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Amendments 2. Amendments Accounting Methods Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Accounting MethodsCash Method Accrual Method Farm Inventory Cash Versus Accrual Method Special Methods of Accounting Combination Method Changes in Methods of Accounting Introduction You must use an accounting method that clearly shows your income and expenses. Amendments You must also figure your taxable income and file an income tax return for an annual accounting period called a tax year. Amendments This chapter discusses accounting methods. Amendments For information on accounting periods, see Publication 538, Accounting Periods and Methods, and the Instructions for Form 1128, Application To Adopt, Change, or Retain a Tax Year. Amendments Topics - This chapter discusses: Cash method Accrual method Farm inventory Special methods of accounting Changes in methods of accounting Useful Items - You may want to see: Publication 538 Accounting Periods and Methods 535 Business Expenses Form (and Instructions) 1128 Application To Adopt, Change, or Retain a Tax Year 3115 Application for Change in Accounting Method See chapter 16 for information about getting publications and forms. Amendments Accounting Methods An accounting method is a set of rules used to determine when and how your income and expenses are reported on your tax return. Amendments Your accounting method includes not only your overall method of accounting, but also the accounting treatment you use for any material item. Amendments A material item is one that affects the proper time for inclusion of income or allowance of a deduction. Amendments An item considered material for financial statement purposes is generally also considered material for income tax purposes. Amendments See Publication 538 for more information. Amendments You generally choose an accounting method for your farm business when you file your first income tax return that includes a Schedule F (Form 1040), Profit or Loss From Farming. Amendments If you later want to change your accounting method, you generally must get IRS approval. Amendments How to obtain IRS approval is discussed later under Changes in Methods of Accounting . Amendments Types of accounting methods. Amendments Generally, you can use any of the following accounting methods. Amendments Each method is discussed in detail below. Amendments Cash method. Amendments Accrual method. Amendments Special methods of accounting for certain items of income and expenses. Amendments Combination (hybrid) method using elements of two or more of the above. Amendments Business and other items. Amendments You can account for business and personal items using different accounting methods. Amendments For example, you can figure your business income under an accrual method, even if you use the cash method to figure personal items. Amendments Two or more businesses. Amendments If you operate two or more separate and distinct businesses, you can use a different accounting method for each business. Amendments Generally, no business is separate and distinct unless a complete and separate set of books and records is maintained for each business. Amendments Cash Method Most farmers use the cash method because they find it easier to keep records using the cash method. Amendments However, certain farm corporations and partnerships and all tax shelters must use an accrual method of accounting. Amendments See Accrual Method Required , later. Amendments Income Under the cash method, include in your gross income all items of income you actually or constructively received during the tax year. Amendments Items of income include money received as well as property or services received. Amendments If you receive property or services, you must include the fair market value (FMV) of the property or services in income. Amendments See chapter 3 for information on how to report farm income on your income tax return. Amendments Constructive receipt. Amendments Income is constructively received when an amount is credited to your account or made available to you without restriction. Amendments You do not need to have possession of the income for it to be treated as income for the tax year. Amendments If you authorize someone to be your agent and receive income for you, you are considered to have received the income when your agent receives it. Amendments Income is not constructively received if your receipt of the income is subject to substantial restrictions or limitations. Amendments Direct payments and counter-cyclical payments. Amendments If you received direct payments or counter-cyclical payments under Subtitle A or C of the Farm Security and Rural Investment Act of 2002, you will not be considered to have constructively received a payment merely because you had the option to receive it in the year before it is required to be paid. Amendments Delaying receipt of income. Amendments You cannot hold checks or postpone taking possession of similar property from one tax year to another to avoid paying tax on the income. Amendments You must report the income in the year the money or property is received or made available to you without restriction. Amendments Example. Amendments Frances Jones, a farmer, was entitled to receive a $10,000 payment on a grain contract in December 2013. Amendments She was told in December that her payment was available. Amendments She requested not to be paid until January 2014. Amendments However, she must still include this payment in her 2013 income because it was made available to her in 2013. Amendments Debts paid by another person or canceled. Amendments If your debts are paid by another person or are canceled by your creditors, you may have to report part or all of this debt relief as income. Amendments If you receive income in this way, you constructively receive the income when the debt is canceled or paid. Amendments See Cancellation of Debt in chapter 3. Amendments Deferred payment contract. Amendments If you sell an item under a deferred payment contract that calls for payment in a future year, there is no constructive receipt in the year of sale. Amendments However, if the sales contract states that you have the right to the proceeds of the sale from the buyer at any time after delivery of the item, then you must include the sales price in income in the year of the sale, regardless of when you actually receive payment. Amendments Example. Amendments You are a farmer who uses the cash method and a calendar tax year. Amendments You sell grain in December 2013 under a bona fide arm's-length contract that calls for payment in 2014. Amendments You include the proceeds from the sale in your 2014 gross income since that is the year payment is received. Amendments However, if the contract states that you have the right to the proceeds from the buyer at any time after the grain is delivered, you must include the sales price in your 2013 income, regardless of when you actually receive payment. Amendments Repayment of income. Amendments If you include an amount in income and in a later year you have to repay all or part of it, then you can usually deduct the repayment in the year