When Must Pawnbrokers Report “Cash Transactions” with Customers to the Internal Revenue Service?

August 2020

Federal law requires pawnbrokers to report “cash transactions” to the Internal Revenue Service when customers make payments in cash or in a combination of cash and monetary instruments (such as money orders) when the total of payments exceeds $10,000 – by even a penny. Pawnbrokers use IRS Form 8300 to file these reports.

The threshold for reporting cash or “cash plus” payments of more than $10,000 may be met in several ways:a customer repays a single loan, along with interest and any fees, in cash or cash plus monetary
instruments and the total amount paid exceeds $10,000.

  • a customer repays a single loan, along with interest and any fees, in cash or cash plus monetary instruments and the total amount paid exceeds $10,000.
  • a customer repays more than one loan that originated within a 24-hour period and the total of the payment–principal, interest and any fees–is in cash or cash plus monetary instruments is more than $10,000. These close-in-time transactions are “related” for reporting purposes.
  • the customer repays a series of pawns made over the course of 12 months and redeems collateral that (a) served as security for this series of pawns and (b) remained in the pawnbroker’s possession over that 12-month period, and the payments in cash or cash plus monetary instruments amounts to more than $10,000. These transactions are “related” for reporting purposes.

However, if the customer pawns an item in January and repays the pawn in full in February of the same year, and then pawns the same collateral in October and repays the pawn in late November, those two transactions are not “related” under guidance the IRS has issued. The difference is in the time gap between pawn transactions using the same collateral.

When a pawnbroker receives more than $10,000 from a customer in cash or in cash-plus-monetary-instrument payment – whether in one day, one week, or within one rolling calendar year of the first payment on the terms described above, then within 15 days of the date on which the threshold of more than $10,000 is met, the pawnbroker must report the cash transaction or related transactions to the IRS on Form 8300.

The IRS requires pawnbrokers to send one annual notice to the customer listed on the Form 8300 they filed. This notice must be sent to the customer by the end of January of the following year and it is the only notice pawnbrokers are required to send.

These reporting requirements are described in the instructions included on pages 3-5 of the IRS Form 8300 at https://www.irs.gov/pub/irs-pdf/f8300.pdf . The reporting requirement is found in 26 U.S.C. §6050l.

 

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.
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