If Your Business Handles Cash Make Sure You Know the Rules

Most of us don’t have to be tax experts to know that cash transactions are hard for the government to track, and that significantly large transactions are often used in less savory business transactions.

But that doesn’t mean that all cash transactions are illegal, or indicative of unscrupulous or illegal activity–many very legitimate businesses do take cash, and large amounts of it, legally and ethically, all the time.

Reporting Requirements

But because of the risk of illegal activity and to ensure there is nothing going on that the government doesn’t want going on, there are strict reporting requirements when your business handles or deposits significantly large cash transactions.

The key number in cash transactions is $10,000. If you deposit more than $10,000 in cash you must fill out a form with the IRS, called form 8300, which tells the IRS you have received the cash, and discloses the source of the cash. The form must be sent to the IRS within 15 days of receiving the cash (not 15 days from the actual deposit).

Cash doesn’t just include actual cash, but anything that acts like cash, like a money order.

Evading the Requirements

And no, you cannot just break a large cash payment into multiple little deposits, to avoid the $10,000 threshold.

While many banks won’t catch on to this, and the IRS may not either, if they do, and you’re caught, there can be criminal penalties. And since many large cash deposit businesses tend to handle and deposit large cash transactions routinely, they will likely catch on if you’re depositing $4,000 today and $6,000 a day later and $3,000 two days after that, etc.

In fact, it is a criminal act to try to evade reporting–not only can the person that doesn’t report the cash, or tries to evade the cash, face criminal penalties, but also, anybody who helped, aided or assisted can also be reported.

Penalties can be monetary as well–and even though it’s technically “the business” that may have evaded reporting requirements, that doesn’t matter–you, individually, can be liable to the government to pay the fine, which can lead to enforcement by the seizure of your personal assets.

Source of Funds

You must disclose any business source of income that is more than the $10,000 amount, even if the source of the cash is a side hustle, or not your primary business purpose.

As an example, if your business were to loan someone money, and they repaid the loan with large cash payments, those repayments must be reported–even if your business is not in the business of loaning money.

Compliance Problems

Compliance can be difficult–especially in businesses where large cash transactions aren’t commonplace. For example, if you collect rent for your commercial properties by online payment or transaction, and one day a single tenant pays you in cash, you may not have the policies and procedures in line, and employees may not be trained, to effect compliance with the statute.

Call our Fort Lauderdale business attorneys at Sweeney Law P.A. at 954-440-3993 for help with your business.

Source:

taxgroupcenter.com/what-is-irs-form-8300/