Made a down payment for a vehicle in cash for $10,000 and a Form 8300 was sent to IRS

This is a record of a transaction made in cash over $10k. This doesn't have anything to do with your taxes, it's just an anti-money-laundering thing.

If you went out next week and bought another car with cash, then kept on doing that week after week, somebody would eventually stop by and ask you some questions regarding where that cash came from and why you're buying so many cars. (If you had good answers, they'd be okay with that; buying a car each week with cash isn't illegal, just suspicious.) Since you just bought a single car, the IRS will almost certainly just file it and ignore it.

Your question is,

What does the IRS do with forms 8300 they receive?

Essentially, they pass the data from the form on to FinCEN, who use it to help track the movement of money.

In the case of Form 8300, the IRS isn't inherently taking any action, and the form is not directly linked to income taxes or any other process the IRS manages. FinCEN, on the other hand, is responsible for acting as the financially-focused member of the US federal intelligence community: they provide financial data to other intelligence and crime fighting organizations, and Form 8300 plays a role in building the information they provide.

Ultimately, FinCEN's mission is to track the movement of money. This doesn't imply that the simple act of moving money is illegal, of course, but money is linked to almost all significant activities in our culture - legal and illegal. Because of this, "following the money trail" is often an indirect way to track or catch criminals. So, it is important that FinCEN is able to track money.

In our modern digital world, much of that "money trail" is already cataloged. If you go to your bank and ask to wire $100,000 to your friend, the bank will keep record of that transaction, and FinCEN will essentially have access to that recordkeeping. Similarly, if you do any other electronic transaction, FinCEN already has access to data about that transaction, because electronic transactions are inherently trackable.

However, cash is different. There is no inherent tracking mechanism for cash. Even if banks tracked the serial numbers of cash they issued, and to whom, there would be no way to track what happened to that cash once it walked out of the branch. In other words, if you decide that you don't want to wire $100,000 to your friend, and instead you hand them a sack of a thousand one hundred dollar bills, FinCEN has no way to track that transaction. This is a potential loophole, since people who want to be off the radar can just operate with cash and avoid any tracking.

As such, the government has put controls in place to help it track the movement of large amounts of cash, by requiring that certain report be filed. Notable examples include:

• Cash transactions involving a bank (or certain bank-like entities, such as casinos) are reported to file FinCEN via form 112, Currency Transaction Report. The bank is responsible for this reporting (not you, the consumer). Banks are responsible to file this report for any cash transactions totaling more than $10,000 in a single day by a single person.
• Cash transactions not involving a bank, but above $10,000, are reported to the IRS via form 8300, as you have discovered.
• Any suspicious transaction(s) taking place at a bank or other financial institution is reported via a SAR (Suspicious Activity Report) as a way to flag the activities. Often, it's a SAR that will actually trigger the use of the data reported on form 8300.

Let's look back at your example and cover a few possible scenarios:

• If you and the car dealer are both completely above-board in terms of your finances, no one will ever even look at the data that was collected on that form.
• If you did something unusual like walking into your bank tomorrow with a giant bag of cash and the teller chose to file a SAR, whatever law enforcement agency investigated would probably go look at the Form 8300 that was filed (as well as any significant electronic records about your accounts) as a way to understand if there were any crimes under way (i.e. money laundering, or off-books income).
• If the car dealer got caught doing something suspicious or illegal, law enforcement may look at your Form 8300 to try to determine if you were somehow in on the deal.
• Similarly, and perhaps more juicy, if the car dealer's books didn't add up because one of the employees was going home with a bag of cash every once in a while, or they were using the car dealership as a front for selling drugs, your Form 8300 might get examined to determine if you were in on the deal.

If you have any kind of security clearance you will also be asked about the money transfer and why. I took out a 10K Savings CD from a bank for cash and was asked about it when I had my clearance review.

Anytime 10K or greater in cash is exchanged, the parties involved are supposed to notify the IRS for money laundering monitoring purposes.