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Part 4. Examining Process

Chapter 26. Bank Secrecy Act

Section 12. Examination Techniques for Form 8300 Industries

4.26.12  Examination Techniques for Form 8300 Industries

4.26.12.1  (06-01-2006)
Overview

  1. This Section discusses basic information and auditing techniques for specific industries that fall under Internal Revenue Code (IRC) § 6050I. It does not apply to examination and auditing techniques for compliance of 31 USC 5331 as further outlined in 31 CFR 103.30 31 CFR 103.30. It is a guide to assist the Bank Secrecy Act (BSA) examiners in conducting a Form 8300 Compliance Review for IRC § 6050I. BSA examiners must remember that all cases are subject to factual development. BSA examiners should adapt the procedures in this section, as necessary, to each particular situation.

  2. The examiner is responsible for supporting the goals of the BSA program: to identify, detect and deter money laundering whether it is in furtherance of a criminal enterprise, terrorism, tax evasion, or other unlawful activity. The examiner must be alert to efforts by customers or businesses to structure transactions to avoid the filing of Form 8300.

  3. This section applies only to reviews for compliance of IRC 6050I. A review for compliance of IRC 6050I cannot be changed to a BSA examination unless a related statute determination can be made. See IRM 4.26.14 for related statute determinations

  4. Any anti-money laundering programs required for certain non-financial trades or businesses as per the BSA cannot be enforced in an IRC 6050I compliance review. Any other potential BSA violations (e.g., bank did not file Currency Transaction Reports (CTRs) on a non-financial trade or business) discovered during an IRC 6050I review cannot be disclosed unless a related statute determination can be made. See IRM 4.26.14 for related statute determinations.

4.26.12.2  (06-01-2006)
Attorney Overview

  1. Attorneys have the potential for receiving large amounts of cash for legal services or funds to be held in trust.

  2. Attorneys usually generate fees based either on retainer or contingency. See Terminology for definitions and discussion.

  3. In addition to general operating accounts, attorneys have trust or escrow accounts to hold funds in trust for their clients. Dollar amounts may be large and the potential for cash transactions is high.

  4. Attorney-client privilege is a legally recognized privilege that protects confidential communication between attorney and client. However, the identity of a client and the amount of cash paid by the client to the attorney is not generally considered privileged information under the attorney-client privilege.

  5. Attorneys may practice as sole proprietorships, in a partnership, or as an employee of a corporation.

  6. Attorneys in a general law practice may handle everything from personal injury cases to corporate reorganizations. Others may specialize (e.g., patent law, criminal defense, estate or corporation law). Generally, even specialists diversify to some degree.

4.26.12.2.1  (06-01-2006)
Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on Form 8300 by January 31 of the succeeding calendar year. A copy of the filed Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. There is no general exception from the reporting requirements of IRC 6050I for attorneys.

  4. In certain instances involving "special circumstances " preparation and filing of Form 8300 may violate attorney-client privilege. "Special circumstances" exist when disclosure of the Form 8300 information reveals a confidential communication, such as the motive or reason the client consulted the attorney, or provides a "last link" to such information.

  5. Cases in which extraordinary circumstances are present will be the exception. Thus far, invocation of the "last link" doctrine as a defense to the disclosure required by section 6050I has been unsuccessful. United States v. Goldberger & Dublin, P.C. 935 F.2d 501, 505 (2d Cir. 1991) finding no "direct linkage" [between the disclosure and the incrimination] is apparent in IRC 6050I. See In re Grand Jury Proceedings 88-9, 899 F.2d 1939 (11th Cir. 1990); In re Shargel, 742 F. 2d 61 (2d Cir. 1984) (disclosure of fee information and client identify are not privileged, even though it might incriminate the client). See also, In re Osterhoudt, 722 F .2d 591, 593 (9th Cir. 1983) (information regarding fee arrangement ordinarily not part of the subject matter of the disclosure of privileged information.)

  6. Generally, since attorneys are not involved in the retail sale of consumer durables, collectibles or travel and entertainment, reporting of monetary instruments is not required. However, if the attorney knew or should have known that the use of monetary instruments was for the purpose of avoiding the filing of the Form 8300, such monetary instruments become reportable. (Treas. Regs. 1.6050I-1(c)(1)(ii)(B)(2).)

  7. Several Federal Circuits have tested the attorney-client privilege as it relates to withholding information required by IRC 6050I. Decisions favorable to the IRS position are:

    • U.S. v. Goldberger & Dubin P.C., 935 F.2d 501 (2d Cir. 1991);

    • U.S. v. Leventhal, 961 F.2d 936 (11th Cir. 1992);

    • U.S. v. Sindel, 53 F.3d 874 (8th Cir. 1995);

    • U.S. v. Blackman, 72 F.3d 1418 (9th Cir. 1995); and,

    • U.S. v. Ritchie, 15 F.3d 592 (6th Cir.), cert. denied, 115 S Ct. 188 (1994).

  8. In two circuits, the courts did not accept the IRS’s representations that it was examining the summoned person, finding rather that the Service was attempting to examine the liabilities of the unknown payers. These cases were resolved in a manner at least partially unfavorable to the IRS position:

    • U.S. v. Gertner, 65 F.3d 963 (1st Cir. 1995); and

    • U.S. v. Ritchie, 15 F.3d 592 (6th Cir.), cert. denied, 115 S Ct. 188 (1994).

