Even back in the mechanical cash register days, sales tax was an itemized entry on the receipt. The store’s copy of the receipts went to accounting for reconciliation and as positive proof of the store’s compliance if they were ever audited. And basically sales tax is low enough that usually it’s just not worth the risk of hefty fines and/or jail time for the comparatively small percentage of the total price.
That would get you busted. In case I wasn’t clear, the ‘shopper’ is an employee of Radio Shack, which used to send them to stores at random to test people for theft. I’m guessing this practice still goes on in retail.
The shopper would have filed a report saying, “Left $5 for a $2 purchase”. Then later, if the store’s paperwork didn’t show the extra $3, the employee was busted.
They used shoppers for lots of things. We used to get quarterly reports on our conduct from the shoppers. They tested not only your honesty, but how you treated customers - especially cantankerous ones, because they would try to get you to say something you shouldn’t. They also scored you on mundane things like appearance, friendliness, knowledge of products, etc.
It used to be a game for us to try to spot the ‘shoppers’. Sometimes it was obvious, other times not.
THAT IS MY POINT! The store’s paperwork would have shown it!
It would go something like this–
Receipt 5/1/1990 4:42PM
Total $2.00
Cash $5.00
Change $3.00
The ONLY difference between your scenario and the normal scenario is that the $3.00 would go to the employee, instead of the customer.
You’re missing the point. The secret shopper is working for the employer. The secret shopper would report that there should have been an extra $3 in the till. The paperwork as you propose would show nothing extra in the till because the $3 was written up as “change”. When the secret shopper reported they got no change, that means the cashier must have pocketed it.
It doesn’t really make sense for a store to have secret shoppers leave extra money, say “keep the change” and keep track of it, it doesn’t really make sense for the store to care what happens to the $3 change that the customer didn’t take (unless they have a tip or donation jar it should go in) - but just because something doesn’t make sense doesn’t mean a business won’t do it.
He said that the accountants would check for the $5, not the extra $3. And the $5 would be in the till, exactly where it belonged.
Oh, come on. Let me state it a different way. They would check to make sure the rule was followed that the employee cannot accept tips. So the extra $3 had better be accounted for. Bottom line: If you pocket the money they will know it, and since it’s against the rules, you will be terminated.
This is not uncommon. In many jobs any kind of personal reward from a client or vendor is absolutely forbidden. Too many opportunities for corruption. I’m not sure if there are any sales jobs where tipping is allowed, but maybe there are.
That follows on to the old joke about the McDonalds uniforms not having pockets so the employees could not pocket tips.
I know even with mostly credit/debit in retail, my wife says it’s not unusual that the till is out a small amount - they don;t need to write an incident report unless the discrepancy for the day is more than $25. (Although accounting will not idf a store is consistently short-changing the system a few dollars.)
One fun time was when they changed the UPC scanners - they were replaced with smart ones; then it was discovered the QR code (square box) also got scanned, and if it was detected first the PC-based register program would pop up an error message. Often the cashier would not notice, scan the next item, which the register took as replying “OK” to the “invalid code” message. As a result, two items were not scanned or included in the total. Since this did not result in a cash discrepancy, just stock shortage, it took a while to notice and correct.
They also changed the store security camera procedures to require logging every time security cameras were checked - to ensure employee privacy and to stop the employees looking for secret shoppers once the camera system could hold more than a month of video.
You most certainly can. If under $600, get a receipt. If over that file a 1099 (which is likely not what the worker wants, I agree). For small amounts, you could just log the name and amount. “Paid Bob Smith $75 to remove palm fronds”.
However, the IRS is cracking down on employers who pay employees significant amounts and dont file the proper forms, pay tthe taxes, etc. For a one man operation, it might work, but for a company, it is too risky and not worth it. That is why the old saw about “paying undocumented workers under the table” is now outdated. The worked just gives a fake SSN , and everything is done properly… other than the fake SSN.
But there shouldnt be an extra $3 in the till, since of course sales tax wouldnt have been charged on a $5 purchase. “Keep the change” is a tip to the employee, not the store. In CA, the employer who stole such tips would get busted.
Which is okay. But it is still not a sale. No sales tax was collected, and the inventory and CoGs would not show a sale for a $5 item. Ringing that $3 up is against tax laws and Generally Accepted Accounting Practices.
If the rule is “no tips” and $3 is left anyway, the only proper thing is to just leave it on the counter- untouched, and if a customer grabs it, no harm.
More to stop stealing.
The point would be to ring up the sale as normal, but put the full $5 in the till. The cash count at the end of the nigh should show $3 over what it should be… or someone got so ‘splainin’ to do.
Cash often does not fully agree with register tally.
This is Alberta in the 1980’s. There was no sales tax to collect. All invoices were written by hand, with the customer’s name and address. If the customer refused, we had to write that. If the customer threw $5 on the counter we would write ‘Customer left $5’ in the name field, fill in the receipt for what they took, and at the end of the day the $3 over would be recorded and the invoice # referenced.
