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The goal of business is generally to make money, which comes in many forms, but, as the age-old saying goes, cash is king. But what do you do when your client brings you a lot of cash all at once? It’s common knowledge that when you deposit more than $10,000 in your bank account, you pique the interest of your bank and the IRS. So, what do you do with all of that money? Do you stuff the cash under your mattress? Do you deposit it in installments? Do you go back to your client and ask for a different form of payment? No to all of the foregoing, rather you make a paper trail, and you take the appropriate steps to document your cash transaction.

When most people hear cash transaction they think of dollar bills, but really a cash transaction includes currency, cashier’s checks, and bank drafts, traveler’s checks, and money orders with a face value of $10,000 or less. Now cash does not include personal checks or bank drafts, traveler’s checks, and money orders with a face value of more than $10,000.

1. Have Some Type of Written Contract.

It’s best practice in general to paper your agreements. Have something in writing describing what you are going to do for your client and how much it will cost. Those are basic terms that any attorney would include in a contract, but worst case scenario, if you’re in a pinch or can’t afford an attorney, write out an invoice and have your customer sign it. That way you have something in a signed writing to substantiate why you have this money.

2. Always Give Receipts.

Make sure that you write up a receipt for your client and keep a copy for yourself. On that receipt (or paid invoice) make sure there’s a note about how payment was made. If you charge your client $15,000, and the client pays $11,000 in cash and $4,000 with a credit card, make sure that you write specifically on the receipt how much was paid in cash and how much was paid by credit card.

3. Keep Good Records.

Everyone’s accounting practices vary, but one very important part of keeping records of the money going in and out of your business is not only identifying where money came or went, but also how it came or went. Your records should not just say “Joan Smith paid $5,000 on May 1, 2023 for Painting Her Home,” it should really say “Joan Smith paid $5,000 in cash on May 1, 2023 for Painting her Home.”

4. File the Appropriate Documents with the Government

Making the appropriate filings and disclosures is key to dealing in large cash transactions. Banks and businesses who receive over $10,000 in cash, are supposed to file a Form 8300, the Currency Transaction Report with the IRS, which can be found here: https://www.irs.gov/pub/irs-pdf/f8300.pdf. A reference guide with information about the form can be found here: https://www.irs.gov/businesses/small-businesses-self-employed/irs-form-8300-reference-guide#cash_includes. You can also read more in this FDIC publication: https://www.fdic.gov/news/financial-institution-letters/2021/fil21012c.pdf. Don’t be afraid to disclose the amount of cash you received. As long as you are running a legitimate business and make proper disclosures, you should not have any problem. The government is not looking to investigate your legitimate business, they are trying to curb and prevent money laundering. However, if the government does come knocking, you’ll have the full paper trail for the transactions if you followed the first three tips provided above and can substantiate why you have this money and where it is from.

Conclusion

Cash is nothing to be scared of in business, in fact, it is usually welcome; however, it is important to keep good records so that you have a paper trail of where exactly money came from and why you got it in the first place. It is also important to take multiple steps to document the transaction because each record corroborates the other. Your receipt is corroborated by the contract and accounting records you keep, so there is no question as to the validity of your role in the transaction. When in doubt, the more places your cash transactions are recorded, the better.

DISCLAIMER: Please note that this article is for purely educational purposes only and does not constitute legal advice or tax advice.

*Please be advised that nothing in any of Suri Law's blog post publications constitutes legal advice and that all publications are purely for educational purposes. Suri Law's blog provides general information about legal topics but does not provide any specific legal advice nor does any individual’s reading of, commenting on, or reliance on this publication create an attorney-client relationship. No publication on this blog should be used as a substitute for legal counsel or advice from a licensed attorney who practices in the area and jurisdiction in which you seek advice or for legal research or consultation on specific matters. Additionally, please note that the law is constantly changing, so, while publications on the blog are accurate as of the date of publication or update, the law may change and portions of any publication may be rendered moot or inaccurate at any time thereafter. Please be further advised that Suri Law does not provide tax law or accounting advice. Please seek out an accountant or tax lawyer for specific advice on any tax-related matters.

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