  9. One penalty case was resolved in the Service’s favor, the court upholding the imposition of the intentional disregard penalty of IRC 6721(e)(2)(C):

    • Gerald B. Lefcourt, P.C. v, U.S., (1997, CA2) 80 AFTR 2d 97-6523, affg (1996, DC NY) 78 AFTR 2d 96-5051,96-2 USTC Para.50345

4.26.12.2.2  (06-01-2006)
Records Commonly Found

  1. Records most commonly found include:

    • Bank statements

    • Case time records

    • Cash receipts journal

    • Client billing records

    • Client case file

    • Client identification or client card index

    • Daily log or receipts book

    • Duplicate deposit slips

    • Notary log

    • Trust fund or escrow account records, including segregated trust accounts and general trust accounts

4.26.12.2.3  (06-01-2006)
Terminology

  1. Annual retainer - An agreed fixed fee for legal services for a specific period of time, generally a year.

  2. Billing hours (a.k.a. billable hours) - Refers to the practice of billing the client by the hour or portion thereof for work in non-contingency cases. This would either be in addition to, or in fulfillment of, the retainer.

  3. Contingency fee - A fee payable only upon the occurrence of the contingency, generally the winning or settlement of a lawsuit for damages. It generally represents a stated percentage of the proceeds of successful settlement of the case.

  4. General trust accounts - Funds held for multiple clients in one accounts.

  5. Referral fee or forwarding fee - An amount, often a percentage of the ultimate fee, paid to the attorney for referring the case to another attorney.

  6. Retainer - A fee generally paid up-front, for "retaining " the services of the attorney.

  7. Specific retainer - An agreed fee for a particular case, part of which may be payable in advance.

  8. Trust accounts - May be called IOLTA (Interest on Lawyers Trust Account) or IOLA (Interest on Lawyers Account), depending on the state. Trust accounts may also be termed escrow or trust fund accounts. These accounts may be segregated, holding only the funds for one client or case.

4.26.12.2.4  (06-01-2006)
Form 8300 Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

4.26.12.2.4.1  (06-01-2006)
Pre-Plan

  1. Prior to a Form 8300 compliance review the examiner should:

    • Review the CBRS for cash activity. By reviewing the CTRs for substantial cash deposits, the examiner is able to identify businesses that have deposited more than $10,000 in cash;

    • Review prior compliance reviews;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation, or Compliance.

  2. The examiner should become familiar with the common business practices of the trade or business.

  3. Any attorney may receive cash in the course of business activities. Attorneys that are compensated through third party payments (i.e., insurance settlements) are less likely to receive currency.

  4. Certain attorneys that are more likely to be paid directly by the client include:

    • Criminal defense attorneys;

    • Estate and trust attorneys;

    • Real estate attorneys; and,

    • Tax attorneys.

4.26.12.2.4.2  (06-01-2006)
Initial Contact

  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring

    .

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

4.26.12.2.4.3  (06-01-2006)
Interview

  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Form 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Form 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Form 8300;

    9. For attorneys, it is important to determine if any prior Form 8300 has been filed blank or incomplete because of a claim of attorney-client privilege, professional ethical obligations or Constitutional protections. If so, the examiner must coordinate with Area Counsel through their manager before proceeding with any summons or penalty actions.

    10. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport or other document?

    11. Procedures used by the business to notify transactors;

    12. The entity’s membership in various trade associations; and,

    13. Related entities.

  3. The interview and inspection of records must be solely for the purpose of the Form 8300 compliance review. No inquires should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

4.26.12.2.4.4  (06-01-2006)
Review of Records

  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transaction involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Form 8300 was filed on such transaction.

  2. The examiner should be alert to identifying transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. There may be a need, on a case by case basis, to interview a client to obtain all the facts needed to develop the issues.

  4. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  5. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

4.26.12.2.4.5  (06-01-2006)
Closing

  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transaction not reported, filed incomplete or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Form 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty consideration, see IRM 4.26.11.

  7. For attorneys, note that any penalty or summons enforcement action where claims of attorney-client privilege, professional ethical obligations or Constitutional protections may be raised must be coordinated with Area Counsel through the examiner’s group manager before proceeding.

  8. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

4.26.12.2.5  (06-01-2006)
Money Laundering Trends

  1. The business and/or the customer can potentially be involved in money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Form 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

  4. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

4.26.12.2.6  (06-01-2006)
Form 8300 Review Techniques

  1. Ensure that sources of cash received are properly identified in the books and records. Claims of unknown or unidentified sources should be scrutinized.

  2. Ensure that trust fund ownership is properly identified on filed forms. If filed CTRs do not fully identify the owner of trust funds, there should be a Form 8300 filed by the attorney. (The exception in Treas. Reg. 1.6050I-1(a)(3)(ii) only applies if the principal in the transaction is fully identified and all cash is transferred by the agent within 15 days.)

  3. Ensure that cases that may involve claims of attorney-client privilege, professional ethical obligations or Constitutional protections are properly coordinated with Area Counsel through the examiner’s group manager before proceeding with any summons or penalty actions.

  4. Ensure that trust funds are clearly identified on filed reports. One widespread practice, which may obscure the ownership of funds, involves attorney trust accounts. Attorneys in some states may be required (or may have the option to) keep their client's funds in a trust account (IOLTA or IOLA.) Attorneys deposit funds into the account. Interest from such accounts may accrue for a public service purpose--such as providing legal services for the poor. However, the identity of the attorney depositing funds or the true owner of the funds may not be identified on CTRs filed by the bank. There are often no Forms 8300 filed. While this practice is not necessarily indicative of money laundering, it does effectively obscure the ownership of the funds.

4.26.12.3  (06-01-2006)
Casinos and Card Clubs Overview

  1. Casinos and card clubs, which have gross annual gaming revenues (GAGR) of $1,000,000 or less, are subject to the requirements of IRC Section 6050I. They are not required to comply with the reporting and recordkeeping of the BSA provisions of Title 31.

  2. For casinos and card clubs operating in Nevada, state Regulation 6A replaces the BSA for casinos with GAGR of $10,000,000 or more. Casinos in Nevada with $1,000,000 to $10,000,000 in GAGR are subject to the provisions of the BSA. Casinos in Nevada with less than $1,000,000 in GAGR are subject to IRC 6050I.

