Form 8300: Why This Form Is Important to Cannabis Businesses
If you already run or are interested in starting a cannabis business you have probably heard of Form 8300: Report of Cash Payments Over $10,000 Received in a Trade or Business. Failing to fill out this form and submit it on time can lead to penalties and filling it out incorrectly can bring your company’s financials under greater scrutiny from the IRS. As your cannabis focused full-service CPA firm we want to you to know what Form 8300 is and its importance in your company’s financial reporting.
What is Form 8300 and what is its purpose?
Form 8300 is a financial document that must be submitted to the IRS whenever a cash transaction of $10,000 or more has occurred between two persons. The IRS defines a person as “an individual, corporation, partnership, trust, estate, association, or company”. The purpose of Form 8300 filings is to assist law enforcement efforts to investigate and prevent certain crimes. Investigations that use Form 8300 filings include suspected money laundering, tax evasion, financing terrorist activities, selling a controlled substance, among other possible crimes.
When should you fill out Form 8300?
Whenever a transaction over $10,000 occurs where the method of payment includes cash, money orders, cashier’s checks, bank drafts, traveler’s checks, or foreign currency. The transaction can be a single transaction or it can be two or more related transactions with the same payor (or their agents) in a 24-hour period.
When should you file your Form 8300?
Form 8300 should be completed and filed within 15 days of receipt of payment for the cash transaction. You can submit the form to:
- By mail to Internal Revenue Service, Detroit Computing Center, P.O. Box 32621, Detroit, MI 48232
- Electronically for free using the Bank Secrecy Act (BSA) Electronic Filing (E-Filing) System on the FinCEN website.
If the transaction involves payments in installments, you will need to file a Form 8300 each time the payments have reached or exceeded $10,000 since the last report. For example, a vendor sells an item worth $25,000 in January and the buyer pays for the item in installments. The first payment in January is $10,000 and requires a Form 8300 to be filed within 15 days of receipt. The buyer pays the following installment payments of $4,000 in February, $5,000 in March and the remaining balance of $6,000 in April. The vendor would complete and file Form 8300 15 days following the final payment in April because the payments in February and March didn’t total over $10,000.
You also need to provide a written statement to each person whose name was required on a Form 8300 for the year by January 31st of the year following the transaction. For example, your company has a transaction over $10,000 in May 2017 and you completed a Form 8300 and submitted it to the IRS. You would need to make sure anyone whose information was included on that form is provided a written statement by January 31, 2018. Statements can be sent electronically only if the recipient has previously agreed to receive the statement this way.
For record keeping purposes, you need to retain a copy of every Form 8300 that you file for 5 years.
What happens if you are late or fail to file?
Failure to file this form on time is a serious matter. Consequences of failing to file range from fines or penalties to possible criminal charges. Intentionally failing to file Form 8300 on time can lead to penalties of $25,000 or the amount of cash you received but failed to report up to $100,000 whichever is greater. Intentionally failing to file the form at all can risk much higher penalties and the possibility of time in prison.
How does it affect Cannabis Businesses?
Due to issues with reliable banking, the cannabis industry is predominantly an all cash business. Many of the business transactions your company will make may require you to complete and file this form. While compliance with tax regulations is an important reason to ensure your company is properly completing these forms and filing them on time, it is also noting that any IRS audits stem from not filing the form.
The takeaway? As a cannabis business, establishing strong cash & compliance internal controls as part of your day to day operations should be a high priority. It can go a long way toward ensuring that you are identifying transactions that require a Form 8300 filing and that they are completed accurately and on time.