IRS Targets Cash Reporting Rules

WASHINGTON - A year long effort by the Internal Revenue Service to increase the number of large cash transaction reports filed by businesses appears to be paying off.

According to IRS the number of cash reports filed has increased substantially -- from about 29,000 in fiscal year 1990 to almost 60,000 in fiscal year 1991. The number filed in the first two weeks of November -- almost 3,000 -- exceeds the total filed for all of November, 1990.

The IRS efforts were in response to concerns that businesses were not complying with rules requiring them to file a Form 8300 "Report of Cash Payments Over $10,000 Received in a Trade or Business" when they receive more than $10,000 in cash from a customer. Beginning in 1990 and continuing in 1991, many IRS offices around the country conducted coordinated compliance checks of businesses, looking for evidence of large cash sales that went unreported.

In addition to checking the records of businesses, IRS offices have been active in educating the business community about the rules and, in particular, the new rules about to go into effect. Beginning Feb. 3, 1992, in certain cases, cashier's checks, bank drafts, traveler's checks and money orders must be treated the same as cash in deciding if a Form 8300 should be filed.

Many IRS offices will concentrate their efforts during the month of November 1991 in advance of the traditionally heavy retail holiday season. In November, IRS agents are visiting over 5,000 businesses that deal in expensive items such as jewelers, furriers, automobile dealers, boat and airplane dealers. As a result of these visits, the IRS may assess penalties if the business failed to report large cash transactions. In most cases, the civil penalty in $50 for each report not filed. The penalty for intentional disregard of the filing requirement can be much higher, however -- up to as much as $100,000.

Cooperation from the business community is important to the IRS because Form 8300 information helps to identify drug dealers and money launderers. The information is also much more than a weapon in the war on drugs. The cash transaction reports can also reveal tax evaders who hope to remain hidden by dealing in cash.

Compliance checks of businesses in Arkansas for example revealed 164 unreported large cash sales totaling more that $2.5 million. The IRS followed up on these leads and found that almost one-third of the persons who paid over $10,000 in cash for items had not filed income tax returns over the last four years. In other instances the money these people spent for cars and other items was more than the total income reported on their returns for the last four years.

In Buffalo, NY, IRS compliance checks revealed similar results. Over 302 penalties were assessed against businesses for failing to report of $3.5 million in cash transactions. The compliance checks also resulted in 229 new leads on tax cheats who had been dealing in large amounts of cash.

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