repaid. Amendments If the repayment is more than $3,000, a special rule applies. Amendments For details, see Repayments in chapter 11 of Publication 535, Business Expenses. Amendments Expenses Under the cash method, generally you deduct expenses in the tax year you pay them. Amendments This includes business expenses for which you contest liability. Amendments However, you may not be able to deduct an expense paid in advance or you may be required to capitalize certain costs, as explained under Uniform Capitalization Rules in chapter 6. Amendments See chapter 4 for information on how to deduct farm business expenses on your income tax return. Amendments Prepayment. Amendments Generally, you cannot deduct expenses paid in advance. Amendments This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. Amendments Example. Amendments On November 1, 2013, you signed and paid $3,600 for a 3-year (36-month) insurance contract for equipment. Amendments In 2013, you are allowed to deduct only $200 (2/36 x $3,600) of the cost of the policy that is attributable to 2013. Amendments In 2014, you'll be able to deduct $1,200 (12/36 x $3,600); in 2015, you'll be able to deduct $1,200 (12/36 x $3,600); and in 2016 you'll be able to deduct the remaining balance of $1,000. Amendments An exception applies if the expense qualifies for the 12-month rule. Amendments See Publication 538 for more information and examples. Amendments See chapter 4 for special rules for prepaid farm supplies and prepaid livestock feed. Amendments Accrual Method Under an accrual method of accounting, you generally report income in the year earned and deduct or capitalize expenses in the year incurred. Amendments The purpose of an accrual method of accounting is to correctly match income and expenses. Amendments Certain businesses engaged in farming must use an accrual method of accounting for its farm business and for sales and purchases of inventory items. Amendments See Accrual Method Required and Farm Inventory , later. Amendments Income Generally, you include an amount in income for the tax year in which all events that fix your right to receive the income have occurred, and you can determine the amount with reasonable accuracy. Amendments Under this rule, include an amount in income on the earliest of the following dates. Amendments When you receive payment. Amendments When the income amount is due to you. Amendments When you earn the income. Amendments When title passes. Amendments If you use an accrual method of accounting, complete Part III of Schedule F (Form 1040) to report your income. Amendments Inventory. Amendments If you keep an inventory, generally you must use an accrual method of accounting to determine your gross income. Amendments An inventory is necessary to clearly show income when the production, purchase, or sale of merchandise is an income-producing factor. Amendments See Publication 538 for more information. Amendments Also see Farm Inventory , later, for more information on items that must be included in inventory by farmers and inventory valuation methods for farmers. Amendments Expenses Under an accrual method of accounting, you generally deduct or capitalize a business expense when both of the following apply. Amendments The all-events test has been met. Amendments This test is met when: All events have occurred that fix the fact that you have a liability, and The amount of the liability can be determined with reasonable accuracy. Amendments Economic performance has occurred. Amendments Economic performance. Amendments Generally, you cannot deduct or capitalize a business expense until economic performance occurs. Amendments If your expense is for property or services provided to you, or for your use of property, economic performance occurs as the property or services are provided or as the property is used. Amendments If your expense is for property or services you provide to others, economic performance occurs as you provide the property or services. Amendments Example. Amendments Jane, who is a farmer, uses a calendar tax year and an accrual method of accounting. Amendments She entered into a contract with ABC Farm Consulting in 2012. Amendments The contract stated that Jane pay ABC Farm Consulting $2,000 in December 2012. Amendments It further stipulates that ABC Farm Consulting will develop a plan for integrating her farm with a larger farm operation based in a neighboring state by March 1, 2013. Amendments Jane paid ABC Farm Consulting $2,000 in December 2012. Amendments Integration of operations according to the plan began in May 2013 and they completed the integration in December 2013. Amendments Economic performance for Jane's liability in the contract occurs as the services are provided. Amendments Jane incurs the $2,000 cost in 2013. Amendments An exception to the economic performance rule allows certain recurring items to be treated as incurred during a tax year even though economic performance has not occurred. Amendments For more information, see Economic Performance in Publication 538. Amendments Special rule for related persons. Amendments Business expenses and interest owed to a related person who uses the cash method of accounting are not deductible until you make the payment and the corresponding amount is includible in the related person's gross income. Amendments Determine the relationship for this rule as of the end of the tax year for which the expense or interest would otherwise be deductible. Amendments For more information, see Internal Revenue Code section 267. Amendments Accrual Method Required Generally, the following businesses, if engaged in farming, must use an accrual method of accounting. Amendments A corporation (other than a family corporation) that had gross receipts of more than $1,000,000 for any tax year beginning after 1975. Amendments A family corporation that had gross receipts of more than $25,000,000 for any tax year beginning after 1985. Amendments A partnership with a corporation as a partner, if that corporation meets the requirements of (1) or (2) above. Amendments A tax shelter. Amendments Note. Amendments Items (1), (2), and (3) above do not apply to an S corporation or a business operating a nursery or sod farm, or the raising or harvesting of trees (other than fruit and nut trees). Amendments Family corporation. Amendments A family corporation is generally a corporation that meets one of the following ownership requirements. Amendments Members of the same family own at least 50% of the total combined voting power of all classes of stock entitled to vote and at least 50% of the total shares of all other classes of stock of the corporation. Amendments Members of two families have owned, directly or indirectly, since October 4, 1976, at least 65% of the total combined voting power of all classes of voting stock and at least 65% of the total shares of all other classes of the corporation's stock. Amendments Members of three families have owned, directly or indirectly, since October 4, 1976, at least 50% of the total combined voting power of all classes of voting stock and at least 50% of the total shares of all other classes of the corporation's stock. Amendments For more