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Check casher businesses must file information returns

New information reporting requirements for check casher businesses operating in California went into effect on January 1, 2006. Assembly Bill 139, enacted on July 19, 2005, amended Civil Code Section 1789.30 and added Revenue and Taxation Code Section 18631.7 to the law. If you have clients who are check cashers, we have established a new Webpage to assist them in meeting these requirements. The Webpage offers guidance on how to comply with the new law and instructions on how to get assistance. Click on www.ftb.ca.gov/businesses/Check_Casher/index.shtml or visit our homepage at www.ftb.ca.govand search for check casher.

Who must file as a check casher?

"Check casher" means a person or entity that for compensation engages, in whole or in part, in the business of cashing checks, warrants, drafts, money orders, or other commercial paper serving the same purpose (Civil Code Section 1789.31).

Exceptions

This law does not apply to state and federally chartered banks, savings associations, credit unions, and industrial loan companies.

"Check casher" also does not include a retail seller engaged primarily in the business of selling consumer goods, including consumables, to retail buyers who cashes checks or issues money orders for a minimum flat fee not exceeding two dollars ($2) as a service to its customers that is incidental to its main purpose or business (Civil Code Section 1789.31(a)).

What to report

Check cashers who cash checks in the course of their trade or business are required to file an information return with the Franchise Tax Board for either:

  • Checks totaling more than 10 thousand dollars ($10,000) in one transaction.
  • Checks totaling more than 10 thousand dollars ($10,000) in two or more transactions for the same person within the calendar year.

Check cashers must provide the following information about affected transactions:

  • The name, address, taxpayer identification number, and any other identifying information of the person presenting the check that the Franchise Tax Board deems necessary.
  • The amounts and dates of each transaction.

For reporting purposes, examples of acceptable identifying information include the person's taxpayer identification number or social security number. If your clients are unable to provide either of these identifying numbers, they should provide the form of identification and identifying number used to cash the checks, or any other identifying information used to cash the checks. If no identification was used to cash the check, check cashers must provide a short explanation with their returns explaining why they are unable to provide identification information.

Missing information

Check cashers who are unable to provide information about a reportable transaction occurring during the first half of the first reporting year (January 1 through June 30 2006), should send us a letter or email explaining the reason for the inability to comply. Send your letter with your return during the filing period, January 1 2007 - April 2, 2007. Send it to:

Check Casher Information Reporting MS A-181
Franchise Tax Board
PO Box 1468
Sacramento CA 95812-1468

Email address:
IRPhelp@ftb.ca.gov

Checks

For information reporting purposes, "checks" includes warrants, drafts, money orders, and other commercial paper serving the same purpose (Revenue and Taxation Code Section 18631.7).

When to file

Annual filing is on a calendar year basis. The law requires check cashers to provide the information to the Franchise Tax Board no later than 90 days after the end of the calendar year.

The filing period for reporting on transactions occurring in calendar year 2006 is January 1, 2007, through April 2, 2007.

How to file

Your clients can file on paper or put their information on CD-ROM. Forms for paper filing, and record layouts and media specifications for submitting returns on CD-ROM will soon be available on the Check Casher Webpage. For answers to questions, you or your clients can also call our Information Reporting Helpdesk at (916) 845-6304 and we will send filing resources to you. When you mail your clients' returns:

  • Clearly identify all CD-ROMS. Do not, however, place large gummed labels on the CD-ROMS - they block our ability to read the data.
  • Include the submission date, your clients' business names, and the sequence of each volume submitted e.g., 1 of 2, 2 of 2, etc. If only one volume is submitted, label it 1 of 1.
  • Be sure to download a Check Casher Program Transmittal Form from our Website and include it with your file. Do not mail it separately.

Businesses with multiple locations

Individuals, partnerships, or corporations that operate more than one check casher location should aggregate the data from all locations and submit a single information return through their headquarters.

Penalties for noncompliance

Check cashers that fail to file correct information returns by the due date and cannot show reasonable cause, may be subject to a penalty. The penalty applies for failure to file timely, failure to include all information required on a return, or including incorrect information on a return. The penalty also applies if your client does not file machine-readable paper forms.
The amount of the penalty is based on when the correct information return is filed. The penalty is:

  • $15 per information return if correctly filed within 30 days of the due date of the return; maximum penalty $75,000 per year ($25,000 for small businesses).
  • $30 per information return if correctly filed more than 30 days after the due date but by August 1, maximum penalty $150,000 per year ($50,000 for small businesses).
  • $50 per information return if filed after August 1 or if the required information returns are not filed, maximum penalty $250,000 per year ($100,000 for small businesses).

Small businesses - lower maximum penalties.

For information reporting purposes, you are a small business if your average annual gross receipts for the three most recent tax years (or for the period you were in existence, if shorter) ending before the calendar year in which the information returns were due are $5 million or less.

Where to get help

Call our Information Reporting Helpdesk at (916) 845-6304. We are available from 7:00 a.m. until 4:00 p.m., Monday through Friday except for official State holidays.

Write to us at:
Check Casher Information Reporting MS A-181
Franchise Tax Board
PO Box 1468
Sacramento CA 95812-1468

Email address:
IRPhelp@ftb.ca.gov

Recommended practices for protecting the confidentiality of social security numbers

We recognize that information reporting places new burdens on check cashers, which includes collecting and protecting customers' social security numbers. The California Department of Consumer Affairs' Office of Privacy Protection has guidelines for protecting the confidentiality of social security numbers. Their recommendations are available on their Website at www.privacy.ca.gov.