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Reminder: Written notice due Jan. 31 to Form 8300 customers

October 28, 2010

Don’t forget, in assembling year-end paperwork, that a Jan. 31 deadline looms regarding Form 8300, the Internal Revenue Service document used for sales transactions involving cash payments over $10,000. Form 8300 commonly is referred to as "the $10,000 cash reporting rule."

No law prohibits a merchant from taking cash, but any sum of $10,000 or more must be reported. A lump sum exceeding $10,000, or installment payments that cause the total cash received within one year of the initial payment to total more than $10,000, dictate that Form 8300 must be filed.

However, a cashier’s check, bank draft, traveler’s check, or money order is not treated as cash if the funds are the proceeds from a bank loan. For instance, a customer pays for an $11,500 vehicle using $2,000 of U.S. currency and a cashier’s check for $9,500 payable to the customer and the dealership.

That it is a cashier’s check is obvious because the note includes instructions to have a lien put on the car as security for the loan.

For this reason, the cashier’s check is not treated as cash. A Form 8300 would not have to be filed in the transaction.

As a merchant, any dealer who filed a Form 8300 with the IRS in 2009 must notify the related customer in writing by Jan. 31. On-the-spot notification does not relieve merchants of the written obligation. All Form 8300 correspondence between dealers, customers and the IRS should be documented using certified mail.

A written statement to a customer can be as simple as: "Dear Customer: We are required by the Internal Revenue Service to report all transactions involving more than $10,000 in cash and cash equivalents,’ under the provisions of 26 U.S.C. 0501.

"We filed Form 8300 with he IRS on (date, 2009), indicating hat you gave us $(amount) in connection with your purchase of a (make, model, year, VIN). Sincerely, . . ."

A dealer’s legal advisor should review the exact wording of the notification.