information on family corporations, see Internal Revenue Code section 447. Amendments Tax shelter. Amendments A tax shelter is a partnership, noncorporate enterprise, or S corporation that meets either of the following tests. Amendments Its principal purpose is the avoidance or evasion of federal income tax. Amendments It is a farming syndicate. Amendments A farming syndicate is an entity that meets either of the following tests. Amendments Interests in the activity have been offered for sale in an offering required to be registered with a federal or state agency with the authority to regulate the offering of securities for sale. Amendments More than 35% of the losses during the tax year are allocable to limited partners or limited entrepreneurs. Amendments A “limited partner” is one whose personal liability for partnership debts is limited to the money or other property the partner contributed or is required to contribute to the partnership. Amendments A “limited entrepreneur” is one who has an interest in an enterprise other than as a limited partner and does not actively participate in the management of the enterprise. Amendments Farm Inventory If you are required to keep an inventory, you should keep a complete record of your inventory as part of your farm records. Amendments This record should show the actual count or measurement of the inventory. Amendments It should also show all factors that enter into its valuation, including quality and weight, if applicable. Amendments Hatchery business. Amendments If you are in the hatchery business, and use an accrual method of accounting, you must include in inventory eggs in the process of incubation. Amendments Products held for sale. Amendments All harvested and purchased farm products held for sale or for feed or seed, such as grain, hay, silage, concentrates, cotton, tobacco, etc. Amendments , must be included in inventory. Amendments Supplies. Amendments Supplies acquired for sale or that become a physical part of items held for sale must be included in inventory. Amendments Deduct the cost of supplies in the year used or consumed in operations. Amendments Do not include incidental supplies in inventory as these are deductible in the year of purchase. Amendments Livestock. Amendments Livestock held primarily for sale must be included in inventory. Amendments Livestock held for draft, breeding, or dairy purposes can either be depreciated or included in inventory. Amendments See also Unit-livestock-price method , later. Amendments If you are in the business of breeding and raising chinchillas, mink, foxes, or other fur-bearing animals, these animals are livestock for inventory purposes. Amendments Growing crops. Amendments Generally, growing crops are not required to be included in inventory. Amendments However, if the crop has a preproductive period of more than 2 years, you may have to capitalize (or include in inventory) costs associated with the crop. Amendments See Uniform capitalization rules below. Amendments Also see Uniform Capitalization Rules in chapter 6. Amendments Items to include in inventory. Amendments Your inventory should include all items held for sale, or for use as feed, seed, etc. Amendments , whether raised or purchased, that are unsold at the end of the year. Amendments Uniform capitalization rules. Amendments The following applies if you are required to use an accrual method of accounting. Amendments The uniform capitalization rules apply to all costs of raising a plant, even if the preproductive period of raising a plant is 2 years or less. Amendments The costs of animals are subject to the uniform capitalization rules. Amendments Inventory valuation methods. Amendments The following methods, described below, are those generally available for valuing inventory. Amendments The method you use must conform to generally accepted accounting principles for similar businesses and must clearly reflect income. Amendments Cost. Amendments Lower of cost or market. Amendments Farm-price method. Amendments Unit-livestock-price method. Amendments Cost and lower of cost or market methods. Amendments See Publication 538 for information on these valuation methods. Amendments If you value your livestock inventory at cost or the lower of cost or market, you do not need IRS approval to change to the unit-livestock-price method. Amendments However, if you value your livestock inventory using the farm-price method, then you must obtain permission from the IRS to change to the unit-livestock-price method. Amendments Farm-price method. Amendments Under this method, each item, whether raised or purchased, is valued at its market price less the direct cost of disposition. Amendments Market price is the current price at the nearest market in the quantities you usually sell. Amendments Cost of disposition includes broker's commissions, freight, hauling to market, and other marketing costs. Amendments If you use this method, you must use it for your entire inventory, except that livestock can be inventoried under the unit-livestock-price method. Amendments Unit-livestock-price method. Amendments This method recognizes the difficulty of establishing the exact costs of producing and raising each animal. Amendments You group or classify livestock according to type and age and use a standard unit price for each animal within a class or group. Amendments The unit price you assign should reasonably approximate the normal costs incurred in producing the animals in such classes. Amendments Unit prices and classifications are subject to approval by the IRS on examination of your return. Amendments You must annually reevaluate your unit livestock prices and adjust the prices upward or downward to reflect increases or decreases in the costs of raising livestock. Amendments IRS approval is not required for these adjustments. Amendments Any other changes in unit prices or classifications do require IRS approval. Amendments If you use this method, include all raised livestock in inventory, regardless of whether they are held for sale or for draft, breeding, sport, or dairy purposes. Amendments This method accounts only for the increase in cost of raising an animal to maturity. Amendments It does not provide for any decrease in the animal's market value after it reaches maturity. Amendments Also, if you raise cattle, you are not required to inventory hay you grow to feed your herd. Amendments Do not include sold or lost animals in the year-end inventory. Amendments If your records do not show which animals were sold or lost, treat the first animals acquired as sold or lost. Amendments The animals on hand at the end of the year are considered those most recently acquired. Amendments You must include in inventory all livestock purchased primarily for sale. Amendments You can choose either to include in inventory or depreciate livestock purchased for draft, breeding, sport or dairy purposes. Amendments However, you must be consistent from year to year, regardless of the method you have chosen. Amendments You cannot change your method without obtaining approval from the IRS. Amendments You must include in inventory animals purchased after maturity or capitalize them at