IRS and attorneys clash over reporting requirements for cash transactions in excess of $10,000.

• Author: Rood, Joan L.

Sec. 6050I requires any person who receives more than $10,000 in cash through his trade or business to report the transaction to the IRS, identifying the name of the payor, the amount of cash received and the basic nature of the transaction (e.g., for personal services). Such transactions are reported on Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business.

Forms 8300 are collected by the IRS Detroit Computing Center and the information contained therein is entered into a data base. This data base, available to Service personnel nationally, is used in examination, collection and criminal investigation work. Particularly benefited by the data base are new initiatives implemented by the IRS in recent years to detect nonfilers and unreported income.

Quite often attorneys will file Forms 8300 without disclosing their clients' identities, claiming that the attorney-client privilege prohibits such disclosure. In fact, several state bar associations have issued ethics opinions stating that such disclosure without a client's permission is a violation of the attorney-client privilege. For example, Florida Bar Advisory Opinion 92-5 states that an attorney may not disclose the identity of his client until the Service issues a summons requesting that information. Once an attorney receives a summons, he then assesses whether the attorney-client privilege applies; if it does not, he is permitted to disclose the client's name to the IRS.

There is substantial case law supporting the Service's position that payment of...