September 18, 2020
During the NPA Federal Update seminar at the recent Dixie Pawnbrokers Conference there were questions and discussion about which federal reporting form pawnbrokers should use when a customer makes cash payments of more than $10,000 in one or a series of related transactions.
Pawnbrokers use Internal Revenue Service Form 8300 to report payments of more than $10,000 received in cash or in cash plus a form of monetary instrument. Period. This reporting requirement applies if you receive more than $10,000 from or on behalf of one customer in one transaction or in one 24-hour period or in a series of “related transactions” over the course one rolling calendar year. Form 8300 and IRS’ instructions for it can be found HERE:
The NPA’s GRC Update from August 26, 2020 covers the rules that apply to IRS Form 8300 reporting. You can read it again Here and see the description of pawnbrokers’ responsibilities to report receipts of cash from customers in one transaction or in “related transactions” to the Internal Revenue Service. IRS Form 8300 reports must be filed within 15 days after the pawnbroker receives cash or a combination of cash and monetary instruments from a customer exceeding the $10,000 threshold. You must also send one annual notice to each customer that you filed a 8300 on.
Form 8300 reports are NOT triggered by the amount of cash the pawnbroker gives out to customers (“Cash Out”), because pawnbrokers are NOT “Money Services Businesses (MSBs).” A different Treasury Department agency, the Financial Crimes Enforcement Network (“FinCEN”), requires MSBs to register with FinCEN and make reports of “cash in” and “cash out.” Some examples of MSB activities are check cashers, money transmitters, and persons who sell/issue money orders, traveler’s checks, prepaid access, and dealers in foreign exchange. MSBs must report to FinCEN every deposit, withdrawal, exchange of currency, or other payments or transfers by, through, or to the reporting financial institution that involves a transaction in “currency” above specified thresholds (some less than $10,000), must be reported on FinCEN Form 104. “Currency” for FinCEN Form 104’s purposes includes U.S. dollars, foreign currency and currency exchanges, cashing of negotiable instruments like checks, other drafts, travelers’ checks, and the purchase of negotiable instruments including checks, drafts, money orders, traveler’s checks, and wire transfers made on the customer’s behalf. MSBs reporting on FinCEN Form 104 are not required to give annual notices to their customers.
If your company operates as a pawnbroker and as a money service business, then you should discuss with your accountant, lawyer, or software provider, or all three, how you might track transactions with each of your
customers by type – pawn or money services. You should not lump pawn and money services transactions together because then you might not file a required report with the correct federal agency.
So, in summary, pawnbrokers report receipts of cash or cash-plus-monetary-instruments (“Cash In”) from their pawn customers to the IRS on Form 8300 if the receipts meet the thresholds described above. Pawnbrokers are not responsible for reporting these same transactions to FinCEN. MSBs report to FinCEN.
This GRC Update is not intended and should not be construed as legal advice to NPA members.
Members should consult their own lawyers for legal advice.
Copyright © National Pawnbrokers Association 2020. All rights reserved.