  3. Since tribal governments do not have to file Forms 8300, but tribal members and others do, the examiner should determine the ownership structure of a tribal casino before proceeding with a Form 8300 review.

  4. Wherever the term casino is used in this section, it includes card clubs.

  5. Casinos vary in size. IRC 6050I and the filing of Form 8300 only apply to the smaller casinos. It is imperative the examiner not confuse the requirements in 31 CFR Part 103 (the BSA regulations under Title 31) with the requirements under IRC 6050I.

  6. Some casinos may also maintain separate rooms or parlors that offer other games such as Keno, Bingo, Poker, Race Betting, Sports Betting, etc.

  7. In addition to a gambling casino, the casino complex may include hotel facilities, restaurants, bars and lounges, theaters and showrooms, sports and health facilities, convention space, and various exclusive shops and stores.

  8. Casinos are licensed and regulated by state, tribal, and local governments. Their organizational structure may vary depending upon applicable laws and regulations, and management needs within each individual casino. Generally, a typical gambling casino is organized into two separate, yet related operations, the casino floor and the casino cage. Larger casinos may have more than one casino floor and/or more than one casino cage. See Exhibit 4.26.12-1.

4.26.12.3.1  (06-01-2006)
Law

  1. IRC 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must also furnish a written statement to each person identified on Form 8300 by January 31 of the succeeding calendar year. A copy of Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on the law and any statutory exceptions, see IRM 4.26.10.

4.26.12.3.2  (06-01-2006)
Records Commonly Found

  1. Casino records that can be used to identify cash transactions will vary depending upon state, tribal, and local laws and regulations as well as the needs of casino management.

  2. Generally, transactions occurring at the gaming tables may be identified through casino Player Rating Systems and/or Multiple Transaction Logs (MTLs), while transactions occurring at the cage may be identified through casino Credit Management Systems and other cage records. See Exhibit 4.26.12-2.

  3. In addition to the normal records found in other businesses, a casino will generally maintain:

    • Casino cage cash logs and registers

    • Casino cage check logs and registers

    • Casino cage customer markers

    • Casino cage customer payment/redemption markers

    • Casino cage deposit slips

    • Casino cage wire transfer logs and registers

    • Casino cage withdrawal slips

    • Customer action cards

    • Form W-2G

    • Jackpot pay out slips

    • Multiple transaction logs (MTLs)

    • Player rating cards

  4. In many casinos, these systems may be highly computerized and the records may be computer generated. Casino records that are processed by or through a computer should be retained by the casino in machine-readable form.

4.26.12.3.3  (06-01-2006)
Terminology

  1. Action Card (a.k.a. Bucket) - a record maintained by the cage for deposit and credit players that is used to record each account transaction in chronological order. Separate cards are maintained for each player and each type of account. There is no requirement to maintain buckets under IRC 6050I.

  2. Cash Equivalent - All negotiable monetary instruments exclusive of currency (e.g., certified checks, cashier’s checks, travelers’ checks, money orders, personal checks, etc.)

  3. Casino Cage - The area of the casino that records, tracks and monitors all financial transactions. It is the financial center of the entire casino operation and is the point at which all cash, chips and other funds are ultimately accounted for. Larger casinos may also maintain satellite cages in slot areas, high roller areas or in the betting parlors. Under the supervision of the Casino Cage Manager, the casino cage operates much like a commercial bank and is generally organized into five components:

    1. Main bank - The area of the casino cage where all cash is stored. It is through the main bank that cash is transferred from the gaming tables, to and from the cashier’s windows, and to or from the casino’s commercial banking institution.

    2. Chip bank - The area of the casino cage where all of the gaming chips are stored. It is through the chip bank that chips are transferred to and from the gaming tables and to or from the cashiers’ windows.

    3. Marker bank - The area of the casino cage where all marker activity related to credit accounts is recorded, processed and stored.

    4. Credit management - The area of the casino cage where customer credit accounts are managed.

    5. Cashier (Teller) windows - The area of the casino cage where financial transactions between the casino cage and its customers occur. Cashiers who conduct the financial transactions and prepare source documents staff the windows.

  4. Cash-in - Places in the normal operations where a casino receives cash. Examples of this may include:

    1. Purchases of chips, tokens and plaques;

    2. Front money deposits;

    3. Safekeeping deposits;

    4. Payments on any form of credit, including markers and counter checks;

    5. Bets of cash;

    6. Cash received by a casino for transmittal of funds through wire transfer for a customer;

    7. Purchases of a casino’s check; and,

    8. Exchanges of currency for currency, including foreign currency.

  5. Casino floor - The area of the casino where all gaming activities occur. It is usually organized into Gaming Pits and Slot Zones and operates under the direction of the Casino Manager.

  6. Chips (a.k.a. Checks, Tokens, Plaques) - A medium of exchange of various denominations used by a casino for gaming purposes.

  7. Chip Redemption - The exchanging of chips by a customer for cash or casino check.

  8. Credit Management System - A financial accounting system used to record and monitor the account-related activity of customers who maintain deposit and/or credit accounts with the casino. The credit management system consists of financial accounting records. Transactional records are prepared by Cage Cashiers and are generally recorded and summarized by cage personnel on Customer Action Cards. Transactional records prepared by the cashiers include the following:

    1. Deposit slips - Record each separate deposit made into the customer’s account and will usually show whether any portion of the deposit occurred in the form of cash.

    2. Withdrawal slips - Record each separate withdrawal from the customer’s account and will usually show whether any portion of the withdrawal occurred in the form of cash.

    3. Payment/Redemption vouchers - Record payments on credit (a.k.a. marker redemption) and may also be used to record other receipts or disbursements of funds such as reimbursements of customer travel expenses and foreign currency exchanges. The payment voucher will usually show whether any portion of the transaction occurred in the form of cash.

    4. Markers Issued - Record the extension of credit to customers in the form of chips or cash.

  9. Marker (a.k.a. Counter Check) - A debt obligation issued by a customer to the casino in exchange for cash or chips. Markers represent draws against previously established lines of credit with the casino.

