What Is The Cash Payment Rule?
Organizations that must comply with the cash payment rule are stunned when they discover their IT network has vulnerabilities. When you submitted IRS Form 8300 from your computer, how secure was that connection, and did the report go out on time? It’s easy to file electronically through the BSA E-Filing System. However, though free, quick, and easy, how confident are you that your system wasn’t exposed?
Today’s article will cover:
- What is the cash payment rule?
- What does the IRS consider as cash?
- IT systems help you follow the rule and stay secure
Companies and organizations are constantly targeted by hackers, ransomware emails, and other forms of data breaching trying to gain access to their networks. Quite often, some areas of the operation are assumed secure. Yet, access occurred when someone submitted sensitive IRS documents online to a secure government agency. To understand how IT systems can help you stay on top of this rule and comply, continue reading.
What Is The Cash Payment Rule?
Quoting from the IRS website, “Federal law requires a person to report cash transactions of more than $10,000 by filing IRS Form 8300, Report of Cash Payments over $10,000 received in a Trade or Business. The information on the form helps law enforcement combat money laundering, tax evasion, drug dealing, terrorist financing, and other criminal activities.” [1]
As mentioned above, a “person” is defined under the law in seven possible categories. Those categories are either an individual, a company, a corporation, a partnership, an association, a trust, or an estate. So if you or the entity you represent are under any of these sections, following the cash payment rule is required and keeps you compliant.
Furthermore, the timeline for electronically filing IRS Form 8300 is fifteen days after cash was received by the “person” and exceeds $10,000. Of course, there are possible reporting situations that need more clarification for your operation. We always recommend checking with a tax lawyer or certified accountant regarding the cash payment rule and your compliance.
What Does The IRS Consider As Cash?
Form 8300 report filing is very specific. The IRS considers cash as currency or coins from the United States or other foreign countries to avoid confusion. But the definition also includes a cashier’s check, a money order, a treasurer’s check, a bank draft, or a traveler’s check with a total amount of $10,000 or less the “person” received.
It also needs noting. Financial institutions must take additional steps when a “person” purchases a cashier’s check, a money order, a treasurer’s check, a bank draft, or a traveler’s check where the total amount is $10,000 or more. They must file a currency transaction report of what they sold to the “person” or entity, which is all part of combating illegal money and criminal activities.
As stated above, under the IRS Cash Payment Rule, we highly recommend checking with a tax lawyer or certified accountant if you’re unsure how your transaction is defined. Doing so will meet or exceed your compliance obligation when it’s time to file your Form 8300 report electronically.
IT Systems Help You Follow The Rule And Stay Secure
An area IT companies dominate is providing standard operating procedures (SOP) to their clients about their company’s technology systems. An SOP is a predetermined set of written instructions. Each describes in detail the step-by-step routine process that must be followed.
Adopting a standard operating procedure is the first step when following the IRS Cash Payment Rule and complying with the agency’s deadlines. Inside those instructions, you’ll know ahead of time, what form to file electronically, and the deadline to meet.
The next step is auditing your entire IT system to ensure your network is secure before sending sensitive information over the internet. Indeed sending your IRS Form 8300 report to a secure online government site is essential, but your network’s unsecure access points need securing.
[1] https://www.irs.gov/newsroom/cash-payment-report-helps-government-combat-money-laundering
To learn more about the cash payment rule for your Knoxville business, please call us at (865) 524-5522 or email us at: ask@1access.com.
