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Cash payment report helps government combat money laundering

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.

Who is covered

By law, a “person” is an individual, company, corporation, partnership, association, trust or estate. For example, dealers in jewelry, furniture, boats, aircraft or automobiles; pawnbrokers; attorneys; real estate brokers; insurance companies and travel agencies are among those who typically need to file Form 8300.

Tax-exempt organizations are also “persons” and may need to report certain transactions. A tax-exempt organization doesn’t have to file Form 8300 for a charitable cash contribution. Note, however, that under a separate requirement, a donor often must obtain a written acknowledgement of the contribution from the organization. See Publication 526, Charitable Contributions, for details. But the organization must report noncharitable cash payments on Form 8300. For example, an exempt organization that receives more than $10,000 in cash for renting part of its building must report the transaction.

What’s cash

For Form 8300 reporting, cash includes coins and currency of the United States or any foreign country. It’s also a cashier’s check (sometimes called a treasurer’s check or bank check), bank draft, traveler’s check or money order with a face amount of $10,000 or less that a person receives for:

  • A designated reporting transaction or
  • Any transaction in which the person knows the payer is trying to avoid a report.

Note that under a separate reporting requirement, banks and other financial institutions report cash purchases of cashier’s checks, treasurer’s checks and/or bank checks, bank drafts, traveler’s checks and money orders with a face value of more than $10,000 by filing currency transaction reports.

A designated reporting transaction is the retail sale of tangible personal property that’s generally suited for personal use, expected to last at least one year and has a sales price of more than $10,000. Examples are sales of automobiles, jewelry, mobile homes and furniture.

A designated reporting transaction is also the sale of a collectible, such as a work of art, rug, antique, metal, stamp or coin. It is also the sale of travel and entertainment, if the total price of all items for the same trip or entertainment event is more than $10,000.

Reporting cash payments

A person must file Form 8300 if they receive cash of more than $10,000 from the same payer or agent:

  • In one lump sum.
  • In two or more related payments within 24 hours. For example, a 24-hour period is 11 a.m. Tuesday to 11 a.m. Wednesday.
  • As part of a single transaction or two or more related transactions within 12 months.

Examples of reporting situations

Automobile dealerships

  • If a husband and wife purchased two cars at one time from the same dealer, and the dealer received a total of $10,200 in cash, the dealer can view the transaction as a single transaction or two related transactions. Either way, it calls for only one Form 8300.
     
  • A dealership doesn’t file Form 8300 if a customer pays with a $7,000 wire transfer and a $4,000 cashier check. A wire transfer is not cash.
     
  • A customer purchases a car for $9,000 cash. Within 12 months, the customer pays the dealership cash of $1,500 for accessories for that car. The dealer doesn’t need to file Form 8300, unless they knew or had reason to know the transactions were connected.

Taxi company

Weekly lease payments in cash from a taxi driver to a taxi company within 12 months is considered the same transaction. The taxi company needs to file Form 8300 when the total amount exceeds $10,000. Then, if the company receives more than $10,000 cash in additional payments from the driver within 12 months, the company must file another Form 8300.

Landlords

Landlords need to file Form 8300 once they’ve received more than $10,000 in cash for a lease during the year. But a person not in the trade or business of managing or leasing real property, such as someone who leases their vacation home for part of the year, doesn’t need to report a cash receipt of more than $10,000.

Bail-bonding agent

A bail-bonding agent must file Form 8300 when they receive more than $10,000 in cash from a person. This applies to payments from persons who have been arrested or anticipate arrest. The agent needs to file the form even though they haven’t provided a service when they received the cash.

Colleges and universities

Colleges and universities must file Form 8300, if they receive more than $10,000 in cash in one or more transactions within 12 months.

Home builders

Home builders and contractors need to file Form 8300 if they receive cash of more than $10,000 for building, renovating or remodeling.

When to file Form 8300

A business must file Form 8300 within 15 days after the date the business received the cash. If a business receives later payments toward a single transaction or two or more related     transactions, the business should file Form 8300 when the total amount paid exceeds $10,000.
Each time payments aggregate more than $10,000, the business must file another Form 8300.

How to file

A person can file Form 8300 electronically using the Financial Crimes Enforcement Network’s BSA E-Filing System. E-filing is free, quick and secure. Filers will receive an electronic acknowledgement of each submission.

