My mechanic asked me for cash rather than credit. I have never had any credit problems and this leads me to believe that he isn’t reporting all of his income.
What should I do? Am I liable in any way? I would hate to accuse him without proof, but I don’t want to get ME in trouble either…
Could be you’re right, but there could be other reasons. Is it a small shop? Maybe he’s operating on a small cash flow and has gotten burned by bad checks. At any rate, I don’t see any liability for you.
I had a buddy back in the 70’s, who was retired from the Navy and supplimented his income by fixing TV’s. He used his garage for a workshop and got the jobs by word of mouth. His rates were very reasonable and he did good work. He always asked for cash. He enjoyed working on electronic stuff, but didn’t like paperwork and recordkeeping. If he’d kept records he would probably have shown a loss on paper. I knew he didn’t pay tax on the business, but never worried about it.
Why would you be in trouble? There’s no law against paying in cash.
I’m not quite sure why you think that, but nonetheless, it’s not your problem. The MOST I can think of that could ever happen to you would be if he got audited, the IRS MIGHT ask his customers how much money they’ve given him. But like I said, it’s not your responsibility to make sure he’s doing a proper job of bookeeping. And if this really worries you, you should probably stay away from most small businesses, it’s a fairly common practice. It you talk to an accountant, they’ll most likely confirm that when someone wants to buy a (established small) business, they always ask to see BOTH sets of books. Meaning, they want to see how much money the company is making and reporting. But at some point the potential buyer is going to want to know how much the business is REALLY making. That means money that wasn’t rung up, employees that were paid in cash and not reported, cash payouts made out of the owners pocket etc etc etc
(Without spending alot of time in the details, an owner can skim more off the top by paying some of the vendors in cash out of his pocket and this all comes into play in the ‘other’ set of books.)
I agree with the others. Why are you focusing on this as a personal concern? He could be flying plane-loads of cash to fund Al Queida and it has nothing to do with you as long as you paid fair money for legitimate work.
There are whistle-blower reporting procedures but that would be kind of a crappy thing to do. It would be a huge pain in the neck for him and might cost him significant time and money to defend it similar to you getting sued by somebody for some random thing that is completely baseless. Let the IRS worry about that. They have systems in place to catch that sort of thing if it goes on for a long time.
So basically if you saw someone steal something from the store, you’d ignore it. After all it’s just a big faceless corporation. Wrong is wrong, period.
If he asks for cash say “sure.” Then say “I need to make sure I get a detailed receipt showing you I paid in cash, because my accountant assures me I can report this on my tax and get a write off.”
This way the guy pulling the scams KNOWS you’re on to him. Even though there is no such deduction, if he asks just say…" I don’t know about all them fancy tax laws but my accountant assures me I can take it off, so I want a detailed receipt for the IRS."
He doesn’t know anyone is stealing. He just knows that someone wants to be paid in cash.
Do you know that personal checks are a huge risk and that credit card systems take money to get started and then the companies charge you a percentage fee for each transaction? Those are legitimate reasons to want cash and there are many small businesses that do that for legitimate reasons.
By accusing him of a crime, you have already hurt him greatly in time and maybe money without any logical reason. Hurray good citizen Gladys Kravitz. If that were the way of the world we would be reporting every student restaurant and bar worker for receiving cash tips and probably not reporting them all.
It’s a legal responsibility to pay taxes on your cash tips. This isn’t GD so all I’ll say is the law is the law.
Ummm, that’s really not correct. If I was the mechanic that wouldn’t mean anything to me if someone demanded a receipt, for several reasons. First, a lot of people want receipts, especially for car repair, big deal, why would that raise a flag. Second, if the customer owns a business, it IS a write off. Third, if the customer doesn’t own a business I would figure that either the customer doesn’t know what he’s talking about, or it is in fact deductable for him in his case, either way who cares. Lastly, I can give him a receipt, and shread my copy, if they’re not numbered know one will know one is missing.
I don’t think that Shagnasty is necessarily arguing that taxes should not be paid. I read his posts as saying that if you are going to assume that the mechanic is automatically cheating because he is receiving cash, we may as well report a boatload of other folks for the same offense with as little proof. He can correct me of course if he meant otherwise.
As others have said, since small businesses have legitimate reasons for preferring cash over other forms of payment, and Khadaji has no proof of wrongdoing on his mechanic’s part, he should not presume guilt and report the guy to the IRS. Khadaji also doesn’t need to be concerned about being accused of any wrongdoing himself, since it’s not his direct concern how the mechanic pays his taxes.
It so happens that lately I’ve had occasion to peruse the IRS web site regarding the reporting of suspected tax cheats. While of course the IRS would like to nail people who are cheating, they also don’t want to spend a lot of time and resources pursuing very thin leads. The best chance you’d have of getting the IRS to investigate someone or a business is to have SSNs/EINs, bookkeeping details, etc. Just calling up the IRS to say, for example, that one’s mechanic took cash instead of a credit card and therefore could be a tax cheat, does not seem to be of great interest to them.
When I was still wrenching I did side jobs. Usually got paid cash. If I knew you real well, I would take your check. Never did credit cards.
I reported that income on my taxes every year.
I also have worked for small shops that almost went belly up from a couple of bad checks of the vary large variety.
A preference for cash != tax cheating
Thanks for the replies. I guess the reason I think he may not be reporting income is because he has *suddenly *asked for cash - in the past my check was fine. It never bounced. Heck, I’ve never bounced a check my entire life.
I don’t mind - beyond the pain of getting the cash it doesn’t make a difference whether I give him a check or cash.
Could be that others have bounced checks on him recently, and he’s just not accepting them at all anymore. Or maybe his business is having cash flow problems, and he can’t wait for the check to clear.
Or he’s trying to save money, business checking accounts charge the business to deposit checks, not much, but small business try to save money wherever they can.
Khadaji, my husband used to take checks. A few customers bounced checks, though, which really f-ed up our bank account. So until that got straightened out (and we could get it out of the negative - otherwise we never would have been able to have money to EAT on because any check he deposited would go towards taking away the negative balance - know what I mean?), he had to ask for cash from other customers - even those who had never ever bounced a check in their lives. It happens - running your own business may sound glamorous to some people, but believe me - it can be hell. We know from experience. 
Now he does take checks again, but they have to be from local banks, and we go directly there after they give one to him and cash them at their banks. No more into our personal account…
As an FYI thing, if you really can’t risk a bounced check but also can’t make it to the client’s bank, you could ask your banker to “deposit this item for collection”.
There is a rather obnoxious service fee, but if the item is uncollectable, you won’t have a sudden bounce. Once the bank actually HAS the money, then they’ll deposit it into your account.
At your size of business, the service fee would probably quash this idea, but it’s something to consider.
Did he offer you a discount for paying in cash? Checks are high-risk and credit cards have high processing fees, so he might simply be trying to minimize his risk and overhead.
You mentioned credit in the OP. Does your mechanic normally accept credit cards? And if so, does he display a sign with any credit card logo on it indicating that he accepts such? If so, he may be obligated to accept a credit card for any transaction in which a customer wishes to pay by that means.
Here’s the relavant info from Visa.com:
Heh. This one time I was buying a six-pack of beer at the party store out of town that I rarely go to. I had exact change, but one of the quarters was Canadian, which in these parts is treated almost universally as if it were a US quarter. When the owner objected, I paid with a credit card. Ha! Won’t take my Canadian quarter? Eat the fees you stingy, little moneygrubber.
Thanks, that is exactly what I was saying.