Form 8300 questions ... am I in violation?

[doubllane]

Hi! I have a question about form 8300, which concerns reporting to the IRS anyone who pays $10K cash in a single transaction, or a series of "related transactions".

I just happened to learn of the existence of form 8300 right as my biggest customer was reaching the $9K cash mark for 2010. Needless to say, I freaked out at the realization that I almost blew past the $10K mark, because according to the law there would have been severe consequences. I refurbish computers, and this customer has been buying them from me and selling them on the street, then coming back for more, so in a sense I'm acting as a wholesaler, and I write up receipts and charge him sales tax (I normally sell on eBay, but this arrangement has been a great alternative, since I don't have to list, sell, and ship the items, which saves me time). He buys from me about once a week, so technically I would consider the transactions distinct and not "related", however the wording of "related" in the 8300 instructions is vague, which makes me hesitant. Anyway, not really wanting to have to bother with the form, or tell the customer I had reported him to the IRS (one of the requirements if you file the form), I asked my accountant if a good strategy might be to tell the customer I was only willing to accept checks from that point on, since checks are not considered cash and therefore are not relevant to form 8300. He said that sounded like a good strategy, and I should just take checks from that point on.

I was happy at that point, and luckily the customer was agreeable to depositing the money in his bank account and paying by check, which he has been doing for a few weeks. However, in my infinite paranoia about accounting/legal issues I have been reading more about form 8300, and it turns out it is illegal to "structure" payments from the customer so that the filing of form 8300 is not necessary. Technically it seems the definition of "structuring" has to do with assisting the customer in paying in smaller amounts (a series of $9K "unrelated" cash transactions, for example) so that the transactions stays under the radar.

So my question is, am I guilty of "structuring" because I told the customer I'd only accept checks when I realized crossing the $10K threshold was imminent? Or is this not relevant at all because he has not gone over the $10K cash threshold? Or, is this not relevant because the transactions were in fact "unrelated" and therefore form 8300 is not appropriate? If I have done something wrong, what is the proper course of action? Should I file the form, and perhaps draw undue attention to the situation, and risk irritating and losing my best customer? Since he's paying with checks now, is there really even an issue? Although I am not involved with his business transactions, it's pretty clear he gets his money from selling my computers, so I don't think money laundering is going on (although I don't know if he is charging HIS customers sales tax, but is that really for me to worry about? Maybe it is...I don't know.)

I am fairly distraught about all this and I honestly don't know what I should do about it, or if there is even a situation to be concerned about. I want to do the right thing, but there are so many vague elements, and so many differing opinions, and I don't want to react too severely, or not severely enough. Like I mentioned, my accountant seems OK with using checks, but I sometimes think he's a little loose with the rules, so I'm asking others. Any help would be greatly appreciated.

Thanks!

[wayside]

My understanding of "related transactions" is that it is for when a large price for something is broken into a series of smaller amounts to get around the $10K limit.

For example, I buy a car for $27,000 and pay cash, but instead of paying $27K at once, I make 3 payments of $9K each.

Your customer is buying different equipment every week, right? And he is paying the full price of each transaction each time. So these don't seem to be related transactions to me.

If I go the grocery store and pay cash for my groceries every week, I am not breaking any laws if the cumulative yearly amount exceeds $10K.

I don't think you have anything to worry about.

Disclamer: that is just my opinion. I am not a lawyer or an accountant.

[doubllane]

Thanks for the reply! I appreciate it!

Yes, that is my impression as well. He buys different equipment every week. I trust him and I sometimes I give him computers in advance which he pays for the next week (after he sells them), but there are distinct receipts for each group of computers he buys, and his payments are for the receipt amount, which I immediately deposit and record. And like I said, since he's in-state, I pay sales tax on the transactions monthly. I assume his bank will report him when he deposits $10K of cash into his account (he deposits it so he can write me checks), but I suppose that's his concern and I should probably not worry about his business, whether he's charging his customers tax, etc.

It's the regularity of the transactions, and the fact that he is amounting to a large portion of my business, and also that I'm in a sense acting as a wholesaler for him that had me worried the purchases might be considered "related". And also the fairly loose wording and limited set of examples in the 8300 instructions. Plus, I work out of my house, so it's not as if he's a random customer who happens to show up at a storefront weekly. Not that that necessarily makes a difference. But anyway, my overall concern is that if I'm doing something wrong, then that could be compounded by continuing to do business with him (and there is potential to do LOTS of business with him over the coming months).

I agree, though -- I am probably being overly cautious. I have been caught by surprise by various accounting issues in the past, so I suppose I'm a little shell shocked and inclined to jump at the slightest potential issue.

[wayside]

By my interpretation of FAQs regarding Reporting Cash Payments of Over $10,000 (Form 8300) no. 7, unless a single computer sells for more than $10,000, form 8300 is not needed.

[Diane Kennedy]

You're definitely not in violation if you tell him to go write you a check. That's actually the behavior that the IRS wants - because then they can track what's going on.

Let's say someone was buying 5 computers from you and the total was over $10K. Under the letter of the law, you're in violation if you stretch out the payments (1 on Mon, 1 on Tues, etc) so that no one cash transaction is over $10K. And you'd be in violation if you told him to buy 3 of them and then have his brother buy the other 2. That's where structuring the transaction can get you in trouble.

Most banks will aggregate your cash transactions for a period of time, if it goes over $10K, then they report the transaction.

In today's post-9/11 world, there is a lot of concern about cash going for nefarious reasons. Plus the IRS and states want to make sure they're getting their fair share of tax money.