7 JANUARY 2023 WorldWide Drilling Resource® Drilling Into Money Not Boring by Mark E. Battersby Telling Tales on Cash When it comes to cash, every drilling contractor, supplier, and manufacturer faces a two-way street. On one hand, it may be necessary to report even routine cash payments received from customers. On the other hand, many of those with whom you conduct business will be required to report the funds paid to your operation. Plus, payments funneled through third parties will be joining transactions conducted via credit cards. Today, every drilling-related business, as well as persons engaged in a trade or business making “reportable” transactions, must report those transactions to the Internal Revenue Service (IRS), as well as furnishing a copy of the information return to recipients. Cash, according to the IRS, includes “the coins and currency of the United States and a foreign country.” Cash does not include personal checks drawn on the account of the customer or a cashier’s check, bank draft, traveler’s check, or money order with a face value of less than $10,000. Receiving $10,000 from a customer may not be an everyday occurrence for some and even cumulative payments in excess of $10,000 from one customer may be rare, but the government wants to know about them - sometimes. The law requires every business to report cash payments of more than $10,000 by filing Form 8300, Report of Cash Payments Over $10,000 received in a Trade or Business. Today, transactions conducted through third parties must be reported to the IRS, and recipients receive Form 1099-K for payments over $600 without any needed minimum transaction, which means more drilling contractors will receive the forms. New reporting requirements for cryptocurrencies were already in place after recent legislation. Brokers are required to report cryptocurrency transactions on Form 1099-B and must include a customer’s basis beginning after 2023. In addition, digital assets are now treated as “cash” for purposes of the rules requiring information reporting by any drilling business receiving cash transfers of more than $10,000. The reporting rules already on the books, along with many of those proposed, will impact almost every transaction used by drilling contractors, suppliers, and manufacturers for its goods and services - not just third party payment services such as PayPal and Venmo. This includes bank accounts and other ways the operation sends and receives money. Failure to adhere to the cash reporting rules, just as with failing to report income on a tax return, can lead to massive fines and penalties. Thus, the need for professional guidance when attempting to navigate the murky cash reporting waters. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com
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