their purchase price. Amendments If the animals are not mature at purchase, increase the cost at the end of each tax year according to the established unit price. Amendments However, in the year of purchase, do not increase the cost of any animal purchased during the last 6 months of the year. Amendments This “no increase” rule does not apply to tax shelters which must make an adjustment for any animal purchased during the year. Amendments It also does not apply to taxpayers that must make an adjustment to reasonably reflect the particular period in the year in which animals are purchased, if necessary to avoid significant distortions in income. Amendments Uniform capitalization rules. Amendments A farmer can determine costs required to be allocated under the uniform capitalization rules by using the farm-price or unit-livestock-price inventory method. Amendments This applies to any plant or animal, even if the farmer does not hold or treat the plant or animal as inventory property. Amendments Cash Versus Accrual Method The following examples compare the cash and accrual methods of accounting. Amendments Example 1. Amendments You are a farmer who uses an accrual method of accounting. Amendments You keep your books on the calendar year basis. Amendments You sell grain in December 2013 but you are not paid until January 2014. Amendments Because the accrual method was used and 2013 was the tax year in which the grain was sold, you must both include the sales proceeds and deduct the costs incurred in producing the grain on your 2013 tax return. Amendments Example 2. Amendments Assume the same facts as in Example 1 except that you use the cash method and there was no constructive receipt of the sales proceeds in 2013. Amendments Under this method, you include the sales proceeds in income for 2014, the year you receive payment. Amendments Deduct the costs of producing the grain in the year you pay for them. Amendments Special Methods of Accounting There are special methods of accounting for certain items of income and expense. Amendments Crop method. Amendments If you do not harvest and dispose of your crop in the same tax year that you plant it, you can, with IRS approval, use the crop method of accounting. Amendments You cannot use the crop method for any tax return, including your first tax return, unless you receive approval from the IRS. Amendments Under this method, you deduct the entire cost of producing the crop, including the expense of seed or young plants, in the year you realize income from the crop. Amendments See chapter 4 for details on deducting the costs of operating a farm. Amendments Also see Regulations section 1. Amendments 162-12. Amendments Other special methods. Amendments Other special methods of accounting apply to the following items. Amendments Amortization, see chapter 7. Amendments Casualties, see chapter 11. Amendments Condemnations, see chapter 11. Amendments Depletion, see chapter 7. Amendments Depreciation, see chapter 7. Amendments Farm business expenses, see chapter 4. Amendments Farm income, see chapter 3. Amendments Installment sales, see chapter 10. Amendments Soil and water conservation expenses, see chapter 5. Amendments Thefts, see chapter 11. Amendments Combination Method Generally, you can use any combination of cash, accrual, and special methods of accounting if the combination clearly shows your income and expenses and you use it consistently. Amendments However, the following restrictions apply. Amendments If you use the cash method for figuring your income, you must use the cash method for reporting your expenses. Amendments If you use an accrual method for reporting your expenses, you must use an accrual method for figuring your income. Amendments Changes in Methods of Accounting A change in your method of accounting includes a change in: Your overall method, such as from the cash method to an accrual method, and Your treatment of any material item, such as a change in your method of valuing inventory (for example, a change from the farm-price method to the unit-livestock-price method, discussed earlier). Amendments Generally, once you have set up your accounting method, you must receive approval from the IRS before you can change to another method of accounting. Amendments You may also have to pay a fee. Amendments To obtain approval, you must generally file Form 3115. Amendments There are instances when you can obtain automatic consent to change certain methods of accounting. Amendments See the List of Automatic Accounting Method Changes located in the Instructions for Form 3115. Amendments For more information on changes in methods of accounting, see Form 3115 and the Instructions for Form 3115. Amendments Also see Publication 538. Amendments Prev Up Next Home More Online Publications
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Amendments Publication 1544 - Main Content Table of Contents Why Report These Payments? Who Must File Form 8300?What Payments Must Be Reported? What Is Cash? Taxpayer Identification Number (TIN) What Is a Related Transaction? What About Suspicious Transactions? When, Where, and What To File Examples Penalties How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Amendments Why Report These Payments? Drug dealers and smugglers often use large cash payments to “launder” money from illegal activities. Amendments Laundering means converting “dirty” or illegally-gained money to “clean” money. Amendments The government can often trace this laundered money through the payments you report. Amendments Laws passed by Congress require you to report these payments. Amendments Your compliance with these laws provides valuable information that can stop those who evade taxes and those who profit from the drug trade and other criminal activities. Amendments The USA PATRIOT Act of 2001 increased the scope of these laws to help trace funds used for terrorism. Amendments Who Must File Form 8300? Generally, any person in a trade or business who receives more than $10,000 in cash in a single transaction or in related transactions must file Form 8300. Amendments For example, you may have to file Form 8300 if you are a dealer in jewelry, furniture, boats, aircraft, or automobiles; a pawnbroker; an attorney; a real estate broker; an insurance company; or a travel agency. Amendments Special rules for clerks of federal or state courts are discussed later under Bail received by court clerks. Amendments However, you do not have to file Form 8300 if the transaction is not related to your trade or business. Amendments For example, if you own a jewelry store and sell your personal automobile for more than $10,000 in cash, you would not submit a Form 8300 for that transaction. Amendments Transaction defined. Amendments A “transaction” occurs when: Goods, services, or property are sold; Property is rented; Cash is exchanged for other cash; A contribution is made to a trust or escrow account; A loan is made or repaid; or Cash is converted to a negotiable instrument, such as a check or a bond. Amendments Person defined. Amendments A “person” includes an individual, a company, a corporation, a partnership, an association, a trust, or an estate. Amendments Exempt