And yes, $1 items show up in inventory. We had to take a physical inventory pf the entire store every quarter, and we counted every .39 cent resistor and every battery. There was no such thing as inventory too small to count and track. And if our inventory count did not match inventory arrival minus purchases within the normal limit for waste and shoplifting, we could expect to answer some hard questions by a security officer at some point. I don’t remember us selling any ‘bulk’ items. Even a single LED or transistor was in its own little package and tracked separately, even if it only cost 29 cents. Even the ‘battery of the month club’ batteries were counted and recorded, even though we could hand those out without writing them up. RS still wanted to know precisely how many were being given out, probably out of fear that employees would just take handfuls home whenever they wanted.
There are good reasons to not allow tipping in retail. There are too many ways to incentivize stealing. For example, if the employee has pricing power, someone may offer them a big tip for a discount, or to get them to bundle something in for free. It also means people who look like they might tip will get attended to first.
This problem also exists to a certain extent with commission sales. In stores that pay minimum wage but the employees make their money on commission, good luck getting help when looking for a $1 item when someone else in the store is looking at stereos. But commission sales don’t have the explicit cheating/negotiating problems that tipping has.
From a US perspective: Yes you can. You even should. But in the US if you pay them at least $600 a year you need to file a 1099 regardless of whether it was paid in cash or by check or direct deposit. When you get to at least $600 a year, calling it a personal gift instead of remuneration for services is possible, but unless it’s really a gift, you’re still breaking the law; a gift has to be “detached and disinterested generosity” and if they’re doing stuff for your business, it’s not. I don’t know about Canadian law though. You’re right that if you have records that show you paid someone at least $600 the IRS will deny the deduction if there’s no 1099 filed, but if you’re going to break the law, you can get around that really easily by breaking the law in other ways. Since I want to remain in compliance with board policies, I won’t discuss how to do that.
There is one client of mine that doesn’t want to give a certain person he pays with the business’s money a 1099, so he claims it’s a personal gift. I don’t have any actual evidence (besides the fact he writes a check from the business account to this person regularly) to dispute the fact that the person isn’t doing anything to earn the money, but I’m pretty sure he just doesn’t want them to pay self-employment and income taxes on it and will pay the income tax on it instead.
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As for the main topic of the thread, the way the IRS can audit places that do a lot of cash business has generally been mentioned. I’ll point out that the IRS can and will stake out a business location and observe how much business is done at a location to see if the owner’s records of not doing much business are realistic, though this is likely done just as much in the opposite direction to catch money laundering, as anyone that has a bustling business but reports nothing in profits will likely have other things that the IRS can use to support their net income being higher or to at least deny deductions that make net income so small.
If you want to discuss how taxes were collected a LONG time ago, keep in mind that income taxes are a pretty new concept, and haven’t been around for very long, precisely because it was very difficult in the days before a lot of records were kept to prove anything about income and most people wouldn’t be keeping track but spending whatever they earned fairly quickly. Most taxes would have been capitation - the tax man collects the same amount from each person. That is obviously terribly regressive, and so there came into being things like the window tax that tried to soak the rich more, who responded by bricking up most of their windows.
You absolutely can. I do so, though not that often (I try to keep payments not in cash because they’re just easier to keep track of.) Where did you get the idea you couldn’t?
And I’m going to say it right back to you, because you’re moving the goalposts.
Back when you started this whole thing, in post #4, you said,
You said very clearly and explicitly that the accountants would "check the day’s receipts for the $5.
I have shown you that the $5 would be in the till EVEN WHEN – nay, especially when – the employee pockets the change of $3.
Are you going to admit that you are wrong?
You can pay someone in cash for sure, but you are supposed to have all the employee’s information, Social Insurance number, etc. People who get paid under the table also don’t want you reporting the payment, because it might get them audited. So such payments are considered to be ‘private’ with no reporting to anyone.
If you are legitimately paying someone in cash, they’ll usually have their own business, and you’ll get their business number and such and report it, expecting them to report it as well. But when some guy comes along and says, "I’ll build your deck for you as long as you pay in cash and there is no paperwork, then either you will pay him and not report it, or you’ll refuse. That’s pretty much the way it works.
No. Are you going to admit that you’re the only one having trouble understanding the concept?
Would it have made it better if I had said they would check to see if ALL of the $5 was there? I mean, really. There’s nitpicking, then there’s willful misreading or micro-parsing to create an issue where one doesn’t exist.
Moderating:
Let’s drop the Radio Shack hijack and get back to the actual topic of this thread, please.
Sure. An “off the books job” is different. I legitimately pay some contractors cash and 1099 them if the work is over $600, and get proper receipts so I can deduct it from my business expenses. Some people just like cash aboveboard. It sounded to me like you were saying you simply couldn’t deduct business contractors if you paid them in cash.
Not for payments under the 1099 threshold.
The IRS works harder at identying cash income that the tax authorities in Japan or Taiwan.
Taiwan is especially lax, and dodging tax is right up there with baseball as a national past time.
I’ve worked for employers who weren’t terribly subtle about cooking the books.