Correction to Cash Reporting Article
Sunday, September 30, 2012
Back-to-the-Basics and Beyond…..
KNOCK..KNOCK..KNOCK, "We're here to do a cash reporting audit."
How's your heart? Calls and conversations these past few months indicate that the IRS is actively doing audits to assure that dealers are properly reporting cash transactions exceeding $10,000.00.
Believe it or not, cash sometimes comes disguised as something else. Also, there is a mistaken belief that reporting only applies on a single transaction/single payment scenario.
The IRS has an excellent publication, IRS Publication 1544 to cover these issues in understandable detail. Please go to http://www.irs.gov/publications/p1544/ar02.html and print your own copy and one for each employee. Everyone needs to read this publication. It is suggested they initial the pages as having been read and place their copy in their employee file. In the event of an audit the dealer has proof that they are making an effort to comply.
Let's try to clarify a few items below:
Q1: When is an IRS Form 8300 report due?
A1a: When the dealer receives cash in excess of $10,000.00 in a single sum or series of sums on a transaction within twelve months.
Example 1. The car sells for $12,000.00 and the dealer receives the $12,000.00 in the form of cash at the time of the sale.
Example 2. The dealer receives $7,000.00 cash at the time of the sale. The dealer takes a cash payment of $2,000.00 in month two. The dealer takes a cash payment of $2,000.00 in month three. These three total $11,000.00 cash received within twelve months. It does not matter how much is still owed, it matters how much cash was received on that transaction within twelve months.
A1b: When a dealer receives a related party transaction within a twenty-four hour time frame.
Example 1. The customer pays $7,000.00 cash for a vehicle. Within twenty-four hours a related party transaction takes place for $5,000 cash. These two total cash in excess of $10,000.00. A report is due.
Note: the definition of a ‘related party' expands beyond the above. Please read the details provided in the Publication 1544.
Q2: What is cash?
A2: the following is considered cash for reporting purposes:
Example 1. US CURRENCY
Example 2. FOREIGN CURRENCY
Example 3. THE FOLLOWING ITEMS - WHEN THEY ARE FOR $10,000.00 (OR) LESS THAN $10,000.00:
· CASHIER CHECK
· MONEY ORDER
· BANK DRAFT
· MONEY ORDER
· TRAVELER'S CHECK
Q3. Why are these four items considered cash?
A3. There is no requirement on the issuing agency to report on an IRS Federal Form 8300 when the issuing agency accepts cash of $10,000.00, or below to create one of these four.
Note: Money launderers, drug dealers, terrorist will purchase these instruments with cash in an amount below $10,000.00 to avoid the mandatory reporting requirements. They are also counting on the dealer not knowing that these are actually considered CASH by law.
It is the responsibility of the dealer to be on the lookout for these and to properly report when the $10,000.00 cash line is crossed.
Q4: Where do I find a IRS Form 8300 and who gets the report?
A4a. www.irs.gov/pub/irs-pdf/f8300.pdf Print and complete the form. Provide to the IRS within fifteen days of crossing the $10,000.00 cash line.
A4b. A written notice must be provided to the customer no later than January 31 following the transaction.
Note: If the funds received are suspicious you may mark the Suspicious Box on Line 2 and there is no requirement to notify the customer.
A4c. A copy of the 8300 needs to be sent within fifteen days to the Florida Department of Revenue at PO Box 6600, Tallahassee, FL 32314.
Whether the dealer has a Dealer Management Program that tracks and notifies the dealer or the dealer tracks independently, the dealer is held responsible for following through.
There is nothing wrong with receiving cash. Do yourself a favor - get these reports off your desk within fifteen minutes of the customer leaving the lot.
HINT: Set aside December 1-5 as catch-up days on this and all governing agencies. Go online and access any updated information that may affect your business. The FIADA has a sheet with multiple Email hot-links to various governing agencies. Contact the office for your copy.
Educate/train your employees annually. It's good for your heart.
This article is not all encompassing. It is always wise to consult your attorney to help assure compliance.
Remember, "What you know makes you money. What you don't know costs you a fortune.”
Terry Myers – Instructor FIADA, Owner/Instructor Florida Auto Dealer School