organizations, including employee plans, are also “persons. Amendments ” However, exempt organizations do not have to file Form 8300 for a more-than-$10,000 charitable cash contribution they receive since it is not received in the course of a trade or business. Amendments Foreign transactions. Amendments You do not have to file Form 8300 if the entire transaction (including the receipt of cash) takes place outside of: The 50 states, The District of Columbia, Puerto Rico, or A possession or territory of the United States. Amendments However, you must file Form 8300 if any part of the transaction (including the receipt of cash) occurs in Puerto Rico or a possession or territory of the United States and you are subject to the Internal Revenue Code. Amendments Bail received by court clerks. Amendments Any clerk of a federal or state court who receives more than $10,000 in cash as bail for an individual charged with any of the following criminal offenses must file Form 8300: Any federal offense involving a controlled substance, Racketeering, Money laundering, and Any state offense substantially similar to (1), (2), or (3) above. Amendments For more information about the rules that apply to court clerks, see Section 1. Amendments 6050I-2 of the Income Tax Regulations. Amendments What Payments Must Be Reported? You must file Form 8300 to report cash paid to you if it is: Over $10,000, Received as: One lump sum of over $10,000, Installment payments that cause the total cash received within 1 year of the initial payment to total more than $10,000, or Other previously unreportable payments that cause the total cash received within a 12-month period to total more than $10,000, Received in the course of your trade or business, Received from the same buyer (or agent), and Received in a single transaction or in related transactions (defined later). Amendments What Is Cash? Cash is: The coins and currency of the United States (and any other country), and A cashier's check, bank draft, traveler's check, or money order you receive, if it has a face amount of $10,000 or less and you receive it in: A designated reporting transaction (defined later), or Any transaction in which you know the payer is trying to avoid the reporting of the transaction on Form 8300. Amendments Cash may include a cashier's check even if it is called a “treasurer's check” or “bank check. Amendments ” Cash does not include a check drawn on an individual's personal account. Amendments A cashier's check, bank draft, traveler's check, or money order with a face amount of more than $10,000 is not treated as cash. Amendments These items are not defined as cash and you do not have to file Form 8300 when you receive them because, if they were bought with currency, the bank or other financial institution that issued them must file a report on FinCEN Form 104. Amendments Example 1. Amendments You are a coin dealer. Amendments Bob Green buys gold coins from you for $13,200. Amendments He pays for them with $6,200 in U. Amendments S. Amendments currency and a cashier's check having a face amount of $7,000. Amendments The cashier's check is treated as cash. Amendments You have received more than $10,000 cash and must file Form 8300 for this transaction. Amendments Example 2. Amendments You are a retail jeweler. Amendments Mary North buys an item of jewelry from you for $12,000. Amendments She pays for it with a personal check payable to you in the amount of $9,600 and traveler's checks totaling $2,400. Amendments Because the personal check is not treated as cash, you have not received more than $10,000 cash in the transaction. Amendments You do not have to file Form 8300. Amendments Example 3. Amendments You are a boat dealer. Amendments Emily Jones buys a boat from you for $16,500. Amendments She pays for it with a cashier's check payable to you in the amount of $16,500. Amendments The cashier's check is not treated as cash because its face amount is more than $10,000. Amendments You do not have to file Form 8300 for this transaction. Amendments Designated Reporting Transaction A designated reporting transaction is the retail sale of any of the following: A consumer durable, such as an automobile or boat. Amendments A consumer durable is property, other than land or buildings, that: Is suitable for personal use, Can reasonably be expected to last at least 1 year under ordinary use, Has a sales price of more than $10,000, and Can be seen or touched (tangible property). Amendments For example, a $20,000 car is a consumer durable, but a $20,000 dump truck or factory machine is not. Amendments The car is a consumer durable even if you sell it to a buyer who will use it in a business. Amendments A collectible (for example, a work of art, rug, antique, metal, gem, stamp, or coin). Amendments Travel or entertainment, if the total sales price of all items sold for the same trip or entertainment event in one transaction (or related transactions) is more than $10,000. Amendments To figure the total sales price of all items sold for a trip or entertainment event, you include the sales price of items such as airfare, hotel rooms, and admission tickets. Amendments Example. Amendments You are a travel agent. Amendments Ed Johnson asks you to charter a passenger airplane to take a group to a sports event in another city. Amendments He also asks you to book hotel rooms and admission tickets for the group. Amendments In payment, he gives you two money orders, each for $6,000. Amendments You have received more than $10,000 cash in this designated reporting transaction. Amendments You must file Form 8300. Amendments Retail sale. Amendments The term “retail sale” means any sale made in the course of a trade or business that consists mainly of making sales to ultimate consumers. Amendments Thus, if your business consists mainly of making sales to ultimate consumers, all sales you make in the course of that business are retail sales. Amendments This includes any sales of items that will be resold. Amendments Broker or intermediary. Amendments A designated reporting transaction includes the retail sale of items (1), (2), or (3) of the preceding list, even if the funds are received by a broker or other intermediary, rather than directly by the seller. Amendments Exceptions to Definition of Cash A cashier's check, bank draft, traveler's check, or money order you received in a designated reporting transaction is not treated as cash if one of the following exceptions applies. Amendments Exception for certain bank loans. Amendments A cashier's check, bank draft, traveler's check, or money order is not treated as cash if it is the proceeds from a bank loan. Amendments As proof that it is from a bank loan, you may rely on a copy of the loan document, a written statement or lien instruction from the bank, or similar proof. Amendments Example. Amendments You are a car dealer. Amendments Mandy White buys a new car from you for $11,500. Amendments She pays you with $2,000 of U. Amendments S. Amendments currency and a cashier's check for $9,500 payable to you and her. Amendments You can tell that the cashier's check is the proceeds of a bank loan because it includes instructions to you to