  10. Marker Redemption - The redemption or paying off of a previously issued marker by a customer.

  11. Multiple Transaction Logs (MTLs) (a.k.a. Action Control Logs - ACLs) -. Generally used to record any type of cash-in or cash-out transaction for amounts starting at $2,000 - $3,000 depending on the jurisdiction. MTLs are often maintained in the Pit, Cage, or Slot areas pursuant to state, tribal, or local laws. There is no requirement to maintain MTLs under IRC 6050I.

  12. Pit - The area of the casino floor enclosed or encircled by gaming tables in which casino personnel administer and supervise the games being played at those tables. Pits may be comprised of tables offering only one type of game or may be made up of tables offering a number of different types of games. Pit personnel may include the following:

    1. Pit Boss - A management employee who has supervisory authority over all gaming activity taking place in the pit.

    2. Floor person – A management employee who has supervisory authority over all gaming activity taking place at a given number of tables within the pit.

    3. Dealer - A casino employee who conducts the gaming activity at a single gaming table within the pit.

  13. Player Rating System - A method used by many casinos to monitor the gaming activity of its customers for purposes of determining the amount of complimentary services and items to be extended to individual customers. It is primarily a marketing tool used to identify and reward good customers. A separate player rating card is prepared for each rated customer at the table by the "Rater" (usually a Floor person) assigned to that table. In addition to the customer’s name and account number, the date, time, pit and table number, the rater generally records the amount of cash received from the customer for the purchase of chips and cash bets.

  14. Rated Player - A customer whose gaming activities on the casino floor are tracked through the casino’s player ratings system.

  15. Slot Zone - The area of the casino floor, usually separated from the gaming pits, where slot machines are grouped into rows, circles and banks of machines. A slot zone may also include slot booths and coin redemption stations where coins and tokens can be purchased or redeemed, slot markers can be issued or redeemed, and slot jackpots can be paid.

4.26.12.3.4  (06-01-2006)
Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

4.26.12.3.4.1  (06-01-2006)
Pre-Plan

  1. Prior to developing a plan, the examiner should determine the scope of the review by:

    • Review of the CBRS for cash activity;

    • Review of the prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

      Note:

      If CBRS research shows the casino is filing CTR By Casinos, CTR By Casinos - Nevada, or has a volume of CTRs sufficient to indicate there is greater than $1,000,000 in gross annual gaming revenues (GAGR), the casino is subject to the reporting and recordkeeping requirements of Title 31 BSA and is not subject to the cash reporting requirements of IRC 6050I (Treas. Reg. 1.60501-1(d)(2)(i)).

  2. An in-depth compliance review should be considered if:

    1. The casino has never been reviewed for compliance;

    2. A prior review revealed deficiencies; or,

    3. The casino has filed relatively few Forms 8300 .

  3. If the casino has been previously reviewed and only minor deficiencies were noted, a more limited scope review may be considered.

  4. When an in-depth review is warranted, the examiner should determine whether the casino’s records are prepared or processed through a computer system prior to developing the plan. If the casino’s records are computerized, an IRS CAS should be assigned to the case and involved in the development of the review plan.

  5. The examiner and CAS, if one is assigned, need to develop a plan that includes the following:

    1. The period to be covered by the compliance review.

    2. Procedures that will analyze and evaluate the casino’s internal control and procedures. The analysis should identify potential weaknesses and deficiencies that may exist in the casino procedures and result in failures to properly file required Form 8300.

    3. An analysis of Form 8300 filed with the Detroit Computing Center to determine the level of accuracy and completeness of those reports.

    4. Procedures that will identify employees or customers who may be structuring cash transactions in an effort to circumvent the reporting requirements.

  6. A Form 8300 compliance review of a casino should be conducted on-site. This provides ready access to casino records and casino employees who have the knowledge regarding those records.

  7. Examiners should familiarize themselves with state, tribal and local laws and regulations related to casinos in their jurisdictions. Particular attention should be placed on casino records, documents and reports required by those laws and regulations that may assist in detecting cash received.

4.26.12.3.4.2  (06-01-2006)
Systems Analysis

  1. Casino records and management needs vary depending upon applicable laws and regulations. A complete analysis should be conducted of the casino accounting system used to record and process customer transaction. This accounting system may be separate from the general accounting system used to report income and expenses of the business. The analysis of the gaming accounting system will establish the audit trail leading to reportable transactions.

  2. The analysis should include:

    1. Identifying the flow of information through the system;

    2. Determining what kinds of original source documents and records are prepared relative to customer transactions, who prepares them, and how they are stored and organized;

    3. Determining what records are prepared by the casino that specifically identify cash received from the customer; and,

    4. Determining the kinds of reports prepared by the casino in the ordinary course of its business that may identify and/or summarize recorded customer transactions, particularly cash received.

  3. If the casino accounting systems are computerized, the CAS should determine:

    1. What computer files and records are maintained relative to customer transactions and what information is stored in those files and records;

    2. What computer files and records are prepared that specifically identify cash received from the customer;

    3. Whether the casino has retained those records; and,

    4. What kinds of computer generated reports are prepared by the casino in the ordinary course of its business that may identify and/or summarize recorded customer transactions, particularly cash received in excess of $10,000.

4.26.12.3.4.3  (06-01-2006)
Initial Contact

  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the casino. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. A formal MOU has been negotiated with Indian Tribal Governments (ITG) in TE/GE for contacts with tribal casinos. The examiner’s group manager is required to contact the appropriate ITG field manager prior to any tribal contact.

