Auto Dealer Indicted For Illegally Structuring Cash Transactions

On June 13, 2013 a federal grand jury charged a dealer in Ohio with illegally structuring bank deposits to avoid IRS reporting requirements.  The 26-count indictment alleges that the dealer “made multiple cash deposits in amounts less than $10,000 on the same day or consecutive days” in order to avoid filing a Form 8300.  The dealer faces penalties of up to five years in prison for each count, while the business faces penalties up to $50,000 for each count.

This case illustrates that the authorities remain vigilant in monitoring cash transactions and prosecuting individuals and businesses that violate reporting requirements.  You should take cash reporting requirements seriously, and establish safeguards so that your employees will not only report cash transactions that exceed $10,000, but also detect efforts by others to avoid reporting requirements by making several smaller cash transactions.  Here are several things to remember when evaluating your dealership’s cash reporting processes:

  • Report cash down payments on retail installment sale contracts and lease agreements:  Many people incorrectly believe that a business does not have to report cash down payments made as part of a retail installment purchase or lease.  The IRS penalizes many businesses that fail to report cash amounts included in down payments that exceed reporting requirements.  Avoid these penalties by reporting cash and cash equivalent amounts above the reporting threshold used as down payments on installment purchases and leases.
  • Add up the cash equivalents and report:  Businesses often ask if they have to report consumers that use a combination of cash and cash equivalents, or a variety of cash equivalents, that, when combined, exceeds $10,000.  The answer is that you should report these transactions.  Remember, the IRS considers forms of payment such as cashier’s checks, traveler’s checks, and money orders as equivalent to cash.  So, if you have a combination of cash and cash equivalents, or no cash but an assortment of cash equivalents, that exceed $10,000, report this transaction to the IRS.
  • Your accounting office should not be only department responsible for compliance:  The accounting office will need the help of your sales staff to report cash and cash equivalents on the Form 8300.  For example, the Form 8300 asks the identity of a person in addition to the buyer who provides cash.  The accounting office may not have this information if it is not gathered by the sales staff at the time of the sale.
  • Don’t delay in notifying consumers that you filed a Form 8300 with the IRS:  While the law allows businesses to wait until next January to notify consumers of the Form 8300 filing, you should try to notify the consumer sooner.  The earlier you send the notification, the earlier you may be alerted to suspicious activity by the consumer, like providing the wrong mailing address to your staff.
  • Cash transactions involving $10,000 are not as rare as they used to be:  As vehicles have become more expensive, transactions involving amounts greater than $10,000 are more common.  As these transactions become more commonplace, your staff may become complacent.  Check with your DMS to see what reporting you can create that identifies transactions that you should report so you can create another safeguard should employees miss a transaction.
  • Know all of your customers, not just the ones that trigger cash reporting requirements:  The United States Criminal Code, and most state criminal codes, prohibits transactions where the business knows, or should know, that funds used in the sale came from criminal activity.  If you have reason to believe a consumer or your employees structured a deal to avoid cash reporting requirements, you should report such activity to the authorities, even when the transaction ultimately does not occur.