Working for cash pay and not reporting income

While seating in my local watering hole I have listened to some local contractors “ bathrooms windows doors & decks” say they encourage cash payments over checks as it is found money in there eyes. They claim there business makes 60.000 and they make 26. They are 1 employees companies but pay cash to regular labors daily. At least 2 of these craftsman said they do easily 160.000 a year. The local auto repair shop also encourages cash and will not charge state tax on the bill if you comply…I have to wonder how rampant this practice is in are country, I wish I could keep my pay and contribute what I please
I know the super rich have there loopholes with stocks and bonds & capital gains so it appears that the country for the most part runs on the working stiffs? Am I missing something?

What they’re doing is illegal. I don’t know how widespread it is. But I have encountered it many times.

What hurts is if everyone pays there fair share the working stiffs who have to pay all the alphabet soup on there pay stub would be a lot less. Do you think the owners of the pub that I was sitting in pay remotely the fair share on the 4 buck pints I drank …nope


If they get caught they go to jail and pretty much lose everything.

Some will never get caught. Some others will be caught quickly. A bunch more will get away with it for a number of years and then get caught.

I’ve seen it happen and it ain’t pretty.

In the USA, I think this is the basis behind a proposed IRS rule (or is it legislation?) where annual transaction totals above a defined amount are to be reported by financial institutions to the IRS. (The current social media gets this wrong.)

If you watch the TV crime shows, any single transaction of $10,000 or more is reported to the IRS. Not quite accurate because under the Bank Secrecy Act (and other laws), it’s a bit more complicated than that. There are behavior trigger points as well as other dollar threshold trigger points.

The proposed rule is designed to catch tax cheats where reported income doesn’t “balance” with actual cash flow. In other words, if the rule goes into effect and someone reports $50k in income but their annual cash transaction cash flow is, say, $500k, the IRS computers will probably flag that individual for further analysis of possible tax cheating.

I believe the IRS looks for underreporting of cash income. I read someplace that they look, for example, at a company’s reported income and compare that against the amount it spends on supplies. So if a pizzeria, for instance, reports income from sales of a hundred pizzas per week but they’re buying enough flour to make a thousand pizzas per week, they’ll dig further.

Obviously, this is laborious and time consuming, but if you are bothered by people cheating on their taxes, you should approve of increased spending on IRS enforcement. (In my case, virtually everything I earn is reported on a W-2 form (salary income) or 1099 form (interest, dividends and capital gains). So I’m not worried about being audited myself.

And sometimes they get injured on the job and there’s no worker’s comp to help.

I’m always bemused by the confusion that many seem to have between what is legal and what you can get away with, when it comes to tax.

Even amongst lower end tax professionals, IME it is common to say “it is deductible” when what they mean is “it is deductible assuming you are prepared to lie, because you are unlikely ever to be caught”.

A friend of mine (who is very law abiding and diligent about such things) said to me a couple of weeks ago that he was told by his accountant that he could deduct the entire cost of a certain sort of vehicle. I told him this was only true if he used the vehicle entirely for work purposes (which we both knew would not be true). He went back to his accountant and told me afterward that he had to be quite insistent before his accountant finally admitted that yes, he could only do this if he represented to the tax office that the vehicle would be used 100% for work purposes. But his accountant also said that all his clients did that, and my friend would be foolish not to do the same.

IME this is not at all isolated. When people say you “can” do this or that concerning tax, they very often mean “you can get away with…”

Up here the Canada Revenue Agency (our version of the IRS) has been auditing the supply houses. When they discover that Joe from Joe’s Roofing has been declaring income for 20 roofing jobs a year but is buying enough shingles for 50, they know that they are going to be having a very awkward conversation, at least on Joe’s part.

I don’t know if it is true but when I was travelling around Israel, a common street food was falafel and salad in a pita bread. The vendor makes a slit in the pita bread and fills it. We were told that they used to slice the top off altogether but tax officers started coming around and counting the number of tops in the bins, and comparing that to the number of filled pita breads the vendor claimed to have sold.

I’ve always thought it seemed a bit of a dodgy story because why would the vendors have ever adopted a practice that involved throwing away an (admittedly small) part of the pita bread? But a funny story anyway.

I worked for a plastering contractor who was being audited both by the IRS and the state Dept of Revenue. These were regular, run-of-the-mill business audits done periodically on any business.

Every single bank deposit and check payment had to be paired up with backing paperwork, otherwise it was assumed to be under the table and taxable. He had done several very large jobs under the table, and had paid some workers under the table to help them out. He ended up owing a couple hundred grand. Sadly, he died of colon cancer a few months afterward. Just as sad, his widow was then stuck with the tax penalty, as tax penalties don’t get wiped out upon death, they’re transferred to the heirs of the estate. He died knowing that his widow and young son would have to shoulder the burden.

I had a job interview a decade ago where I lied to cover up “Resume Gap” because why should this entry level job give a shit why I didn’t have a job for six months? I just told them I was supporting myself with an eBay Store (really I inherited cash and decided to take it easy for 6 months) and the job interviewer IMMEDIATELY asked me if I had the IRS forms to “Prove” this and when I said No they actually lectured me how I was suppose to claim taxes on anything I sold. I obviously didn’t get the job but am still angry about it.

I really don’t think so. People aren’t obligated to pay other people’s debts, not even taxes. I suspect what you mean is that his estate was stuck with the penalty, meaning that there was little left for the widow and son.

Tax burdens here don’t die when the person dies.

Understand that but everywhere I’m familiar with, debts owed by a person (tax or otherwise) don’t fall on other people when the debtor dies, they fall on the estate of the person who died.

The practical upshot may not be much different if a person dies and their assets are subject to a debt and their dependents were relying on the deceased’s assets to live. However, the point remains that the debt does not fall on the dependents as such.

It depends on exactly how the business was set-up and how the taxes were filed - the wife could have been a co-owner of the business or maybe it was a sole proprietorship or S corporation and the income was reported on a joint individual tax return. If my husband underreports his income on our joint tax return and dies, I will still be responsible for the unpaid taxes, interest and penalties unless I can establish that I am entitled to “innocent spouse relief” which is probably not so easy. This only apply if it’s a joint tax return ( and is no doubt why some married people file separately) and would never affect the son in the anecdote directly, but it could absolutely affect the wife.

The estate was his widow. This is a community property state.

She would have been on the hook if she had co-signed anything.

Googling, it appears that this may have been the case. It looks like it was a partnership.

In community property states, creditors of the deceased generally have a claim on community property now owned by the surviving spouse. There is no requirement that the surviving spouse was a co-signatory for the debt, or that a business asset was a partnership. Details and exceptions vary among states.

Community Property Debts: When is the Spouse Liable for the Debt Incurred by the Other Spouse? | Stimmel Law

This is a considerably worse state of affairs than just the estate of the deceased being liable for debts. There is also a claim on the “other half” of the community property, which may often amount to the entire assets of the surviving spouse. But there’s still no inheritance of any net debt liability after the community property is exhausted.