Page 3 - When Money Costs Too Much: Section 8300 Filing Requirements and Penalties

COLUMNS I Tax Practice & Procedure

Exhibit transaction, not to exceed $100,000 [IRC
Current Penalty Regime section 6721(e)(2)]. For failure to furnish
customer statements, the penalty is the
Penalty for Aggregate Annual Limit Aggregate Annual Limit greater of $500 per failure, or 10% of
Violation ($5 million or more in (less than $5 million in
gross receipts) gross receipts) the aggregate amount of the items to be
reported. There is no aggregate annual
Failure to file com- $250 $3,000,000 $1,000,000 limitation for intentional disregard pen-
plete Form 8300/fur-
nish annual statement alties [IRC sections 6721(e); 6722(e)].
A failure is due to intentional disregard
Noncompliance cured $50 $500,000 $175,000 if it is “knowing or willful” [Treasury
within 30 days
Regulations section 301.6721(f)(2)];
Denbo v. United States, 988 F.2d 1029,
1034-35 (10th Cir. 1993), defining “will-
filers must retain copies of the forms for include all of the required information; ful” conduct under section 6672 as a
five years [Treasury Regulations section and 2) failure to timely file the form [IRC “voluntary, conscious and intentional
1.6050I-1(e)(3)(iii)]. section 6721(a)(2)]. Similarly, there are decision”]. This determination is based
two bases for penalties for failure to fur- on all of the facts and circumstances
Furnishing the Annual Statement nish statements to customers: 1) failure [Purser Truck Sales v. United States, 710
In addition to the requirement to to include all required information; and F. Supp. 2d 1334, 1339 (Md. Ga. 2008)].
file the Form 8300 itself, IRC section 2) failure to timely furnish the statement These facts and circumstances include,
6050I(e) requires any person who files [IRC section 6722(a)(2)]. but are not limited to the following:
a Form 8300 to furnish a single, annual (i) Whether the failure to file timely
written statement to each person identi- Penalties Not Due to Intentional or the failure to include correct infor-
fied on Form 8300 by January 31 of the Disregard mation is part of a pattern of conduct
next calendar year [Treasury Regulations The penalty under both provisions is by the person who filed the return
section 1.6050I-1(f)]. The statement must $250 per violation for violations not due of repeatedly failing to file timely or
contain the name, address, and telephone to intentional disregard of the reporting repeatedly failing to include correct
number of the contact for the business, requirements [IRC sections 6721(a)(1), information;
the aggregate amount of reportable cash 6722(a)(1)]. There is no particular intent (ii) Whether correction was promptly
received from the person during the cal- required, although there is a reasonable made upon discovery of the failure;
endar year, and a statement that the filer cause defense (discussed below). There (iii) Whether the filer corrects a failure
reported this information to the IRS. If are annual aggregate limitations on the to file or a failure to include correct
the business only filed one Form 8300 maximum amount of penalties that can information within 30 days after the
during the year for a particular payor, be imposed, depending upon the busi- date of any written request from the
the filer may send a copy of the Form ness’s annual gross receipts. Both penal- Internal Revenue Service to file or to
8300 to satisfy the annual statement ties are reduced if the business corrects correct; and
requirement. However, merely providing the noncompliance within 30 days. These (iv) Whether the amount of the infor-
a copy of the Form 8300 to the payor penalty rates and ceilings are adjusted for mation reporting penalties is less than
at the time of the transaction does not inflation (IRM 4.26.10.10.1). the cost of complying with the require-
meet the requirement (IRM 4.26.10.3; The Exhibit summarizes the current ment to file timely or to include cor-
4.26.10.7.2). The one exception to the penalty regime for violations not due to rect information on an information
annual statement requirement is that intentional disregard. return. [Treasury Regulations section
when the business voluntarily files a 301.6721-1(f)(3)].
Form 8300 to report a suspicious trans- Penalties for Intentional Disregard There are few reported cases involv-
action, it should not send the statement If the failure to comply was the ing these penalties, but they indicate
to that payor. result of intentional disregard of the that there must be something more than
filing requirements or annual statement just poor recordkeeping practices or
Civil Penalties requirements, the penalty is substantially ignorance of the rules for the IRS to
The failure to comply with these pro- larger. For intentional disregard of the impose heightened penalties. Because of
visions can result in substantial penalties. rules requiring the filing of Form 8300, the “extreme harshness” of the penalties
There are two separate bases for penal- the penalty is the greater of $25,000 or involved, intentional disregard is “a high
ties related to Form 8300: 1) failure to the amount of cash received in such standard of culpability, requiring much

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