The IRS is getting tough on cannabis business in Colorado and is going after cannabis entrepreneurs who failed to fill out Form 8300. If you want to avoid being audited by the IRS, it is important for you to stay on top of these filings. Here is what Form 8300 is and why it is important.
What Is Form 8300?
Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, is a form used by the federal government to keep track of cash payments of more than $10,000. These filings are designed to assist law enforcement in investigating and preventing money laundering, tax evasion, drug dealing, financing of terrorism activities, and other criminal acts.
For purposes of Form 8300, cash doesn't only include U.S. dollar coins and bills and foreign currency notes; it may also include cashier's checks, bank drafts, traveler's checks, and money orders if the face value is $10,000 or less.
These filings are designed to assist law enforcement in investigating and preventing money laundering, tax evasion, drug dealing, financing of terrorism activities, and other criminal acts.
Who Must File Form 8300?
Every person who engages in a trade or business and also receives more than $10,000 in cash in a single transaction or in two or more related transactions is required to file Form 8300. Transactions that are considered related transactions are those that are conducted between a payer (or its agent) in a 24-hour period. The transactions may also be considered related if the recipient of the payment knows that each transaction is a part of a series of transactions.
The IRS has also issued IRS Form 8300 Reference Guide to help you determine which transactions qualify as reportable transactions. Cash doesn't only include U.S. dollar coins and bills and foreign currency notes. It may also include cashier's checks, bank drafts, traveler's checks, and money orders if the face value is $10,000 or less.
Form 8300 Filing Examples
Here are two examples to help you understand when you need to file Form 8300:
Example 1. Jack asks an employee to purchase cannabis for his dispensary. The employee orders the product in two shipments and he pays with two cash payments, each for $6,000. The cannabis grow business who received more than $10,000 in the designated reporting transaction must file Form 8300.
Example 2. A cannabis supply shop sells growing equipment for $9,000 in cash to Adam at 10 a.m. During the afternoon on the same day, Adam returns to buy more equipment and pays an additional $9,000 in cash. Since, both transactions occurred within a 24-hour period, they are related transactions and the grow equipment supplier must file Form 8300.
When Do I File Form 8300?
Each time you receive a payment that meets the criteria for filing Form 8300, you must file the form for the transaction within 15 days of receiving the payment. You can file online using the Bank Secrecy Act (BSA) Electronic Filing (E-Filing) System at the FinCEN website.
What Are the Penalties for Failing to File Form 8300?
If you simply fail to file Form 8300 on time, a penalty of $250 per occurrence will be assessed. This penalty is capped at $1,000,000 per year for businesses with gross receipts not exceeding $5 million. If you fix the error and make sure that the forms are filed within 30 days of the deadline, then this penalty limited is reduced to $175,000 per year for businesses with gross receipts not exceeding $5 million. However, if your business grosses more than $5 million, then the penalty cap increases to $3 million.
However, if you intentionally fail to file Form 8300, the penalty increases to $25,000 of the total amount of the transaction, up to a maximum of $100,000 for each time that you failed to file. In addition, felony charges may be brought against you in more severe cases. Criminal penalties will be applied by default if you structure or appear to structure payments in order to avoid filing Form 8300 for the transactions.