  3. The Form 8300 compliance review should be conducted at the casino.

  4. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the casino, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The Form 8300 filing requirements;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring

  5. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

4.26.12.3.4.4  (06-01-2006)
Interview

  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the casino and the employee responsible for filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the casino;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Form 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the casino to identify reportable transactions and file Forms 8300;

    4. The internal controls of the casino with regard to cash transactions. Determine who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    5. The number and types of bank accounts;

    6. The type of records maintained on transactions required to be reported on Form 8300;

    7. Whether or not the casino has filed any Form 8300 ;

    8. Procedures used by the casino to ensure that the information contained in the Form 8300 is complete and correct. For example, did the recipient verify the identity of the person from whom the cash was received by a driver’s license, passport, or other official document;

    9. Procedures used by the casino to notify transactors;

    10. The entity’s membership in various trade associations; and,

    11. Related entities.

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the casino that the information from their records may be used for any tax matter permitted by the Internal Revenue Code.

4.26.12.3.4.5  (06-01-2006)
Review of Records

  1. The records to be reviewed to determine a casino’s compliance with IRC 6050I are different from those reviewed in any other business. This is because the records to be reviewed are those generated in the gaming area and not necessarily the accounting records. Refer to IRM 4.26.12.3.2 for the types of records commonly found in casinos. Identify, with the CAS (if used), the appropriate records to be reviewed. The records chosen should assist the examiner in finding:

    1. Transactions involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions in excess of $10,000; and,

    3. Whether Forms 8300 were filed on such transactions.

  2. Generally casinos will have cash going in and out of the casino. IRC 6050I requires reports only of cash received and therefore the focus should be restricted to funds coming into the casino, not funds going out.

  3. The examiner should be alert to identifying transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  4. There may be a need, on a case by case basis, to interview the customer to obtain all the facts as required to develop the issues.

  5. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  6. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

4.26.12.3.4.6  (06-01-2006)
Closing

  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the casino the transactions not reported, or filed incompletely or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the casino to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly and procedures, see IRM 4.26.11.

4.26.12.3.5  (06-01-2006)
Money Laundering Trends

  1. The more cash intensive a business is, the more likely it will attract individuals or groups seeking to use the "normalcy" of currency in the business as a cover to launder funds obtained from illegal sources. Casinos by nature are cash intensive. Either the casino and/or its customers can be involved in potential money laundering schemes. The examiner must focus on both the casino and the customers during a Form 8300 compliance review.

  2. Money laundering techniques which could be used by the casino include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions; and,

    4. Conducting numerous transactions at the same location at different times during one day.

  4. Examiners should be alert to situations where casinos or their customers may structure transactions in amounts of $10,000 or less to circumvent the reporting requirements of the IRC 6050I.

  5. Examples of how casino employees may structure transactions or advise customers how to avoid a Form 8300 filing include the following:

    1. Employees may fragment larger cash transactions into amounts of $10,000 or less, when preparing source documentation.

    2. Employees may advise customers to limit their cash activity to amounts of $10,000 or less per transaction.

    3. Employees at the gaming tables may advise customers, who are buying chips with cash, that they are approaching the reporting threshold thereby suggesting or implying that they should move to another table. This action could be viewed as potentially assisting in structuring transactions.

  6. Examples of how customers may structure transactions, with or without the knowledge of the casino, to avoid a Form 8300 filing include the following:

    1. A customer may move from table to table limiting their cash buy-ins to amounts of less than $10,000 per table.

    2. A customer may conduct cash transactions at the casino cage in increments of $10,000 or less. He may conduct the transactions at different windows or at different times of the day using different cashiers.

    3. A customer may maintain more than one account with the casino, sometimes using an alias, and limit cash transactions to $10,000 or less per account.

    4. A customer may structure cash transactions throughout the casino to avoid the filing requirement.

    5. A customer could purchase a large amount of chips with cash (in amounts just below the reporting threshold) at a table, engage in minimal gaming and then go to the cage and redeem the chips for a casino check.

    6. A customer could make a large deposit using numerous small denomination bills, engage in minimal gaming and then withdraw the funds in large denomination bills, a casino check or a wire transfer.

    7. A customer could insert cash into a slot machine bill validator, accumulate credits with minimal or no gaming activity and then cash out the credits for large denomination bills or a casino check.

    8. When reviewing customer cash transactions, if an examiner identifies transactions at or near the reporting threshold, the examiner should review all other activity by that customer for that day (and prior and subsequent days) to determine if the customer was attempting to structure transactions and whether a filing was required.

  7. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).

4.26.12.3.6  (06-01-2006)
Form 8300 Review Techniques for Manual Systems

  1. Examination techniques used to conduct compliance reviews of casinos will vary significantly depending upon whether the casino inputs and processes its customer transaction records by or through a computer system, and has retained those records in machine readable form or uses a manual system of records.

  2. If casino records are computerized and have been retained by the casino, the examiners should use a computer audit specialist. See IRM 4.26.12.3.9.

  3. If computerized records are available for some transactions but not for others, a combination of manual examination techniques and computer auditing techniques should be utilized.

  4. In a manual environment, the examiner should consider the following steps in reviewing filed Forms 8300:

    1. Inspect the casino’s retained copies of Forms 8300 for completeness.

    2. Reconcile retained copies to those found on CBRS to ensure all were filed.

    3. Examine the source documents associated with these transactions to ensure that all information required to be reported and was available from source documents was included on Forms 8300.

    4. Take appropriate steps to verify that customers had been provided with the required written statement.

  5. All identified potential reporting violations should be grouped as either single transactions over $10,000 or multiple and related transactions totaling over $10,000. In the case of all reporting violations, the examiner must determine whether the total transaction amount includes one or more single transactions in cash greater than $10,000 or whether the amount is comprised exclusively of multiple transactions of less than $10,000.

  6. A single transaction is one that involves a physical transfer of cash from the customer to the casino in one event, even though the cash may be intended for more than one purpose and may appear in the casino’s records as more than one transaction.

    1. Example #1 - A customer redeems three markers of $5,000 each by making one payment, at one time, of $15,000 cash at the cage. This represents a single transaction even though it may appear in the casino’s records as three separate transactions.