Those who prefer to mail Form 8300 can send it to Internal Revenue Service, Federal Building, P.O. Box 32621, Detroit, MI  48232. Filers can confirm the IRS received the form by sending it via certified mail with return receipt requested or calling the Detroit Federal Building at 866-270-0733.

Taxpayer identification number

Form 8300 requires the taxpayer identification number (TIN) of the person paying with cash. If they refuse to provide it, the business should inform the person that the IRS may assess a penalty.

If the business is unable to obtain the customer’s TIN, the business should file Form 8300 anyway. The business needs to include a statement with Form 8300 that explains why the form doesn’t have a TIN. The business should keep records showing it requested the customer’s TIN and give the records to the IRS upon request.

Informing customers about Form 8300 filing

The business must give a customer written notice by Jan. 31 of the year following the transaction that it filed Form 8300 to report the customer’s cash transaction.

  • The government doesn’t offer a specific format for the customer statement, but it must:
  • Be a single statement aggregating the value of the prior year’s transactions,
  • Have the name, address and phone number of the person who needs to file the Form 8300 and
  • Inform the customer the business is reporting the payment to the IRS.

A business can give a customer who only had one transaction during the year a copy of the invoice or Form 8300 as notification if it has the required information. The government doesn’t recommend using a copy of Form 8300 because of sensitive information on the form, such as the employer identification number or Social Security number of the person filing the Form 8300.

A business may voluntarily file Form 8300 to report a suspicious transaction below $10,000. In this situation, the business doesn’t let the customer know about the report. The law prohibits a business from informing a customer that it marked the suspicious transaction box on the form.

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Be Tax Ready – understanding tax reform changes affecting individuals and families

The Tax Cuts and Jobs Act (TCJA), enacted in late 2017, produced the most sweeping tax law change in more than 30 years. The TCJA, often referred to as tax reform, affects nearly every taxpayer — and the 2018 federal return they’ll file in 2019.

For taxpayers preparing to file their 2018 tax return or getting ready to meet with their tax professional, understanding the changes from the Tax Cuts and Jobs Act can help them “Be Tax Ready.” More information is available in IRS Publication 5307, Tax Reform Basics for Individuals and Families.

Federal income tax withholding changes

The Tax Cuts and Jobs Act changed the way taxable income is calculated and reduced the tax rates on that income. The IRS issued new 2018 withholding tables last year to reflect these changes. Since taxpayers need to pay most of their tax during the year, as income is earned or received, the tables show payroll service providers and employers how much tax to withhold from employee paychecks.

Most taxpayers probably started seeing withholding changes in their paychecks early in 2018. IRS encouraged taxpayers throughout 2018 to use the IRS Withholding Calculator to perform a Paycheck Checkup and adjust their tax withholding by filing Form W-4, Employee’s Withholding Allowance Certificate, with their employer if too much or too little tax was being withheld for the year. Taxpayers can also make estimated or additional tax payments to avoid an unexpected tax bill and possibly a penalty.

Taxpayers who pay too much tax during the year will claim a credit or refund for the overpayment while those who have too little tax, either through withholding or paid through estimated payments, may owe tax.

Taxpayers should review their tax withholding in 2019 and make any adjustments with their employer as early in the year as possible. This can help protect against having too little tax withheld and facing a lower refund or unexpected tax bill and even a penalty next year.

In addition to lowering the tax rates, other changes in the law that affect taxpayers and their families include suspending personal exemptions, increasing the standard deduction, increasing the child tax credit, and limiting or discontinuing certain deductions.

Deduction for personal exemptions suspended

For 2018, taxpayers can’t claim a personal exemption deduction for themselves, their spouse or dependents. This means that taxpayers will not be able to reduce income subject to tax by an exemption amount for each person included on their tax return as they have in previous years. However, changes to the standard deduction amount and child tax credit may offset at least part of this change for most families and, in some cases, may result in a larger refund.

Standard deduction nearly doubled

The standard deduction is a dollar amount that reduces the income on which a taxpayer is taxed. It varies by filing status. The Tax Cuts and Jobs Act nearly doubled standard deductions.