have a lien put on the car as security for the loan. Amendments For this reason, the cashier's check is not treated as cash. Amendments You do not have to file Form 8300 for the transaction. Amendments Exception for certain installment sales. Amendments A cashier's check, bank draft, traveler's check, or money order is not treated as cash if it is received in payment on a promissory note or an installment sales contract (including a lease that is considered a sale for federal tax purposes). Amendments However, this exception applies only if: You use similar notes or contracts in other sales to ultimate consumers in the ordinary course of your trade or business, and The total payments for the sale that you receive on or before the 60th day after the sale are 50% or less of the purchase price. Amendments Exception for certain down payment plans. Amendments A cashier's check, bank draft, traveler's check, or money order is not treated as cash if you received it in payment for a consumer durable or collectible, and all three of the following statements are true. Amendments You receive it under a payment plan requiring: One or more down payments, and Payment of the rest of the purchase price by the date of sale. Amendments You receive it more than 60 days before the date of sale. Amendments You use payment plans with the same or substantially similar terms when selling to ultimate consumers in the ordinary course of your trade or business. Amendments Exception for travel and entertainment. Amendments A cashier's check, bank draft, traveler's check, or money order received for travel or entertainment is not treated as cash if all three of the following statements are true. Amendments You receive it under a payment plan requiring: One or more down payments, and Payment of the rest of the purchase price by the earliest date that any travel or entertainment item (such as airfare) is furnished for the trip or entertainment event. Amendments You receive it more than 60 days before the date on which the final payment is due. Amendments You use payment plans with the same or substantially similar terms when selling to ultimate consumers in the ordinary course of your trade or business. Amendments Taxpayer Identification Number (TIN) You must furnish the correct TIN of the person or persons from whom you receive the cash. Amendments If the transaction is conducted on the behalf of another person or persons, you must furnish the TIN of that person or persons. Amendments If you do not know a person's TIN, you have to ask for it. Amendments You may be subject to penalties for an incorrect or missing TIN. Amendments There are three types of TINs. Amendments The TIN for an individual, including a sole proprietor, is the individual's social security number (SSN). Amendments The TIN for a nonresident alien individual who needs a TIN but is not eligible to get an SSN is an IRS individual taxpayer identification number (ITIN). Amendments An ITIN has nine digits, similar to an SSN. Amendments The TIN for other persons, including corporations, partnerships, and estates, is the employer identification number (EIN). Amendments Exception. Amendments You are not required to provide the TIN of a person who is a nonresident alien individual or a foreign organization if that person or foreign organization: Does not have income effectively connected with the conduct of a U. Amendments S. Amendments trade or business; Does not have an office or place of business, or a fiscal or paying agent in the United States; Does not file a federal tax return; Does not furnish a withholding certificate described in §1. Amendments 1441-1(e)(2) or (3) or 1. Amendments 1441-5(c)(2)(iv) or (3)(iii) to the extent required under 1. Amendments 1441-1(e)(4)(vii); Does not have to furnish a TIN on any return, statement, or other document as required by the income tax regulations under section 897 or 1445; or In the case of a nonresident alien individual, the individual has not chosen to file a joint federal income tax return with a spouse who is a U. Amendments S. Amendments citizen or resident. Amendments What Is a Related Transaction? Any transactions between a buyer (or an agent of the buyer) and a seller that occur within a 24-hour period are related transactions. Amendments If you receive over $10,000 in cash during two or more transactions with one buyer in a 24-hour period, you must treat the transactions as one transaction and report the payments on Form 8300. Amendments For example, if you sell two products for $6,000 each to the same customer in 1 day and the customer pays you in cash, these are related transactions. Amendments Because they total $12,000 (more than $10,000), you must file Form 8300. Amendments More than 24 hours between transactions. Amendments Transactions are related even if they are more than 24 hours apart if you know, or have reason to know, that each is one of a series of connected transactions. Amendments For example, you are a travel agent. Amendments A client pays you $8,000 in cash for a trip. Amendments Two days later, the same client pays you $3,000 more in cash to include another person on the trip. Amendments These are related transactions, and you must file Form 8300 to report them. Amendments What About Suspicious Transactions? If you receive $10,000 or less in cash, you may voluntarily file Form 8300 if the transaction appears to be suspicious. Amendments A transaction is suspicious if it appears that a person is trying to cause you not to file Form 8300 or is trying to cause you to file a false or incomplete Form 8300, or if there is a sign of possible illegal activity. Amendments If you are suspicious, you are encouraged to call the local IRS Criminal Investigation Division as soon as possible. Amendments Or, you can call the FinCEN Financial Institution Hotline toll free at 1-866-556-3974. Amendments When, Where, and What To File The amount you receive and when you receive it determine when you must file. Amendments Generally, you must file Form 8300 within 15 days after receiving a payment. Amendments If the Form 8300 due date (the 15th or last day you can timely file the form) falls on a Saturday, Sunday, or legal holiday, it is delayed until the next day that is not a Saturday, Sunday, or legal holiday. Amendments More than one payment. Amendments In some transactions, the buyer may arrange to pay you in cash installment payments. Amendments If the first payment is more than $10,000, you must file Form 8300 within 15 days. Amendments If the first payment is not more than $10,000, you must add the first payment and any later payments made within 1 year of the first payment. Amendments When the total cash payments are more than $10,000, you must file Form 8300 within 15 days. Amendments After you file Form 8300, you must start a new count of cash payments received from that buyer. Amendments If you receive more than $10,000 in additional cash payments from that buyer within a 12-month period, you must file another Form 8300. Amendments You must file the form within 15 days of the payment that causes the additional payments to total more than $10,000. Amendments If you are already required to file Form 8300 and