    2. Example #2 - A customer uses cash to redeem a marker of $5,000 and also to make a deposit of $10,000, at the same time. This represents a single transaction even though the funds are intended for separate purposes and result in two separate records.

  7. Multiple transactions are those that are aggregated and total over $10,000. Some examples:

    1. From a Multiple Transaction Log, a customer is identified as making five trips to the cage to purchase chips which total over $10,000.

    2. An individual repays a $15,000 marker in installments of $5,000 each with currency.

4.26.12.3.6.1  (06-01-2006)
Receipt of Cash by the Casino (Cash-in)

  1. When reviewing casino records to determine if a Form 8300 is required to be filed for a cash-in transaction, all cash-in transactions are to be aggregated together regardless of the type of transaction involved.

  2. Casinos may maintain various types of records that will track "cash-in" from customers.

  3. Where Multiple Transaction Logs (MTL) are prepared, review the MTLs to identify single and/or aggregated reportable cash transactions.

    Note:

    If a casino prepares a MTL, it should be used.

  4. Player Rating Cards - If the casino tracks or monitors certain customer’s gaming activities through the use of a player rating system or similar process, review the player ratings reports which may summarize individual customer transactions. These reports will generally identify the total amount of cash received from the customer. Such reports may include Daily Player Rating Audit Reports, Trip History Summary Reports, and Player Complimentary Reports.

  5. Customer Deposits (Front Money and Safekeeping) - Review individual Customer Action Cards or Buckets for deposit account activity. This card will show, in chronological order, the date and amount of each separate deposit and will generally identify the medium used (e.g. cash, chips, check, wire transfer, etc.).

  6. Marker Redemptions - Review individual Customer Action Cards or Buckets for credit account activity. This card will show, in chronological order, the date and amount of each separate marker issued and each marker redeemed and will generally identify the medium used (e.g. cash, chips, check, wire transfer, etc.).

  7. Checks Purchased - Review records of casino checks issued to customers. Such records will usually include check registers or logs, as well as the casino checks themselves, and will generally identify the purpose for which the check was issued.

4.26.12.3.7  (06-01-2006)
Computer Auditing Techniques

  1. If casino records are computerized and have been retained by the casino, examiners should use the techniques described in this Section to identify potential reportable cash transactions. As previously stated, if computerized records are available for some transactions but not for others, a combination of these computer auditing techniques and the manual review techniques described in this handbook should be utilized.

  2. The CAS should develop application programs to identify reportable cash transactions using the casinos retained machine-readable files and records. The computer auditing techniques and sample computer generated reports included in this Section are to be used as a guide and are not intended to limit the CAS’s ability to customize applications to the casino records being examined. However, computer generated reports should provide the basic information described in the following sub-sections.

  3. The CAS should secure machine readable records of all Forms 8300 filed by the casino during the examination period from the Detroit Computing Center. The records should be used to produce a report listing all Forms 8300 filed by the casino in chronological date order and also in alphabetical order by customer name. In addition to the date, customer name, amount, and type of transaction, the report should state whether any of the key items of identifying information was missing from the Forms 8300. These reports will be used in conjunction with the other reports generated by the CAS to eliminate correctly filed Forms 8300 and to identify potential reporting violations.

4.26.12.3.7.1  (06-01-2006)
Review of Form(s) 8300

  1. Using the machine-readable records of filed Forms 8300, provided by the DCC, the CAS should analyze the records to determine both the number and percentage of filed Forms 8300, which are missing key items of required information.

  2. The CAS should not include missing SSNs of non-resident aliens or missing account numbers on non-account related transactions in the analysis of incomplete Forms 8300.

4.26.12.3.7.2  (06-01-2006)
Receipt of Cash by the Casino (Cash-in)

  1. Using the casino’s machine-readable records of customer account transactions, the CAS should produce a report that will list, in chronological order and in summary form, all of the potential reportable cash transactions related to cash received by the casino from each of its customers during the review period. The report should identify the aggregated total of all cash received from the customer without regard to where in the casino the transaction occurred or the type of transaction that was conducted.

  2. For each potential reportable transaction listed, the report should identify the date of the transaction, the name and account number of the customer, and the total amount of cash received by the casino. The report should also identify the types of transactions being conducted and provide information as to the number of single transactions included within each category.

  3. When aggregating cash-in transactions, the CAS should include as many of the types of cash-in transactions as are processed through the computer, and for which there are common customer identifying fields. Generally, player rating records and transactions related to deposit and credit accounts are recorded using the same account number. Sorting these transactions by account number, aggregating the total cash received as recorded in the account, and then printing out the accounts with aggregated total cash-in greater than $10,000 can produce this report.

  4. Examiners should compare this report to the report of Forms 8300 actually filed to identify potential failures to file as well as failures to report the correct amount of cash on filed Forms 8300.

4.26.12.3.7.3  (06-01-2006)
Detail Listing of Transactions

  1. For all potential reporting violations identified, the CAS should prepare a report listing every transaction conducted by the customer during that gaming day. The report, which will be used to document the violations and to provide the necessary audit trail information back to the casino’s original source documentation, should only be prepared for those transactions where potential violations exist. The report should list, in chronological order and in detail form, all of the customer’s individual account transactions.

  2. The report should be prepared for all potential reporting violations including failures to file Forms 8300, filing of Forms 8300 with incorrect amounts, and filings of incomplete Forms 8300 on single transactions. Separate reports may be prepared for cash-in and incorrect IRC 6050I violations, or a single report may be prepared that includes all types of reporting violations.

  3. In addition to listing every account related transaction conducted by the customer that day, the report should include:

    1. The customer’s name;

    2. Complete address;

    3. Social security number;

    4. Account number; and,

    5. Information relating to documents used to verify the customer’s identity (e.g., drivers license number, passport number, etc.) to the degree that such identifying information is recorded in the system.

