Many dealers assume that their employees understand the obligation to report to the government the receipt of cash in excess of $10,000. After all, TV crime shows from “Miami Vice” to “CSI: Miami” have dealt with it.
If you don't have a process for cash reporting, put one in place — just on the off chance that you hire someone who doesn't watch TV crime shows.
The cash reporting law is a tool in the government's wars on terrorism and drugs. It aids the government in tracking the activities of folks spending large amounts of cash. As a result, the Internal Revenue Service often audits dealers to determine if they comply with federal cash-reporting requirements.
A dealer must report on IRS form 8300 the receipt of cash and cash equivalents (such as money orders, traveler's checks, and cashier's checks) that exceed $10,000 either individually or in total.
The report must go to the IRS within 15 days after receipt of the qualifying amount. No later than January 31 of the next year, the dealer must notify the customer that the report was sent to the IRS.
The penalty for failure to report when required is $50 for an unintentional violation. Unfortunately, if the IRS feels that the failure was something other than unintentional, the penalty is $25,000 per failure. In recent years, the government has been aggressive in imposing $25,000 per non-report against dealers.
In recent cases in which my firm has represented dealers, the vast majority of transactions that dealers failed to report are deals that are financed. With the price of today's vehicles, it is not unusual to see a down payment in excess of $10,000 in cash or cash equivalents.
However, because some dealership personnel view these as financed deals and not cash deals (as the term is generally used in dealerships), sometimes the bells don't go off and the required report isn't filed.
It is essential for a dealership to develop a cash-reporting program.
Put the program in writing
Whether it is in your personnel handbook or in a separate document given to employees, those involved in the sale process and those who receive cash must understand your cash-reporting program and its importance.
They should know when the dealership's reporting obligation is triggered and what must they do to gather information.
Do not leave the reporting obligation solely to the general office
Many dealers simply require that office to catch deals that involve receipt of cash in excess of $10,000. Unfortunately, there is information that must go on the 8300 Form that may not be developed if the deal awaits the general office identifying it as a reportable transaction. And information may be improperly documented leading general office personnel to miss the deal.
Because of turnover and the press of other business, the importance of the cash-reporting program is sometimes lost. Train all new employees and update training regularly.
Have a backup
No matter how much training you do, employees can miss reportable transactions. Have the general office check deals forwarded to it for cash reporting compliance, either using the dealership-management system or a manual process.
Make sure the program warns about money laundering
Many dealership personnel think they can't get into trouble unless a cash deal involves more than $10,000. Even though a deal may not be reportable to the IRS, employees can wind up doing jail time for money laundering by accepting funds they know or should know are the proceeds of a crime, regardless of the amount.
If you fail to report your eligible transactions, convincing the IRS that the failure was unintentional will be critical to avoiding $25,000 per failure penalties. Having a program in place, and showing you regularly train staff of its importance, will be critical to making your case.
Attorney Michael Charapp of Charapp & Weiss, LLP specializes in representing dealers. He's at (703) 564-0220 or [email protected].
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