you receive additional payments within the 15 days before you must file, you can report all the payments on one form. Amendments Example. Amendments On January 10, you receive a cash payment of $11,000. Amendments You receive additional cash payments on the same transaction of $4,000 on February 15, $5,000 on March 20, and $6,000 on May 12. Amendments By January 25, you must file a Form 8300 for the $11,000 payment. Amendments By May 27, you must file an additional Form 8300 for the additional payments that total $15,000. Amendments Amending a Report? If you are amending a report, check box 1a at the top of Form 8300. Amendments Complete the form in its entirety (Parts I-IV) and include the amended information. Amendments Do not attach a copy of the original report. Amendments Where to file. Amendments Mail the form to the address given in the Form 8300 instructions. Amendments Required statement to buyer. Amendments You must give a written or electronic statement to each person named on any Form 8300 you must file. Amendments You can give the statement electronically only if the recipient agrees to receive it in that format. Amendments The statement must show the name and address of your business, the name and phone number of a contact person, and the total amount of reportable cash you received from the person during the year. Amendments It must state that you are also reporting this information to the IRS. Amendments You must send this statement to the buyer by January 31 of the year after the year in which you received the cash that caused you to file the form. Amendments You must keep a copy of every Form 8300 you file for 5 years. Amendments Examples Example 1. Amendments Pat Brown is the sales manager for Small Town Cars. Amendments On January 6, 2009, Jane Smith buys a new car from Pat and pays $18,000 in cash. Amendments Pat asks for identification from Jane to get the necessary information to complete Form 8300. Amendments A filled-in form is shown in this publication. Amendments Pat must mail the form to the address shown in the form's instructions by January 21, 2009. Amendments He must also send a statement to Jane by January 31, 2010. Amendments Example 2. Amendments Using the same facts given in Example 1, suppose Jane had arranged to make cash payments of $6,000 each on January 6, February 6, and March 6. Amendments Pat would have to file a Form 8300 by February 26 (17 days after receiving total cash payments within 1 year over $10,000 because February 21, 2009, is a Saturday). Amendments Pat would not have to report the remaining $6,000 cash payment because it is not more than $10,000. Amendments However, he could report it if he felt it was a suspicious transaction. Amendments Penalties There are civil penalties for failure to: File a correct Form 8300 by the date it is due, and Provide the required statement to those named in the Form 8300. Amendments If you intentionally disregard the requirement to file a correct Form 8300 by the date it is due, the penalty is the greater of: $25,000, or The amount of cash you received and were required to report (up to $100,000). Amendments There are criminal penalties for: Willful failure to file Form 8300, Willfully filing a false or fraudulent Form 8300, Stopping or trying to stop Form 8300 from being filed, and Setting up, helping to set up, or trying to set up a transaction in a way that would make it seem unnecessary to file Form 8300. Amendments If you willfully fail to file Form 8300, you can be fined up to $250,000 for individuals ($500,000 for corporations) or sentenced to up to 5 years in prison, or both. Amendments These dollar amounts are based on Section 3571 of Title 18 of the U. Amendments S. Amendments Code. Amendments The penalties for failure to file may also apply to any person (including a payer) who attempts to interfere with or prevent the seller (or business) from filing a correct Form 8300. Amendments This includes any attempt to structure the transaction in a way that would make it seem unnecessary to file Form 8300. Amendments Structuring means breaking up a large cash transaction into small cash transactions. Amendments How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Amendments By selecting the method that is best for you, you will have quick and easy access to tax help. Amendments Free help with your return. Amendments Free help in preparing your return is available nationwide from IRS-certified volunteers. Amendments The Volunteer Income Tax Assistance (VITA) program is designed to help low-moderate income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Amendments Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Amendments To find the nearest VITA or TCE site, visit IRS. Amendments gov or call 1-800-906-9887 or 1-800-829-1040. Amendments As part of the TCE program, AARP offers the Tax-Aide counseling program. Amendments To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website at www. Amendments aarp. Amendments org/money/taxaide. Amendments For more information on these programs, go to IRS. Amendments gov and enter keyword “VITA” in the upper right-hand corner. Amendments Internet. Amendments You can access the IRS website at IRS. Amendments gov 24 hours a day, 7 days a week to: Check the status of your 2011 refund. Amendments Go to IRS. Amendments gov and click on Where's My Refund. Amendments Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Amendments If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Amendments Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Amendments E-file your return. Amendments Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Amendments Download forms, including talking tax forms, instructions, and publications. Amendments Order IRS products online. Amendments Research your tax questions online. Amendments Search publications online by topic or keyword. Amendments Use the online Internal Revenue Code, regulations, or other official guidance. Amendments View Internal Revenue Bulletins (IRBs) published in the last few years. Amendments Figure your withholding allowances using the withholding calculator online at www. Amendments irs. Amendments gov/individuals. Amendments Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant available online at www. Amendments irs. Amendments gov/individuals. Amendments Sign up to receive local and national tax news by email. Amendments Get information on starting and operating a small business. Amendments Phone. Amendments Many services are available by phone. Amendments Ordering forms, instructions, and publications. Amendments Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. Amendments You should receive your order within 10 days. Amendments Asking tax questions. Amendments Call the IRS with your tax questions at 1-800-829-1040. Amendments Solving problems. Amendments You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Amendments An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Amendments Call your local Taxpayer Assistance Center for an appointment. Amendments To find the number, go to www. Amendments irs. Amendments gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Amendments TTY/TDD equipment. Amendments