting is a high priority of the IRS and businesses and dealerships should establish a plan to fully comply with the rules. Businesses handling cash should always be prepared for some type of cash reporting audit in the future.

If you have any questions you are welcome to contact me or Louis Young in our New Brunswick office. He can be reached at lyoung@withum.com.

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