Form 8300 Compliance Examiniations

Ms. Greta P. Hicks
July 31, 2013 — 4,111 views  
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The Internal Revenue Service (IRS) has within the Small Business Self-Employed Division a very active group of individuals known as Bank Secrecy Examiners. Their duties include performing compliance examinations of businesses to identify transactions subject to reporting requirements and determine if Forms 8300 have been filed.

A compliance examination is not considered an examination for income tax purposes. Therefore, a business could be subject to its books and records also being examined by a revenue agent for income, excise, employment, or estate tax purposes at an earlier or later date.

Typically, a Form 8300 compliance examination is triggered by a currency transaction report (CTR) submitted to the IRS by a financial institution, such as a bank. The compliance examination is initiated by an IRC 6050I Appointment Letter that states the time, place and date of the examination. An information document request is attached and asks for such documents as:

  • Bank statements complete with deposit slips and cancelled checks;
  • Source documents to support deposits;
  • Receipts written at the time payments are received from customers;
  • Sales, cash receipts, accounts receivable, and notes receivable journals;
  • Request for initial interview of owners of the business, as well as the person handling customer and banking transactions;
  • Installment agreements, leasing agreements and closing statement;
  • Copies of Forms 8300 that have been prepared and submitted; and
  • Copies of notification statements furnished to customers.

As a general rule, the initial scope and depth of a Form 8300 examination will be transactions during the most current 12-month period. Examination steps include: (1) conducting an initial interview; (2) determining entity’s adequacy and effectiveness of internal controls; and (3) comparing the CTR report to bank records and source documents.

If the examiner determines that Forms 8300 were not properly filed or there was a failure to file, a report for penalty assessment will be prepared. The business can choose to agree with the examiner or appeal the examiner’s decision.

Where there is a failure to file or incorrect forms are filed, civil or criminal penalties may apply. Form 8300 civil penalties can be applied under IRC 6721 and IRC 6722. These penalties may apply to negligent or intentional conduct, but will not apply in the case of reasonable cause. To determine reasonable cause, see IRS 6724, Treasury Regulations 301.6724-1 and the Penalty Handbook at IRM

IRC 6721 applies to a person who fails to file Form 8300, or who files a return and fails to include all the required information, or who provides incorrect information on the return. (Refer to IRM 20.1 on Penalties.) IRC 6722 applies to a person who fails to furnish correct payee statements.

Review of Form 8300 Rules

Any persons who receive more than $10,000 while conducting their trade or business must file a Form 8300. The $10,000 may occur in a single transaction or a series of related transactions. For example:

  • Over $10,000;
  • Received as: one lump sum of over $10,000; two or more related payments that total in excess of $10,000; or payments received as part of a single transaction (or two or more related transactions) that cause the total cash received within a 12-month period to total more than $10,000;
  • Received in the course of trade or business;
  • Received from the same buyer (or agent); and received in a single transaction or in two or more related transactions.

Form 8300 is due within 15 days after the date the cash was received. Cash does not include personal checks drawn on the account of the writer. Cash is money, currency and coins of the United States. It is also certain monetary instruments—a cashier’s check, bank draft, traveler’s check, or money order—if it has a face amount of $10,000 or less and the business receives it in a retail sale of a consumer durable, a collectible, a travel or entertainment activity, or any transaction in which the recipient knows the payer is trying to avoid the reporting of the transaction on Form 8300.

Transactions that require Form 8300 include, but are not limited to, sale of goods/services; sale of goods/services; sale of real property; sale of intangible property; rental of real or personal property; reimbursement of expenses; making or repaying a loan; exchange of cash for other cash; escrow arrangement contributions. Examples include:

  • A taxi driver makes weekly payments in cash to a taxi company as a lease payment;
  • A customer deposited over $10,000 in cash into his/her bank account, which was obtained from a sale of heavy equipment;
  • A travel agency’s out-of-state representative collects cash from 10 unrelated customers of $1,000 each, and the cash is deposited in the travel agency’s bank account; the next day, the travel agency’s main office reconciles the cash with each individual airline ticket;
  • A customer buys a boat from Marina Boating Company valued at $16,000, schedules delivery in 10 days, and pays for the boat with currency; the following day, the customer comes to Marina Boating and cancels the sale; Marina Boating refunds the $16,000 in the form of a company check.

For more information on BSA Compliance Examinations, see Internal Revenue Manual (IRM) 4.26.11, BSA Examiner Responsibilities for Form 8300/6050I Examinations, and,id=152532,00.html.

Ms. Greta P. Hicks

Greta P Hicks CPA

Greta P Hicks is a former IRS Examination manager and Ms Hicks currently serves on the Editorial Board of the Texas Society of CPAs and is Tax Editor of Today’s CPA. Greta is active on the TSCPA IRS Relations Committee and teaches seminars on IRS.