Starting in 2018, the standard deduction for each filing status is:

Filing StatusStandard Deduction
Starting in 2018		Increased from 2017
Single$12,000Up from $6,350 in 2017
Married filing jointly. Qualifying widow(er).$24,000Up from $12,7000 in 2017
Married filing separately$12,000Up from $6,350 in 2017
Head of Household$18,000Up from $9,350 in 2017

The amounts are higher for taxpayers who are blind or at least age 65.

More than nine out of 10 taxpayers use tax software or a paid preparer to file their taxes. Generally, taxpayers answer a series of questions in an interview format and the software or preparer chooses the best option (standard deduction or itemized deductions) for them. The new tax law hasn’t changed this process and the IRS has worked extensively with software developers and tax preparers to ensure that they are prepared to help.

Itemized deductions modified or discontinued

Almost everyone who usually itemizes deductions filing Schedule A, Itemized Deductions, is affected by changes from the Tax Cuts and Jobs Act. Many individuals who itemized last year may now find it more beneficial to take the now higher standard deduction – and may have a simpler time filing their taxes.

Deduction for state and local income, sales and property taxes modified. A taxpayer’s deduction for state and local income, sales and property taxes is limited to a combined, total deduction of $10,000 ($5,000 if married filing separately). Anything above this amount is not deductible.

Deduction for home equity interest modified. Interest paid on most home equity loans is not deductible unless the interest is paid on loan proceeds used to buy, build or substantially improve a main home or second home. For example, interest on a home equity loan used to build an addition to an existing home is typically deductible, while interest on the same loan used to pay personal living expenses, such as credit card debts, is not.

Deduction for casualty and theft losses modified. A taxpayer’s net personal casualty and theft losses must now be attributable to a federally declared disaster to be deductible.

Miscellaneous itemized deductions suspended. Previously, when a taxpayer itemized, they could deduct the amount of their miscellaneous itemized deductions that exceeded 2 percent of their adjusted gross income. These expenses are no longer deductible. This includes unreimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel. It also includes deductions for tax preparation fees and investment expenses.

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Treasury, IRS issue proposed regulations on charitable contributions and state and local tax credits

Today the U.S. Department of the Treasury and the Internal Revenue Service issued proposed regulations providing rules on the availability of charitable contribution deductions when the taxpayer receives or expects to receive a corresponding state or local tax credit.

The proposed regulations issued today are designed to clarify the relationship between state and local tax credits and the federal tax rules for charitable contribution deductions. The proposed regulations are available in the Federal Register.

Under the proposed regulations, a taxpayer who makes payments or transfers property to an entity eligible to receive tax deductible contributions must reduce their charitable deduction by the amount of any state or local tax credit the taxpayer receives or expects to receive.

For example, if a state grants a 70 percent state tax credit and the taxpayer pays $1,000 to an eligible entity, the taxpayer receives a $700 state tax credit. The taxpayer must reduce the $1,000 contribution by the $700 state tax credit, leaving an allowable contribution deduction of $300 on the taxpayer’s federal income tax return. The proposed regulations also apply to payments made by trusts or decedents’ estates in determining the amount of their contribution deduction.

The proposed regulations provide exceptions for dollar-for-dollar state tax deductions and for tax credits of no more than 15 percent of the payment amount or of the fair market value of the property transferred. A taxpayer who makes a $1,000 contribution to an eligible entity is not required to reduce the $1,000 deduction on the taxpayer’s federal income tax return if the state or local tax credit received or expected to be received is no more than $150.

Treasury and IRS welcome public comments on these proposed regulations. For details on submitting comments, see the proposed regulations.

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Law change affects moving, mileage and travel expenses

The Internal Revenue Service today provided information to taxpayers and employers about changes from the Tax Cuts and Jobs Act that affect:

  • Move related vehicle expenses
  • Un-reimbursed employee expenses
  • Vehicle expensing

Changes to the deduction for move-related vehicle expenses

The Tax Cuts and Jobs Act suspends the deduction for moving expenses for tax years beginning after Dec. 31, 2017, and goes through Jan. 1, 2026. Thus, during the suspension no deduction is allowed for use of an automobile as part of a move using the mileage rate listed in Notice 2018-03. This suspension does not apply to members of the Armed Forces of the United States on active duty who move pursuant to a military order related to a permanent change of station.

Changes to the deduction for un-reimbursed employee expenses

The Tax Cuts and Jobs Act also suspends all miscellaneous itemized deductions that are subject to the 2 percent of adjusted gross income floor. This change affects un-reimbursed employee expenses such as uniforms, union dues and the deduction for business-related meals, entertainment and travel.

