In the world of automotive sales, $10,000 may not seem like a lot of money—but that’s all it takes to sink a dealership.
By failing to properly report even a single cash payment of $10,000 or more, a dealer takes on serious legal and financial risks, including the possibility of criminal prosecution. The Department of Justice and the Internal Revenue Service are looking out for money laundering. Central to their search is a document known as IRS Form 8300.
Every time your business receives a payment of at least $10,000, you need to fill out and file a Form 8300 within 15 days. Forget—or try to get around your Form 8300 requirements—and you mark your business as a potential money laundering operation.
And it’s not just the IRS and the DOJ that are keeping their eyes on Form 8300. Increasingly, floorplan lenders are scrutinizing how and when dealers receive payments.
A recent article in Auto Finance News advises lenders to “pay close attention to how their dealership partners receive payments from customers.” The article centers on data collected by fraud analyst Josh Wortman, who discovered the following:
“In an analysis of Department of Justice documents that mention ‘dealership,’ Wortman found 56 unique fraud cases between 2013 and 2019, 75% of which involved dealerships defrauding lenders, consumers or the government. Upon closer inspection, a third of those involved tax evasion or money laundering, including a common trend of failure to properly file IRS Form 8300, the required document for cash deposits of more than $10,000.
Instead, these dealerships use a method called “structured deposits” to hide cash payments, Wortman said. For example, instead of depositing the entire $10,000, the dealership makes two deposits—one for $8,000 and one for $2,000, for example—with false invoices in an attempt to hide the cash sum.”