When Do Businesses Need to Report the Receipt of Cash and Digital Assets?

 Posted on February 15, 2024 in Taxation Law

For business owners, it is important to understand the reporting obligations that apply when receiving cash and digital assets. To ensure that taxes can be assessed correctly, the IRS requires businesses to report certain cash transactions, and transactions involving digital assets may need to be reported as well. Failure to comply with these requirements can result in penalties. An attorney who has experience addressing small business tax issues can provide guidance in this area, ensuring that a business owner takes the correct steps to report transactions, respond to tax audits, and avoid penalties.

Cash Transactions

The IRS requires businesses to report any cash transactions that exceed $10,000 in a single transaction or a series of related transactions. This includes any payments received by a business for goods or services, to address debt obligations, when exchanging cash, or to place in escrow or trust funds. It is important to note that these reporting requirements do not only apply to cash but also to other forms of currency, such as money orders, cashier's checks, traveler's checks, and bank drafts.

Businesses must file Form 8300 with the IRS within 15 days after receiving cash in a transaction. This form includes information about the payer(s), the recipient, and any people for whom the transaction was conducted on their behalf. A business is also required to provide annual written statements to each payer listed on Form 8300.

Digital Assets

The Infrastructure Investment and Jobs Act, which was passed by Congress in 2021, stated that digital assets will be considered cash for reporting purposes. The law stated that digital assets would need to be reported for any tax returns, statements, or forms filed after December 31, 2023. However, the IRS has not yet settled on a definition of “digital assets,” and it has not finalized the rules and regulations for reporting these assets.

Due to these factors, the IRS has issued a notice stating that until regulations are finalized, digital assets do not need to be considered when determining whether the cash received in a transaction meets the reporting threshold. Once the final regulations are put in place, the IRS will provide forms and instructions for reporting transactions involving cash and digital assets.

It is important to note that even though digital assets do not currently need to be reported on Form 8300, tax obligations will still apply when these assets are received as income, paid to employees as wages, or sold, transferred, or exchanged. Income taxes will apply when a person receives digital assets as income, and capital gains taxes will apply to the gains or losses realized when selling or transferring digital assets. Cryptocurrency, non-fungible tokens (NFTs), stablecoins, or other types of digital assets may result in tax obligations for businesses, employers, employees, or independent contractors.

Contact Our San Jose, CA Business Tax Attorney

If you have questions or concerns about your reporting obligations related to cash and digital asset transactions, John D. Teter Law Offices can provide guidance on the applicable tax laws and help ensure compliance with all relevant rules and regulations. If you are concerned about penalties that may apply because you have not reported digital assets, we can provide you with representation as you address these issues with the IRS. Contact our San Jose tax lawyer today at 408-866-1810 to set up a consultation.