Attorney-client privilege does not extend to requirement for cash reporting.

• Author: Koppel, Michael D.

The IRS and attorneys have had an ongoing disagreement about whether the attorney-client privilege exempts attorneys from being required to report cash payments of more than $10,000 under Sec. 6050I.

Sec. 6050I states that any person engaged in a trade or business who receives more than $10,000 in cash in a single transaction must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, within 15 days of the date of the transaction. Regs. Sec. 1.6050I-1(c)(1) has clarified that cash includes U.S. and foreign currency, as well as monetary instruments with face value amounts of less than $10,000 (if the face value is more than $10,000, the funds would have been reported when the monetary instrument was purchased); these include cashier's checks, bank drafts and traveler's checks.

Persons who intentionally do not comply with Sec. 6050I are subject to a civil penalty of the greater of $25,000 or the amount of the transaction (not to exceed $100,000). In addition, criminal penalties may be imposed if a complete and correct Form 8300 is not filed. Anyone who causes or attempts to induce the receiver of the cash to fail to file or to file an incomplete return is subject to the same civil and criminal penalties.

The receiver of the cash is required to disclose the complete identity of the payor, including name, address and social security number. Also, if the funds were received for the benefit of another, disclosure must be made on whose behalf the payment was made. Complete disclosure of the nature of the transaction is also required, including the amount and form of the cash and the type of transaction. Lastly, information regarding the receiver of the cash (similar to that of the payor) is required.

The issue for attorneys is whether disclosure of this information is a violation of their canons of ethics. Attorneys are prohibited from disclosing information made by their clients in confidence. There have been numerous attempts by law firms to...