As a business owner, whether you sell goods or services, you are legally required to report cash transactions larger than $10,000 to the IRS. This involves filing Form 8300 within 15 days of a transaction. Failing to do so may lead to penalties. Typically, the process starts with the IRS sending you Letter 2277 to request an 8300 exam, and you will also get Form 4564 outlining which documents you need to provide.

While a Form 8300 examination isn’t quite as serious as a full-blown income tax audit, it does require preparation and a thorough look at your current protocols and procedures.

Key takeaways:

  • The IRS uses Form 8300 to track cash transactions greater than $10,000.
  • Failure to report these transactions could result in a Form 8300 examination and civil or criminal penalties.
  • If an examination uncovers irregularities and discrepancies in a business’s taxes, an income tax audit may follow.

Why Businesses Must Take Form 8300 Seriously

Some business owners are hit-and-miss with their cash transaction reporting, while others are completely unfamiliar with this requirement. However, you need to be diligent about reporting cash transactions – these requirements come from the IRS and FinCEN, and failing to comply could cost your business a lot.

Cash Reporting Requirements

The IRS requires that cash transactions greater than $10,000 be documented on Form 8300, which is then submitted to the IRS. Businesses sending in Forms 8300 must also provide a notice to their client or customer that the IRS will be receiving a Form 8300 about the transaction.

Non-Compliance Penalties

Form 8300 non-compliance penalties have increased steadily over the years. Starting in 2024, the civil penalty for failing to file a Form 8300 on time is $310 per return. The IRS drops that to $60 if the business corrects the error within 30 days after the initial due date. If the IRS determines that a business is willfully not complying, the penalty is much steeper—the higher of $31,520 and the amount of cash received in the transaction.

The Possibility of Deeper Investigations

In addition to the civil penalties described above, the IRS may pursue criminal charges if they determine that an individual willfully fails to file a Form 8300 correctly and on time. This often occurs with repeated noncompliance; while the IRS does understand that people may misunderstand the requirements or occasionally forget, they are not endlessly patient.

Failing to file may result in up to five years of imprisonment plus a fine as high as $25,000. Corporations may be charged a fine as high as $100,000. There are even higher penalties for willfully filing a false Form 8300.

Breaking Down the Form 8300 Process

  • Who must file a Form 8300? A business that processes any single transaction involving more than $10,000 in cash or multiple related transactions totaling over $10,000 in cash. This includes businesses that provide services, work in trades, or sell goods.
  • What is required? Form 8300 requires detailed information on the payer, the payment method, the transaction purpose, and details of the service or property being sold.
  • Which payment types are covered? Form 8300 is required for transactions involving U.S. currency, foreign currency, cashier’s checks worth less than $10,000, and money orders worth less than $10,000. Single cashier’s checks and money orders with a face value of $10,000 or greater are reported by the bank, not the person receiving the cashier’s check or money order.
  • Who enforces these requirements? This is a collaborative effort between the IRS and FinCEN.

Form 8300 Examination

The IRS may move forward with a Form 8300 examination if they have reason to believe that a business is not properly reporting cash transactions. A number of things may trigger an examination:

  • A business may be reported by an employee, customer, competitor, or other party.
  • A company’s number of Forms 8300 may be significantly lower than the average for their industry or location.
  • There may be discrepancies on other forms indicating potential noncompliance.

During a Form 8300 examination, an IRS examiner will be assigned to your case. They send Letter 2277 and Form 4564. Letter 2277 explains that your business is being examined and that they will be conducting an in-person visit. Form 4564 includes the specific documents, forms, and records you must gather and prepare.

The examiner will look for evidence of any unreported cash transactions over $10,000, as well as any efforts to structure transactions to sidestep Form 8300 requirements. They may also look into communications between employees. managers, and clients for signs of willful or knowing misconduct.

During their examination, the examiner may want to talk to employees of the business to find out how they handle cash transactions and if they are trained in handling cash transactions with more than $10,000. Leading up to the visit, the examiner may look at previous Forms 8300 filed by the business to determine if they have a history of compliance, timely submissions, and accurate reporting.

Consequences of Ignoring an Examination

Ignoring a Form 8300 examination can be devastating for your business. Any time the IRS is digging into your business activities, you do not want to be caught unaware or unprepared—even if you believe you have done nothing wrong and have met all IRS requirements. Being prepared ensures you can provide all necessary documents upfront, answer the examiner’s questions, and address any unexpected issues.

Even if you ignore an examination or fail to prepare for it, it will go on without you. If you do not provide the requested documents, the IRS can issue a formal summons. This legally obligates you to provide the documents or face legal consequences.

How Form 8300 Examinations May Lead to Greater Issues

A business that regularly handles cash transactions greater than $10,000 may handle lots of cash without ever having to process it through a bank. This dramatically increases the risk of underreported income, and the IRS knows this.

Depending on what the Form 8300 examination uncovers, a Form 8300 examination may open the door to a full audit of your business’s taxes. At that point, you aren’t just looking at penalties for failing to file Form 8300 on time. You could be facing massive underpayment penalties or even criminal charges if the IRS determines that your failure to follow reporting rules is willful.

Best Practices for Businesses Wanting to Avoid Compliance Risk

Whether or not you’ve already been targeted by a Form 8300 examination, it’s always good to have protocols in place that help you stay compliant and avoid issues.

  • Internal controls – ensure your business has strong internal policies around cash transactions.
  • Training – every employee who may have the possibility of conducting such a large transaction should be trained in Form 8300 requirements and proper recording of large transactions. Ongoing training and education can ensure that employees are up-to-date with all IRS regulations.
  • Internal audits – regular internal audits can also catch any potential errors or trends before they become massive—and costly—tax concerns. Working with a CPA or other tax professional to handle these audits can help you feel confident that you are compliant.
  • Diligent recordkeeping – ensure that your record-keeping protocols and strategies keep you prepared for any potential examinations or audits. Even if you do nothing wrong, the IRS can always choose you for an audit—and if that happens, you’ll be happy your paperwork is in order.

Frequently Asked Questions

What transactions require filing Form 8300?

If a single transaction or multiple related transactions involve over $10,000 in cash, they must be reported on a Form 8300. Cash includes U.S. currency and foreign currency as well as money orders or cashier’s checks with a face value of less than $10,000.

How does a Form 8300 examination differ from an income tax audit?

A Form 8300 examination looks specifically at a business’s compliance with Form 8300 requirements, rather than analyzing the entirety of their tax compliance.

What are the penalties for failing to file Form 8300?

Civil penalties may be as high as $310 for non-willful noncompliance and $31,520 or the value of the cash transaction for willful noncompliance. Criminal penalties include fines as high as $500,000 and prison time.

Can a Form 8300 examination lead to an income tax audit?

If a Form 8300 examination uncovers discrepancies and errors that warrant an income tax audit, an audit may follow a Form 8300 examination.

Why is professional representation important during a Form 8300 examination?

During an examination, the IRS will be looking for evidence of noncompliance. You want to have your paperwork in order to prove that your business has been compliant. If you have made mistakes or been noncompliant, you want to be able to show that your noncompliance was not willful and that you have taken steps to ensure future compliance. A tax attorney can help you with these aspects of a Form 8300 examination.

Contact Seattle Legal Services Today

Form 8300 requirements are complex, but they’re also a necessary part of stopping money laundering in the United States. By staying current on all regulations and requirements, you can avoid unnecessary penalties and be prepared for examinations and audits. Facing a Form 8300 examination and unsure how to prepare? Seattle Legal Services is here to help. Call us today or reach out online to set up a consultation with our experienced tax team now.