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him why he was the subject of such drastic tactics. Later, the dealer found out that a prior “sale” had been to an undercover officer who paid for a vehicle with over $10,000 cash. The police assumed that the dealer did not report the cash payment as required by FinCEN and would thus be liable for civil and criminal penalties. Thankfully, the dealer had in fact filed an IRS Form 8300. The dealer’s property was returned without an apology by the obviously disappointed officers. FinCEN provides that any person (person is defined as an individual, company, corporation, partnership or other business entity) in a trade or business who receives more than $10,000 in cash in a single transaction, or a series of related transactions, must fill out an IRS form 8300, reporting the identity of the person paying with cash, and send the form to the IRS. The form must be filed within 15 days of the receipt of the cash. With regard to the acceptance of payments in coin or currency, reporting is required if: 1. the cash payment is a lump sum exceeding $10,000; or 2. installments or other payments of cash received within one year of the initial payment total $10,000.
Cash Equivalents In addition to currency, the rules also include in the definition of cash certain cash equivalents such as cashier’s checks, bank drafts, traveler’s checks, or money orders. These instruments often can’t be traced to the source of the funds they were purchased with. The acceptance of one of these instruments in full or partial payment for a vehicle (other than as a regular payment on an installment contract) is reportable if: 1. the face amount of the instrument is $10,000 or less (if the face amount is more than $10,000 and was paid for by currency, the issuing institution was required to report that transaction); and
use personal property) purchased had a sales price of more than $10,000.
An exception to the reporting rules on cashier’s checks, bank drafts, traveler’s checks and money orders applies if the instrument is the obvious proceeds of a bank loan, or if one is given as a regular installment payment on a retail installment agreement or lease.
“Structuring” Transactions A report should also be filed if it appears that a purchaser is trying to avoid the reporting of a cash transaction by structuring payments that fall short of the $10,000 threshold. Banks are required to report to the IRS any transactions that involve an amount less than $10,000, if it appears the bank customer is intentionally keeping the deposit under $10,000 to avoid reporting. Such transactions are referred to as “structuring.” A former Speaker of the U.S. House of Representatives spent 13 months in federal prison after being found guilty of “structuring” bank transactions to circumvent federal cash reporting laws, even though none of the individual transactions exceeded the $10,000 threshold. The money was used to pay blackmail to keep certain criminal allegations quiet. It was found that withdrawals and deposits were purposely kept under the $10,000 triggering amount to avoid reporting requirements.
Form 8300s are to be mailed to the IRS at the address that appears on 2. a vehicle (or boat or other consumerthe form. Copies should be kept
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for five years. The rules require that written or electronic notices be sent to buyers informing them that the Form 8300 was filed. These notices should be sent before January 31 of the year following the year in which the Form 8300 was filed. Dealers should be aware that banks are also reporting cash deposits to the IRS. This means that when a dealer deposits large amounts of cash, the IRS will probably be informed. One dealer in South Texas recently found that he had drawn the attention of the IRS because several of his deposits contained large amounts of cash, although each was under $10,000. Congress obviously intended the law to be taken seriously. The simple inadvertent failure to file might lead to an audit and an assessment of penalties. But a finding of intentionally failing to file a form 8300 can include a fine of $250,000 ($500,000 for corporations) and/or five years in prison. Under no circumstances should an agreement be made with a buyer to not report applicable cash transactions. Some dealer management software packages offer cumulative cash payment monitoring and Form 8300 printing. While the rules governing filing Form 8300 are complicated and confusing (like the IRS Code, FinCEN contains rules, exceptions to the rules, and exceptions to the exceptions), a good faith effort to comply should be made. Form 8300 can be obtained from banks or can be downloaded, along with detailed instructions, from the IRS website. IRS Publication 1544, which provides a detailed explanation of the reporting requirements, including some specific references to car transactions, is available at the IRS site (www.irs.gov).
Michael W. Dunagan is General Counsel for our sister association, TIADA (Tennessee).
