Form 8300 Reporting: Cash Payments From Customers Call for Special Treatment
It’s not uncommon for dealerships to receive large sums of cash as payment for vehicles. As you know, your dealership is generally required to file a special form with the IRS to report cash transactions of more than $10,000. It’s a good time to review the requirements.
The federal government uses the information on Form 8300, “Report of Cash Payments Over $10,000 Received in a Trade or Business,” to combat a wide range of criminal activities. This includes tax evasion, money laundering, drug dealing and terrorist financing. The IRS has provided detailed guidance about the reporting requirements for the form.
For the purposes of Form 8300 reporting, cash includes both United States and foreign currency and coins. The following items also are generally considered to be cash for Form 8300 reporting, if they are $10,000 or less and included as part of a cash transaction that exceeds $10,000.
• Cashier’s checks (also called treasurer’s checks and bank checks),
• Bank drafts,
• Traveler’s checks, and
• Money orders.
You must file Form 8300 if your dealership receives total cash payments of more than $10,000 from a single payer in a lump sum. This rule also applies if you receive more than $10,000 in two or more related payments within a 24-hour period, or as part of a single transaction or two or more related transactions within one year. The form must be filed within 15 days of the date you receive the cash payment that puts you over the $10,000 limit.
On its website, the IRS describes several scenarios in which filing Form 8300 is, and is not, required by dealerships. For example, if a husband and wife bought two vehicles from a dealership at the same time and paid a total of $10,200 in cash, the dealer can consider this one transaction or two related transactions. Regardless, only one Form 8300 must be filed.
Another scenario illustrates filing obligations if a customer split a payment between cash and a wire transfer. If the cash portion was $4,000 and the wire transfer portion was $7,000, filing isn’t required. Yet another scenario explains that, if a car was purchased for $9,000 and the customer bought $1,500 worth of accessories later in the same year, filing isn’t required unless the dealer knew (or had reason to know) the transactions were connected.
Getting the payer’s TIN
When completing Form 8300, you should include the taxpayer identification number (TIN) of the customer who made the cash payment. If the customer refuses to provide his or her TIN, the IRS recommends that you file the form without it and include a statement explaining why the TIN is missing.
The IRS also recommends that you tell the customer he or she could be penalized for not providing a TIN as requested. In addition, you should document the fact that you requested the TIN and be prepared to provide this documentation to the IRS if they request it.
Your dealership is also required to provide written notice to customers that you filed Form 8300 to report their cash transactions. This notice must be provided no later than January 31 of the year following the transaction. The statement must:
• Be a single statement aggregating the value of cash transactions from the previous year,
• Include your dealership’s name, address and phone number, and
• Inform your customer that you’re reporting a cash payment to the IRS.
If a customer only had one cash transaction during the year of $10,000 or more, a copy of the vehicle invoice or the Form 8300 itself can serve as notification if it includes the information noted above. However, the IRS doesn’t recommend sending customers copies of Form 8300, because the form contains sensitive information, such as your dealership’s employer identification number.
The IRS encourages dealerships to file Forms 8300 electronically using the Financial Crimes Enforcement Network’s BSA E-Filing System. Electronic filing is fast, free and uncomplicated, and you’ll receive an automatic acknowledgment as soon as you file.