part4-219

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 clients 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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