If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Amendments TeleTax topics. Amendments Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Amendments Refund information. Amendments You can check the status of your refund on the new IRS phone app. Amendments Download the free IRS2Go app by visiting the iTunes app store or the Android Marketplace. Amendments IRS2Go is a new way to provide you with information and tools. Amendments To check the status of your refund by phone, call 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Amendments Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Amendments If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Amendments Have your 2011 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Amendments If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Amendments Other refund information. Amendments To check the status of a prior-year refund or amended return refund, call 1-800-829-1040. Amendments Evaluating the quality of our telephone services. Amendments To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Amendments One method is for a second IRS representative to listen in on or record random telephone calls. Amendments Another is to ask some callers to complete a short survey at the end of the call. Amendments Walk-in. Amendments Many products and services are available on a walk-in basis. Amendments Products. Amendments You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Amendments Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Amendments Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Amendments Services. Amendments You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Amendments An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Amendments If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Amendments No appointment is necessary—just walk in. Amendments If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Amendments A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Amendments If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. Amendments All other issues will be handled without an appointment. Amendments To find the number of your local office, go to www. Amendments irs. Amendments gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Amendments Mail. Amendments You can send your order for forms, instructions, and publications to the address below. Amendments You should receive a response within 10 days after your request is received. Amendments Internal Revenue Service 1201 N. Amendments Mitsubishi Motorway Bloomington, IL 61705-6613 Taxpayer Advocate Service. Amendments The Taxpayer Advocate Service (TAS) is your voice at the IRS. Amendments Our job is to ensure that every taxpayer is treated fairly, and that you know and understand your rights. Amendments We offer free help to guide you through the often-confusing process of resolving tax problems that you haven’t been able to solve on your own. Amendments Remember, the worst thing you can do is nothing at all. Amendments TAS can help if you can’t resolve your problem with the IRS and: Your problem is causing financial difficulties for you, your family, or your business. Amendments You face (or your business is facing) an immediate threat of adverse action. Amendments You have tried repeatedly to contact the IRS but no one has responded, or the IRS has not responded to you by the date promised. Amendments If you qualify for our help, we’ll do everything we can to get your problem resolved. Amendments You will be assigned to one advocate who will be with you at every turn. Amendments We have offices in every state, the District of Columbia, and Puerto Rico. Amendments Although TAS is independent within the IRS, our advocates know how to work with the IRS to get your problems resolved. Amendments And our services are always free. Amendments As a taxpayer, you have rights that the IRS must abide by in its dealings with you. Amendments Our tax toolkit at www. Amendments TaxpayerAdvocate. Amendments irs. Amendments gov can help you understand these rights. Amendments If you think TAS might be able to help you, call your local advocate, whose number is in your phone book and on our website at www. Amendments irs. Amendments gov/advocate. Amendments You can also call our toll-free number at 1-877-777-4778. Amendments TAS also handles large-scale or systemic problems that affect many taxpayers. Amendments If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. Amendments irs. Amendments gov/advocate. Amendments Low Income Taxpayer Clinics (LITCs). Amendments Low Income Taxpayer Clinics (LITCs) are independent from the IRS. Amendments Some clinics serve individuals whose income is below a certain level and who need to resolve a tax problem. Amendments These clinics provide professional representation before the IRS or in court on audits, appeals, tax collection disputes, and other issues for free or for a small fee. Amendments Some clinics can provide information about taxpayer rights and responsibilities in many different languages for individuals who speak English as a second language. Amendments For more information and to find a clinic near you, see the LITC page on www. Amendments irs. Amendments gov/advocate or IRS Publication 4134, Low Income Taxpayer Clinic List. Amendments This publication is also available by calling 1-800-829-3676 or at your local IRS office. Amendments Free tax services. Amendments Publication 910, IRS Guide to Free Tax Services, is your guide to IRS services and resources. Amendments Learn about free tax information from the IRS, including publications, services, and education and assistance programs. Amendments The publication also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on the telephone. Amendments The majority of the information and services listed in this publication are available to you free of charge. Amendments If there is a fee associated with a resource or service, it is listed in the publication. Amendments Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Amendments DVD for tax products. Amendments You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Amendments Prior-year forms, instructions, and publications. Amendments Tax Map: an electronic research tool and finding aid. Amendments Tax law frequently asked questions. Amendments Tax Topics from the IRS telephone response system. Amendments Internal Revenue Code—Title 26 of the U. Amendments S. Amendments Code. Amendments Links to other Internet based Tax Research Materials. Amendments Fill-in, print, and save features for most tax forms. Amendments Internal Revenue Bulletins. Amendments Toll-free and email technical support. Amendments Two releases during the year. Amendments – The first release will ship the beginning of January. Amendments – The final release will ship the beginning of March. Amendments Purchase the DVD from National Technical Information Service (NTIS) at www. Amendments irs. Amendments gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Amendments This image is too large to be displayed in the current screen. Amendments Please click the link to view the image. Amendments Fill-in Form 8300 Prev Up Next Home More Online Publications