  4. For each account related transaction listed, the report should include all information needed to document the nature of the transaction, establish knowledge on the part of an employee, and locate the original source documentation. Such information will generally include:

    1. The time and location of the transaction;

    2. Document numbers;

    3. The identities of the casino employees who conducted and approved the transactions;

    4. The type and amount of the transaction; and,

    5. The medium used to conduct the transaction (e.g., cash, chips, check, etc.).

4.26.12.3.7.4  (06-01-2006)
Additional Analysis

  1. Depending upon the findings of the cash-in analysis, examiners may wish to expand the scope of the review to include additional testing of transactions, particularly when the casino’s tracking system for cash transactions is totally dependent on data entered into the computer.

  2. Examiners may want to include testing of transactions that have been recorded in the computer as having occurred in a form other than cash. If Forms 8300 are prepared from computer records, casino employees may attempt to conceal cash received by recording them in the system as non-cash transactions.

  3. The purpose of these analysis is to ensure that transactions have not been incorrectly entered into the computer, whether by intent or accident, thereby circumventing the casino’s tracking systems

4.26.12.4  (06-01-2006)
Construction Industry Overview

  1. The construction industry covers a broad area of business activity, ranging from heavy construction, such as building bridges and dams, to home remodeling.

  2. The size of the firms range from very small (representative of most of the contractors) to multinational firms. The smaller firms perform construction work only, while the larger firms, often referred to as "engineering and construction" firms, provide a wide range of services besides construction.

  3. Building construction includes the construction of office buildings, warehouses, hospitals, single-family dwellings, and multi-family dwellings. The majority of contractors are engaged in building construction.

4.26.12.4.1  (06-01-2006)
Law

  1. IRC Section 6050I requires that any person engaged in a trade or business who receives cash in excess of $10,000 in one transaction, or two or more related transactions, in the course of their trade or business, must file Form 8300 within 15 days of receipt of the reportable cash. A copy of each filed Form 8300 must be retained for five years by the business.

  2. Any business filing a required Form 8300 must furnish a written statement to each person identified on the Form 8300 by January 31 of the succeeding calendar year. A copy of the Form 8300 should not be enclosed. A copy of the written statement must be retained by the business for five years. The statement must show:

    1. The name, address, and telephone number of the person to contact for the business;

    2. The aggregate amount of reportable cash received during the calendar year; and,

    3. That the information was reported to the IRS.

  3. For additional information on law and any statutory exceptions, see IRM 4.26.10.

4.26.12.4.2  (06-01-2006)
Records Commonly Found

  1. Records most commonly found include:

    • Back charges

    • Balance sheet

    • Billing schedules

    • Building permits

    • Cash receipt journal

    • Certificates of payment

    • Change orders or add-ons

    • Bank statements (checking and savings)

    • Construction contracts

    • Duplicate deposit slips

    • Internal reports

    • Invoices

    • Job listings

    • Job status reports

    • Project control statements

4.26.12.4.3  (06-01-2006)
Terminology

  1. Advance payments - Payments generally made to a prime contractor prior to performance of any work under a contract.

  2. Back charges - Cost of incomplete work charged to the contractor.

  3. Backlog - The accumulation of unfinished jobs of a contractor, including those not started, measured by the amount of revenue expected from them.

  4. Bid - A formal offer from a contractor, which specifies the price to be charged for completing work in accordance with project specifications and contract requirements.

  5. Claims - Amounts in excess of the original contract price which the contractor seeks to collect from the owner or others due to unanticipated circumstances.

  6. Construction - The converting of the plans and specifications into physical structures and facilities, involving the organization and coordination of all the resources for the project to complete the project on schedule, within budget, and according to specifications.

  7. Construction manager – A contractor who enters into an agency contract with the project owner to supervise and coordinate the construction activity on the project, including the negotiation of contracts with others on behalf of the owner for all the construction work.

  8. General contractor (also called a prime contractor) - Contracts with the project owner for the construction of the project and takes full responsibility for its completion.

  9. Guarantee or retention payment - The final payment after certification of project completion, usually 10% of contract amount.

  10. Job listing - Lists all active projects by job or project customer, contract or project number. It also may list job locations, description or scope of work and date started.

  11. Progress reports - Daily reports prepared by the supervisor for the contractor on the progress of the job.

  12. Progressive payments - Payments received over the course of a contract as specific benchmarks in the contract are met.

  13. Specialty trade construction - Subcontracts for electrical, carpentry, plumbing, roofing, heating and air conditioning, mechanical, steel erection, excavation and foundation and demolition.

4.26.12.4.4  (06-01-2006)
Compliance Review Procedures

  1. The scope and depth of each Form 8300 compliance review will depend upon the facts and circumstances of each case.

  2. The following techniques are intended to be used as a guide and should not be considered all-inclusive.

4.26.12.4.4.1  (06-01-2006)
Pre-Plan

  1. Prior to a Form 8300 compliance review, the examiner should:

    • Review the CBRS for cash activity;

    • Review prior compliance review results;

    • Check for previous penalties; and,

    • Review the IDRS to verify that there are no assignments controlled to Collection, Criminal Investigation or Compliance.

  2. The examiner should become familiar with the common business practices of the construction industry.

4.26.12.4.4.2  (06-01-2006)
Initial Contact

  1. The initial contact may be made by telephone. An appointment letter with the scheduled time and date for the Form 8300 compliance review is required to be given to the business. The letter can either be mailed or hand delivered to the business. On occasion, cold call visits may be appropriate with management approval. See IRM 4.26.11 for detailed information.

  2. The Form 8300 compliance review should be conducted at the place of business.

  3. Outreach is a critical part of a Form 8300 compliance review. In the initial contact with the business, the examiner must discuss with the owner/officer and the person responsible for cash transactions:

    • The filing requirements of Form 8300;

    • Notification to customer of any required Form 8300 filings;

    • The records to be maintained;

    • The civil and criminal penalties; and,

    • Structuring

  4. The examiner should explain the compliance review process and specifically state that a Form 8300 compliance review is NOT an income tax examination.

