The obvious first question that comes to mind is what is considered “cash” for purposes of Form 8300? Cash is defined in Treasury Regulations section 1.6050I-1(c)(1) as:
U.S. and foreign coin and currency received in any transaction; or
Monetary instruments, such as cashier’s check, money order, bank draft, or traveler’s check having a face amount of $10,000 or less that is received in a designated reporting transaction (defined below), or that is received in any transaction in which the recipient knows that the instrument is being used in an attempt to avoid the reporting of the transaction under either section 6050I or 31 USC section 5331.
Cash does not include a check drawn on the payer’s own account, such as a personal check [Treasury Regulations section 1.6050I–1(c)(1)(ii)].
The rules for reporting monetary instruments received in a “designated reporting transaction” can be complex. A “designated reporting transaction” is “a retail sale … of a consumer durable, a collectible, or a travel or entertainment activity” [Treasury Regulations section 1.6050I-1(c)(iii)]. A consumer durable is defined as an “item of tangible personal property of a type that, under ordinary usage, can reasonably be expected to remain useful for at least 1 year, and that has a sales price of more than $10,000” [Treasury Regulations section 1.6050I-(c)(2)].
The Form 8300 requirements apply not just to the direct seller or service provider, but the person who acts on behalf of another as an agent as well. An agent who receives cash from a principal and uses it within 15 days in a second cash transaction is not required to report initial receipt of the cash if the agent discloses the name, address, and taxpayer identification number (TIN) of the principal to the recipient of the second reportable cash transaction; the recipient in the second transaction is required to file Form 8300 [Treasury Regulations section 6050I-1(a)(3)]. The Form 8300 requirements also apply in other situations where cash is received on account of another, such as a business that collects delinquent accounts receivables for other businesses. [Treasury Regulations section 6050I-1(a)(2)].
In addition, the IRS encourages businesses to file Forms 8300 to report “suspicious transactions,” transactions in which it appears that a person is attempting to cause Form 8300 not to be filed, or to file a false or incomplete form (IRM 4.26.10.7.1). There are some exceptions to these requirements. To avoid duplicate reporting, financial institutions that are required to file Currency Transaction Reports (CTR) do not have to file Form 8300 [Treasury Regulations section 1.6050I-1(d)(1)]. There also is no requirement to report a cash transaction if the entire transaction occurs outside of the United States [Treasury Regulations section 6050I-1(d)(4)].
If the failure to comply was the result of intentional disregard of the filing requirements or annual statement requirements, the penalty is substantially larger. For intentional disregard of the rules requiring the filing of Form 8300, the penalty is the greater of $25,000 or the amount of cash received in such transaction, not to exceed $100,000 [IRC section 6721(e)(2)]. For failure to furnish customer statements, the penalty is the greater of $500 per failure, or 10% of the aggregate amount of the items to be reported. There is no aggregate annual limitation for intentional disregard penalties [IRC sections 6721(e); 6722(e)].
A failure is due to intentional disregard if it is “knowing or willful” [Treasury Regulations section 301.6721(f)(2)]; Denbo v. United States, 988 F.2d 1029, 1034-35 (10th Cir. 1993), defining “willful” conduct under section 6672 as a “voluntary, conscious and intentional decision”]. This determination is based on all of the facts and circumstances [Purser Truck Sales v. United States, 710 F. Supp. 2d 1334, 1339 (Md. Ga. 2008)].
These facts and circumstances include, but are not limited to the following:
Whether the failure to file timely or the failure to include correct information is part of a pattern of conduct by the person who filed the return of repeatedly failing to file timely or repeatedly failing to include correct information;
Whether correction was promptly made upon discovery of the failure;
Whether the filer corrects a failure to file or a failure to include correct information within 30 days after the date of any written request from the Internal Revenue Service to file or to correct; and
Whether the amount of the information reporting penalties is less than the cost of complying with the requirement to file timely or to include correct information on an information return. [Treasury Regulations section 301.6721-1(f)(3)].
There are few reported cases involving these penalties, but they indicate that there must be something more than just poor recordkeeping practices or ignorance of the rules for the IRS to impose heightened penalties. Because of the “extreme harshness” of the penalties involved, intentional disregard is “a high standard of culpability, requiring much more than merely negligent or reckless disregard” [Purser Truck Sales at 1339].
A clear case of intentional disregard is Bickham Lincoln-Mercury v. United States [168 F.3d 790 (5th Cir. 1999)], in which the taxpayer had previously pled guilty to criminal charges for failure to file Form 8300, and later withheld information from the IRS in a deliberate effort to assist a customer who wanted to conceal the amount of cash paid for a car. On the other side of the spectrum is Kruse, Inc. v. United States [213 F. Supp. 2d 939, 944 (N.D. Ind. 2002)], in which a jury found that the IRS had improperly imposed the intentional failure to file penalties. There was evidence that the taxpayer honestly believed that auction businesses were exempt from the Form 8300 requirements. This belief was wrong, but because the taxpayer genuinely held it, he did not act willfully. The taxpayer’s defense was bolstered by the fact that he did not make any attempt to conceal his cash receipts but kept accurate books and records and deposited all cash receipts in his bank account.
In Tysinger Motor Co. [428 F. Supp. 2d 480 (E.D. Va. 2006)], the line between intentional disregard and negligence is less clear. The IRS conducted a compliance review and found that the family-owned automobile dealership had failed to report several transactions involving cash in excess of $10,000. The IRS conducted a second review, in which it again found that the company had been inconsistent with its Form 8300 compliance. After the second review, the chief financial officer acknowledged that he was aware of the Form 8300 requirements and of the penalties for failure to file, and the company implemented a system to identify cash transactions. The system did not work, however, and during a third compliance review, the IRS found that the company had failed to file Forms 8300 for four of the eight reportable transactions during the period under review. The company prevailed on its defense that it did not intentionally disregard its obligation but that the failures to file were simply mistakes, the result of sloppy recordkeeping and an inadequate compliance system:
