While many organizations are making strides toward a fully-cashless world, others still receive significant volumes of cash. By and large, independent schools are cashless, typically accepting tuition payments via electronic means. But some parents prefer to pay in cash, triggering additional reporting requirements that independent schools must be aware of.
When a school receives cash transactions, it is required to report all transactions over $10,000 to the IRS. Reports are filed by submitting Form 8300. In this overview, we cover the key concepts independent schools should understand about Form 8300 and answer several frequently asked questions about these filing requirements.
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IRS Form 8300 is an informational filing that helps the IRS understand when large volumes of cash are being transacted. The filing enables the IRS to better identify money laundering or other types of illegal activities and is required to be filed when certain thresholds are met.
It’s important to note that filing Form 8300 does not open independent schools up to any additional taxes, penalties, or costs: it is a purely informational return. Form 8300 filings do not impact an independent school’s other tax filings, such as their Form 990 filing.
Filers are required to collect information about the individual from whom the cash was received, including their name, address, and taxpayer identification number. It is important for administrators to clearly communicate the reason they are collecting this information. Form 8300 filings must also specify what the payment was for and include details about the reporting organization.
School administrators can often be unaware of the reporting requirements that receiving large cash transactions can trigger, but fortunately, Form 8300 is a relatively straightforward filing provided administrators understand the following issues.
Cash transactions are not limited to cash itself. The IRS uses a broader definition of cash, which includes cashier’s checks, money orders, and bank drafts.
If your school accepts payments via any of these methods, it is considered to have accepted a cash payment in the eyes of the IRS and should file Form 8300 if these transactions exceed the thresholds.
Organizations are required to disclose all cash transactions in excess of $10,000.
It’s important to note that these transactions can occur in a series: a nuance that can be easy for school administrators to overlook. Here is a simple example to illustrate this point.
A school has annual tuition of $24,000, payable at $2,000 per month.
One family at the school elects to pay their monthly tuition payment in cash, paying $2,000 per month. While each $2,000 payment is below the threshold, the cumulative value of the transaction is $24,000 – above the threshold.
In this instance, the school would have to file Form 8300 on two separate occasions: after the fifth payment and after the tenth payment. Installment payments are considered one transaction by the IRS. Once the $10,000 threshold is reached, the count is reset, meaning that for the second $10,000 of tuition payments, the school would have to file a new Form 8300. If several families paid in the same way, the school would have to submit separate Form 8300s for each of them.
Form 8300 submissions must be made within 15 days of the cash being received. Filings can be made through the IRS E-Filing system or by mail.
Form 8300 is a relatively simple filing and the majority of independent schools handle these filings themselves. If your school lacks the bandwidth or expertise to make this filing, your accounting firm should be able to walk you through the process.
Penalties for failing to comply with informational form filing requirements can be relatively steep, and Form 8300 is no exception. If an organization’s failure to file is judged to be intentional or willful, they face a minimum penalty of $25,000. In egregious cases, criminal penalties may apply.
If your organization has a reasonable cause for not filing, you may be able to avoid these files. However, it’s best to avoid this scenario altogether and satisfy all filing requirements within the specified deadlines.
Many schools have moved away from accepting cash payments. Most organizations no longer need to hold significant amounts of cash, particularly independent schools.
In addition to satisfying the additional compliance requirements of filing Form 8300, dealing with large volumes of cash can be impractical for schools. An employee will have to go to the bank to deposit this cash and may be at risk while doing so.
For these reasons, after receiving an unexpected cash payment, many independent schools will update their payment policies to expressly prohibit cash transactions in the future.
Even in today’s digital economy, cash transactions still occur with surprising frequency, and school administrators should understand the requirements associated with processing cash transactions over a certain threshold.
At Smith + Howard, our specialized independent schools accounting professionals are well-equipped to help school administrators navigate all filing and reporting requirements. With experience in tax, assurance, accounting, and more, our experienced team serves as an invaluable long-term partner to many independent schools across the country.
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