4.26.12.4.4.3  (06-01-2006)
Interview

  1. The examiner should interview both the owner and/or manager to obtain information on the operation of the business and the employee responsible for filing Forms 8300.

  2. During the interview, the examiner should ascertain and/or verify:

    1. The TIN of the business;

    2. The names and titles of officers or employees who handle cash transactions and are responsible for filing Forms 8300;

    3. The owner/officer’s knowledge of IRC 6050I and its regulations and that of the employee(s) designated by the business to identify reportable transactions and file Forms 8300;

    4. The internal controls of the business with regard to cash transactions;

    5. Who handles received cash receipts, prepares bank deposit slips, and makes the bank deposits;

    6. The number and types of bank accounts;

    7. The type of records maintained on transactions required to be reported on Form 8300;

    8. Whether or not the business has filed any Forms 8300;

    9. Procedures used by the business to ensure that the information contained in the Form 8300 was complete and correct; For example, did the recipient verify the identity of the person from whom the cash was received by a drivers license, passport or other official document?

    10. Procedures used by the business to notify transactors; Request copies of the written statements furnished and review for completeness;

    11. The entity’s membership in various types of trade associations; and,

    12. Related entities.

  3. The interview and records inspection must be solely for the purpose of the Form 8300 compliance review. No inquiries should be made as to the filing of other returns required by Title 26 or whether a specific item is reported on any such returns. The latter inquiries could result in the opening of an income tax examination.

  4. Refer to IRM 4.26.11 for additional questions relating to knowledge and intent.

  5. The examiner should advise the trade or business that information from their records may be used for any tax matter permitted by the Internal Revenue Code.

4.26.12.4.4.4  (06-01-2006)
Review of Records

  1. The examiner should examine the appropriate documents and accounting records to determine:

    1. Transaction involving the receipt of reportable cash in excess of $10,000;

    2. Consecutive or related reportable transactions totaling in excess of $10,000; and,

    3. Whether a Form 8300 was filed on such transaction.

  2. The examiner should be alert to identify transactions that may indicate attempts to avoid the reporting requirements of IRC 6050I, such as:

    1. A single transaction structured as multiple transactions of less than $10,000.

    2. Transactions in excess of $10,000 where cash and non-cash payments appears to be combined to avoid the filing requirements.

    3. A pattern or series of transactions of less than $10,000 conducted over a relatively short period of time by or for the same person.

  3. Upon completion of the interview conduct a random sample of transactions, tracing the customer’s payment through the banking and accounting records. The review of sample transactions should be used to confirm the information given in the interview about the records and also to test that the records to be reviewed are complete and include all sales. Note any discrepancies.

  4. Adjust pre-plan to include information gained from the interview and the random sample.

  5. When recording potential cash transactions, it is important to note:

    1. The date funds were received;

    2. The amount;

    3. The date funds were deposited;

    4. The name of the transactor;

    5. The receipt number; and,

    6. Account number and account owner (if different from transactor).

  6. For any transaction the examiner believes was reportable and a Form 8300 was not filed, the examiner should copy the receipts, contracts, and any other supporting documentation needed. The examiner should record the location of the original records pertaining to these transactions.

  7. If a computerized system is utilized, the examiner must perform testing to ensure its integrity before relying upon such records for the Form 8300 compliance review.

  8. Depending on the initial findings of the Form 8300 compliance review, the examiner may need to expand the scope and/or depth of the review to include additional periods.

  9. There may be need, on a case by case basis, to interview the customer to obtain all the facts needed to develop the issues.

  10. For additional information refer to IRM 4.26.11 .

    Note:

    The examiner may encounter inadequate records in some operations. Be alert for transactions between related entities or parties.

4.26.12.4.4.5  (06-01-2006)
Closing

  1. A closing conference should be held with the owner, corporate officer, or general partner. Other employees, such as the person responsible for filing Form 8300 may be asked to attend to assist in addressing specific items.

  2. The examiner should first review with the business the transactions not reported, filed incomplete or incorrectly.

  3. Obtain an explanation for any non-filed or incorrect Form 8300.

  4. If systemic deficiencies have been identified, ask the business to provide a written statement of the corrective actions they will undertake to address the deficiencies noted.

  5. If no referral to CI is warranted, the examiner should secure delinquent Forms 8300. (See IRM 4.26.11 for detailed information.)

  6. For a discussion of penalty considerations, see IRM 4.26.11.

  7. For details regarding case content, assembly, and procedures, see IRM 4.26.11.

4.26.12.4.5  (06-01-2006)
Money Laundering Trends

  1. The business and/or the customer can be involved in potential money laundering schemes. The examiner must focus on both the business and the transactor(s) during the Form 8300 compliance review.

  2. Money laundering techniques which could be used by the business include:

    1. Failing to maintain complete records;

    2. Failing to maintain accurate records;

    3. Failing to record specific transactions;

    4. Failing to file Forms 8300 on reportable transactions; and,

    5. Structuring a transaction by breaking one transaction into several to circumvent the reporting requirements.

  3. Money laundering techniques which could be used by the customer/transactor include:

    1. Using multiple locations to conduct transactions;

    2. Using several individuals at one or more locations to conduct a transaction;

    3. Using aliases when conducting transactions;

    4. Conducting numerous transactions at the same location at different times during one day; and,

    5. Using a combination of currency and monetary instruments to conduct transactions.

  4. Money laundering techniques specific to the construction industry include:

    1. Financing a project and receiving the sales proceeds,

    2. Payments received from the general contractor to underreport income.

  5. Evidence uncovered of potential money laundering schemes should be referred to CI on a Referral Report for Potential Fraud Cases ( Form 2797).


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