Q: Is it against the law for our travel agency to receive more than $10,000 in cash? Do we have to report it to the federal government? If so, how do we do that? What if a client pays in two installments each totaling more than $5,000 in cash as part of a single sale? What about $10,000 in cash equivalents such as traveler's checks, cashier's checks or money orders?
It is certainly not illegal to accept cash, but to help the government crack down on money laundering, federal law requires that businesses report clients' cash payments of more than $10,000 to the Internal Revenue Service by filing Form 8300.
You can download the form at www.irs.gov/pub/irs-pdf/f8300.pdf
. To file it, you mail it to a post office box in Detroit no later than 15 days after the transaction. You cannot e-file it.
In addition, by Jan. 31 of the following year, you must send the client a notice with your agency's name, address, contact person and phone number; the amount of the client's cash you reported to the IRS; and a statement that you provided this information to the IRS.
There is no standard IRS format for this notice, although it would be similar to a Form 1099.
These obligations belong to the travel agency, not an individual travel agent working as an employee. However, if you are an independent contractor of a travel agency, the rules apply to you as a self-employed businessperson.
"Cash" is defined as U.S. or foreign currency. The law applies to a lump sum of more than $10,000 as well as two or more payments totaling more than $10,000 that are part of a single transaction or related transactions, or that the client divides up in order to avoid the $10,000 threshold. If you suspect that the client is trying to avoid the rule, the Jan. 31 notice described above does not apply.
The law does not apply to cash equivalents that are over $10,000, such as cashier's checks, traveler's checks and money orders with a face value of more than $10,000, as banks report these transactions anyway.
However, in an interesting twist, the law does indeed apply to cashier's checks, traveler's checks and money orders with a face value of $10,000 or less, if they are either part of a "designated reporting transaction" or any transaction in which the business knows the client is trying to avoid the reporting law.
For a travel agency, a "designated reporting transaction" means a sale of travel if the total sales price of all items for the same trip is more than $10,000. In other words, if someone pays for an $11,000 trip with two cashier's checks of $5,500 each, you have to report it, even if you don't know that the client is trying to avoid the $10,000 rule.
The penalty for failing to file the required form is $100 per transaction. However, if you are convicted of intentionally disregarding the need to file, the penalty is the greater of $25,000 or the amount of cash received in such a transaction, not to exceed $100,000. There are similar penalties for failure to furnish the client with the required statement by the Jan. 31 deadline.
The law does not apply to wire transfers or personal checks, no matter how large. Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at firstname.lastname@example.org.