Thus, the business standard mileage rate listed in Notice 2018-03, which was issued before the Tax Cuts and Jobs Act passed, cannot be used to claim an itemized deduction for un-reimbursed employee travel expenses in taxable years beginning after Dec. 31, 2017, and before Jan. 1, 2026. The IRS issued revised guidance today in Notice 2018-42.

Standard mileage rates for 2018

As mentioned in Notice 2018-03, the standard mileage rates for the use of a car, van, pickup or panel truck for 2018 remain:

  • 54.5 cents for every mile of business travel driven, a 1 cent increase from 2017.
  • 18 cents per mile driven for medical purposes, a 1 cent increase from 2017.
  • 14 cents per mile driven in service of charitable organizations, which is set by statute and remains unchanged.

The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical purposes is based on the variable costs.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Increased depreciation limits

The Tax Cuts and Jobs Act increases the depreciation limitations for passenger automobiles placed in service after Dec. 31, 2017, for purposes of computing the allowance under a fixed and variable rate plan. The maximum standard automobile cost may not exceed $50,000 for passenger automobiles, trucks and vans placed in service after Dec. 31, 2017. Previously, the maximum standard automobile cost was $27,300 for passenger automobiles and $31,000 for trucks and vans.

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Tax Cuts and Jobs Act, Provision 11011 Section 199A – Qualified Business Income Deduction FAQs

Basic questions and answers on new 20-percent deduction for pass-through businesses

Below are answers to some basic questions about the new 20-percent deduction for pass-through businesses. Also known as the section 199A deduction or the deduction for qualified business income, the deduction was created by the 2017 Tax Cuts and Jobs Act.

Q1. What is the Qualified Business Income Deduction?

A1. Section 199A of the Internal Revenue Code provides many taxpayers a deduction for qualified business income from a qualified trade or business operated directly or through a pass-through entity. The deduction has two components.

  1. Eligible taxpayers may be entitled to a deduction of up to 20 percent of qualified business income (QBI) from a domestic business operated as a sole proprietorship or through a partnership, S corporation, trust or estate. For taxpayers with taxable income that exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers, the deduction is subject to limitations such as the type of trade or business, the taxpayer’s taxable income, the amount of W-2 wages paid by the qualified trade or business and the unadjusted basis immediately after acquisition (UBIA) of qualified property held by the trade or business. Income earned through a C corporation or by providing services as an employee is not eligible for the deduction.
     
  2. Eligible taxpayers may also be entitled to a deduction of up to 20 percent of their combined qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income. This component of the section 199A deduction is not limited by W-2 wages or the UBIA of qualified property.

The sum of these two amounts is referred to as the combined qualified business income amount. Generally, this deduction is the lesser of the combined qualified business income amount and an amount equal to 20 percent of the taxable income minus the taxpayer’s net capital gain. For details on figuring the deduction, see Q&A 6 and 7. The deduction is available for taxable years beginning after Dec. 31, 2017. Most eligible taxpayers will be able to claim it for the first time when they file their 2018 federal income tax return in 2019. The deduction is available, regardless of whether an individual itemizes their deductions on Schedule A or takes the standard deduction.

Q2. Who may take the section 199A deduction?

A2. Individuals, trusts and estates with qualified business income, qualified REIT dividends or qualified PTP income may qualify for the deduction. In some cases, patrons of horticultural or agricultural cooperatives may be required to reduce their deduction. The IRS will be issuing separate guidance for co-ops.

Q3. How do S corporations and partnerships handle the deduction?

A3. S corporations and partnerships are generally not taxpayers and cannot take the deduction themselves. However, all S corporations and partnerships report each shareholder’s or partner’s share of QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends and qualified PTP income on Schedule K-1 so the shareholders or partners may determine their deduction.

Q4. What is qualified business income (QBI)?

A4. QBI is the net amount of qualified items of income, gain, deduction and loss from any qualified trade or business. Only items included in taxable income are counted. In addition, the items must be effectively connected with a U.S. trade or business. Items such as capital gains and losses, certain dividends and interest income are excluded.

Q5. What is a qualified trade or business?

