Dealing with Large Cash Volumes and Filing Form 8300 [Blog Post]

The following SC&H Group blog post discusses the issues cannabusinesses face with large cash volumes, as well as their resulting need to comply with reporting requirements such as Form 8300.

In today’s quickly shifting medical cannabis environment, businesses face several unique industry challenges.

As checks and credit cards cannot typically be used in cannabis transactions, most cannabusinesses handle large volumes of cash. In fact, legal cannabis is anticipated to reach $6.7 billion in sales this year, according to a recent ArcView Market Research report. Further, it is expected to experience a compound annual growth rate of nearly 30 percent over the next few years and total $21.8 billion in annual sales by 2020.

As a result of these large cash volumes, cannabusinesses must then comply with various reporting requirements enacted under the Bank Secrecy Act and Patriot Act, such as Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business. Cannabusinesses must learn how and why they should file the form, as well as understand the penalties for misfiling.

Reporting to the IRS Using Form 8300

Form 8300 requires businesses to report cash received over $10,000 from one buyer in a single transaction or two or more related transactions conducted between a payer (or its agent).

For instance, suppose a customer buys $1,000 of medical marijuana one month and repeats this for several months. The cannabusiness has to monitor who is giving the cash and at what point the total reaches $10,000 to know when to file Form 8300. Once the $10,000 threshold is reached, a new count is started related to that buyer. The cannabusiness must file Form 8300 within 15 days of reaching the $10,000 threshold.

Furnishing a Written Statement to Each Buyer

Along with Form 8300, cannabusinesses are required to furnish a written statement to each applicable payer by January 31 of the year following the transaction.

This statement, which the cannabusiness must keep for five years, must include:

  • The name, address, contact person, and telephone number of the cannabusiness filing Form 8300
  • The aggregate amount of reportable cash the cannabusiness reported to the IRS from the payer
  • Affirmation that the cannabusiness accurately provided this information to the IRS

Learning Strategies for Compliance

To prepare for compliance, cannabusinesses should set up filing procedures. Forms are filed either by mailing to the address provided with the form or by e-filing using the government’s FinCEN BSA E-Filing system.

Moreover, each cannabusiness should incorporate strict cash management and monitoring activities to ensure that procedures are adequately followed. The IRS routinely uses Form 8300 audits to target cannabis companies.

Realizing Penalties for Failure to File or Furnish Information

The penalties are severe for willfully failing to file, filing false report, trying to stop a form from being filed, or setting up a transaction to avoid the filing requirement. Specifically, cannabusinesses could be exposed to the following penalties:

  • $250 for failing to file a timely and correct Form 8300
  • $250 per violation for failing to furnish a written statement
  • $50 when the failure is corrected on or before 30 days after the required filing date
  • $50 when the failure is corrected on or before 30 days after the required furnishing date
  • Greater of $25,000 or the amount of cash received in such transaction not to exceed $100,000 for intentionally disregarding filing
  • Greater of $500 per failure or 10 percent of the aggregate amount of the items required to be reported correctly for intentional disregard of furnishing requirements

Ultimately, cannabusinesses should work with an advisor to learn why and how they should file Form 8300 to comply with all regulations, avoid penalties, and thrive in today’s uncertain medical cannabis landscape.

Stay tuned for the next blog post in this series, which discusses the specific challenges cannabusinesses must consider when dealing with large cash volumes.

To find out the most effective ways to manage large cash volumes, or get help in preparing Form 8300, contact SC&H Group’s Medical Cannabis Advisory practice here.