Form 8300 Jan 31 Compliance Reminder, Steps to Take when Missing a TIN
AAFCPAs would like to remind cannabis business clients of their potential January 31, 2021 Form 8300 reporting obligation. If you filed a Form 8300 in 2020, you must furnish a written statement to each person whose name was required to be included in the Form 8300 by January 31 (i.e. the year following the transaction).
Who Must File a Form 8300?
Due to limited banking for cannabis companies, cash transactions persist. The details of cash transactions in excess of $10,000 are required to be reported to the US Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”) using Form 8300. Filing of the Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, is required by the 15th day after the date the cash transaction occurred. Read more about Who Must File a Form 8300.>>
Penalties Can Be Severe for Failure to File a Form 8300, and Failure to Furnish a Copy to Each Person Named
Unless due to reasonable cause and not willful neglect, reporting failures are subject to penalties. AAFCPAs has outlined details and key considerations related to Form 8300 penalties:
- Internal Revenue Code Section 6721 imposes a penalty for failing to file Form 8300 timely or failing to provide a complete and accurate Form 8300 to FinCEN.
- Code Section 6722 imposes a penalty for failing to timely furnish a copy of Form 8300 to the individual from whom the cash was received and, if applicable, the person on whose behalf the transaction was conducted.
- Forms 8300 filed or furnished without a Taxpayer Identification Number (“TIN”) or with an incorrect TIN are considered a failure to file a complete and correct Form 8300.
- A penalty under Sections 6721 and 6722 can apply to the same transaction (e.g. not filing with FinCEN and not providing a copy to the person) and is the most common situation for Form 8300.
- The penalties are based on when the Form 8300 is filed with FinCEN or furnished to the person.
- For Forms 8300 due in 2021, the penalty is $50 if less than 31 days late or $110 if more than 30 days late.
- If the failure is due to intentional disregard for the rules, the penalty is the greater of 1) $550 or 2) the greater of $25,000 or the amount of cash not reported (capped at $100,000).
- Penalties will not be imposed if the failure was due to reasonable cause and not willful neglect. Reasonable cause is defined in Treasury Regulation 301.6724-1 as existing if the filer establishes: 1) that there are significant mitigating factors for the failure, or the failure arose from events beyond the filer’s control, and 2) the filer acted in a responsible manner both before and after the failure occurred. The Regulation provides examples of mitigating factors, events beyond the filer’s control, and of acting in a responsible manner.
Steps to Take When Missing a TIN
Obtaining all the information to timely file a complete and accurate Form 8300 is not always easy. One reason is that personally identifiable information (“PII”), including a taxpayer identification number (“TIN”), of the individual, often a (non-owner or non-manger) employee, providing the cash is required to be reported.
The US Department of the Treasury provides guidance specific to acting in a responsible manner to obtain a missing or incorrect TIN. For missing TINs, the filer must make initial and, if required, annual solicitations for the TIN. Additional solicitations via e-mail are recommended for the purpose of documentation as well as professional courtesy.
Step 1 – Make an initial solicitation: If you know in advance that a customer will be paying in cash, request the information of the individual or individuals from whom the cash will be received. Otherwise, request the information at the time the cash is received. If the TIN is not obtained after an initial request, then a subsequent request (i.e. annual solicitation) must be made.
Step 2 – Make an additional initial solicitation: Immediately follow-up via e-mail (i.e. a paper trail), if the TIN is not obtained after the initial request.
Step 3 – File Form 8300 with FinCEN: When filing a Form 8300 missing a TIN, filers are advised to explain why using the comment section on page two of Form 8300.
Step 4 – Make an annual solicitation: If unable to obtain the TIN after initial solicitation, make a request before the end of year, or if the transaction occurs in December make the request by January 31st.
Step 5 – Make an additional annual solicitation: If unable to obtain the TIN after the annual solicitation, send a follow-up e-mail (again, a paper trail) at least seven days prior to January 31st.
Step 6 – Furnish a copy of Form 8300 to the person by January 31st.
If you have questions about filing Form 8300, corrective steps to take, or IRS penalty notices, please contact: David McManus, CPA, CGMA, Tax Partner at 774.512.4014, firstname.lastname@example.org; or your AAFCPAs Partner.