A5. A qualified trade or business is any trade or business, with two exceptions:

  1. Specified service trade or business (SSTB), which includes a trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, investing and investment management, trading, dealing in certain assets or any trade or business where the principal asset is the reputation or skill of one or more of its employees. This exception only applies if a taxpayer’s taxable income exceeds $315,000 for a married couple filing a joint return, or $157,500 for all other taxpayers
     
  2. Performing services as an employee

Q6. How is the deduction for qualified business income computed?

A6. The SSTB limitation discussed in Q&A 5 does not apply if a taxpayer’s taxable income is below $315,000 for a married couple filing a joint return and $157,500 for all other taxpayers; the deduction is the lesser of:

       A) 20 percent of the taxpayer’s QBI, plus 20 percent of the taxpayer’s qualified real estate investment trust (REIT) dividends and qualified publicly traded partnership (PTP) income

     B) 20 percent of the taxpayer’s taxable income minus net capital gains.

If the taxpayer’s taxable income is above the $315,000/$157,500 thresholds, the deduction may be limited based on whether the business is an SSTB, the W-2 wages paid by the business and the unadjusted basis of certain property used by the business. These limitations are phased in for joint filers with taxable income between $315,000 and $415,000, and all other taxpayers with taxable income between $157,500 and $207,500. The threshold amounts and phase-in range are for tax-year 2018 and will be adjusted for inflation in subsequent years.

Q7. I have income from a specified service trade or business. How does that affect my deduction?

A7. The SSTB limitation does not apply to any taxpayer whose taxable income is below the $315,000/$157,500 threshold amounts discussed in Q&A #6. For taxpayers whose taxable income is within the phase-in range discussed in Q&A #6, the taxpayer’s share of QBI, W-2 wages and UBIA of qualified property related to the SSTB may be limited. If the taxpayer’s taxable income exceeds the phase-in range, no deduction is allowed with respect to any SSTB. The threshold amounts and phase-in range are for tax year 2018 and will be adjusted for inflation in subsequent years.

Q8. In 2018, I will report taxable income under $315,000 and file married filing jointly. Do I have to determine if I am in an SSTB in order to take the deduction? Is there any limitation on my deduction?

A8. No, if your 2018 taxable income is below $315,000, if married filing jointly, or $157,500 for all other filing statuses, it doesn’t matter what type of business you are in. You will be able to deduct the lesser of:

     a) Twenty percent (20%) of your QBI, plus 20 percent of your qualified REIT dividends and qualified PTP income, or

     b) Twenty percent (20%) of your taxable income minus your net capital gains.

Q9. In 2018, I will report taxable income between $157,500 and $207,500 and file as single. I receive QBI. Does it matter if it is from an SSTB?

A9. Yes, because your taxable income is above the threshold amount, your section 199A deduction with respect to any SSTB will be limited. However, because you are within the phase-in range, you may be allowed some section 199A deduction with respect to an SSTB. In addition, for taxpayers above the threshold amount, the section 199A deduction with respect to any trade or business, including an SSTB, may be limited by the amount of W-2 wages paid by the trade or business and the UBIA of qualified property held by the trade or business. The phase-in range is $315,000 to $415,000 for joint filers and $157,500 to $207,500 for all other filing statuses. Section 1.199A-1 of the proposed regulations provides additional information.

Q10. In 2018, I am single and will report taxable income over $207,500. My only income is from an SSTB. Am I entitled to the deduction with respect to the SSTB?

A10. No. The same is true for a married couple filing a joint return whose taxable income exceeds $415,000. However, you may be entitled to a deduction for QBI earned from another trade or business that is not an SSTB or from qualified REIT dividends or qualified PTP income.

Q11. In 2018, I am single and will report taxable income over $207,500. I am NOT in an SSTB.  Am I entitled to the deduction?

A11. Yes, if you have QBI, qualified REIT dividends or qualified PTP income. For eligible taxpayers with total taxable income in 2018 over $207,500 ($415,000 for married filing joint returns), the deduction for QBI may be limited by the amount of W-2 wages paid by the qualified trade or business and the UBIA of qualified property held by the trade or business. The proposed rulesprovide additional information on these limitations. The IRS also issued a notice of proposed revenue procedure providing methods for determining W-2 wages for purposes of the limitation.

Q12. How do co-ops qualify for the 199A deduction?

A12. The IRS will be issuing separate guidance for co-ops.