Page 6 - When Money Costs Too Much: Section 8300 Filing Requirements and Penalties

is the same as for failure to file a rule that a taxpayer must pay the full Under 31 USC section 5322(a), the
timely and correct Form 8300 under assessment before filing a refund suit criminal penalties are more severe than
IRC section 6721. Under the BSA, [Flora v. United States, 362 U.S. 145, under the tax code. A person who willful-
the penalty may be up to the amount 177 (1960)]. ly violates the Form 8300 filing require-
involved in the transaction [31 USC The one avenue for Tax Court ments can be fined up to $250,000 and
section 5321(a)(4)]. review exists when a taxpayer did not up to five years of imprisonment. If
receive an opportunity for Appeals the Form 8300 noncompliance occurs
Challenging Form 8300 and review and the IRS has issued a notice while the defendant was violating anoth-
Related Penalties of intent to levy. The taxpayer can er federal law or as part of an illegal
During an examination, the taxpayer then challenge the penalty through activity involving more than $100,000
should have an opportunity to raise the Collection Due Process (CDP) in a 12-month period, the sanctions are
defenses to penalties. The taxpayer, procedures [IRC section 6330(c)(2) increased to a fine of up to $500,000 and
however, must make a specific request (B); Our Country Home Enterprises, up to 10 years of imprisonment.
for waiver of penalties on the basis of Inc., v. Comm’r, 855 F.3d 773 (7th For structuring under the BSA, the
reasonable cause (IRM 20.1.7.12.1). If Cir. 2017)]. If the taxpayer does not criminal penalty is imposed under 31
the IRS assesses penalties, the taxpayer prevail during the CDP hearing, the USC section 5324(d), which provides
can protest the assessment with the taxpayer can seek review of that deci- for a criminal fine and up to five years
IRS Independent Office of Appeals. sion in the Tax Court [Callahan v. of imprisonment. If the structuring
Form 8300 penalties are “assessable Comm’r, 130 T.C. 44, 48 (2008)]. occurred while the defendant was vio-
penalties,” meaning that they are The IRS provides Appeals rights lating another federal law or as part
assessed on notice and demand, and as a matter of course, and thus it is of an illegal activity involving more
they are not subject to the deficiency rare that a taxpayer can challenge than $100,000 in a 12-month period,
procedures, meaning that the taxpayer Form 8300 penalties in the Tax Court. the term of imprisonment is increased
cannot petition for review in the Tax Rather, the usual course is for the tax- to up to 10 years.
Court (IRC section 6671). The IRS payer to pay a divisible portion of the
provides for pre-assessment Appeals penalties and bring a refund action. Tips to Avoid and Reduce
review only of penalties for inten- Penalties
tional disregard of the requirements Criminal Penalties for Form The penalties for noncompliance
(IRM 4.26.11.11.2). For all other Form 8300 Noncompliance with the Form 8300 rules can have
8300 and related penalties, there is The above discussion focuses on an extremely detrimental impact on a
no pre-assessment Appeals review. civil penalties, but it is important to business. Below are some suggestions
Rather, post-assessment, the taxpayer note that taxpayers who flout these for CPAs to assist clients with Form
can request abatement in writing, and requirements can also be prosecuted 8300 compliance:
if that request is denied, the taxpayer if the government is able to prove ■ Communicate and educate.
will have an opportunity for Appeals beyond a reasonable doubt that the Periodically ask clients whether they
review (IRM 20.1.1.4.1.2). taxpayer acted willfully. Criminal receive cash payments in their trade
If the taxpayer does not get relief charges for failure to file Forms 8300 or business and explain the reporting
through these procedures (with one and furnish statement and structuring requirements.
exception explained below), the rem- are brought under IRC section 7203 ■ Develop systems and procedures.
edy is to pay the penalties and file an (Willful failure to file return, supply Assist clients in developing proce-
administrative claim for refund, and, information, or pay tax), which is a dures to identify large cash transac-
if that is denied, file a refund action felony punishable by a fine of up to tions and promptly report them.
in federal district court or the Court $25,000 ($100,000 in the case of a ■ Promptly correct noncompliance.
of Claims [IRC section 7422(a), 28 corporation) and up to five years of If the correction is made within 30
USC section 1346(a)(1)]. Form 8300 imprisonment. Filing a false Form days, the initial penalty is reduced.
penalties are “divisible,” meaning 8300 is prosecuted under IRC section Even if the correction is made later, it
that payment of the penalty associ- 7206(1), declarations under penalties will be a positive factor in the reason-
ated with a single failure to file is of perjury, also a felony. The sentence able cause analysis. ■
sufficient to file a refund claim and may include a fine of up to $100,000
institute a refund suit [Chief Counsel ($500,000 in the case of a corpora- Megan L. Brackney, JD, LLM (Tax),
Advice 201315017 (April 12, 2013)]. tion), and three years of imprisonment is a partner at Kostelanetz & Fink,
This is an exception to the general [IRC section 7206(1)]. LLP, New York, N.Y.

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