When I worked in a discount store in the late 1980s (think K-Mart but even more down market) we had two customers who came in a bought cartloads of stuff for cash.
An oil change guy (and his teenage sons) who would load up on Valvoline or Quaker State motor oil and Fram oil filters whenever they were on sale. I assume this was because he was doing oil changes for cash. His sons would complain about having to empty all those bottles of oil into the drums at the shop. You could get four quarts of oil and a filter for $6, and he was charging $20 for an oil change, so even if he was paying a little more for the product than he could have gotten it from his supplier he was pocketing $14 in undeclared income on every cash customer. I assume he was going through this charade because he had been bitten by an audit that compared his oil purchases to his declared sales.
A Chinese takeout place who came in whenever we had Coke/Pepsi cans on sale. I think all they were doing was buying it cheaper than they could get it directly from the Coke/Pepsi guy. We used to get a huge discount for promoting Coke or Pepsi every week (either 2 liter, cases of cans or six packs of 16.9oz bottles of either Coke or Pepsi were on sale each week for more than 50% of regular retail) and we would sell it for even less than we were buying it for. We theoretically had a limit of 4 cases per customer, but they would just come in several times every day and without a loyalty card there was no process to stop them. Heck, the family would be lined up with four shopping carts in a row at the same checkout with four cases in each, and they would go through the charade.
Both these businesses were on the same shopping center as us, and I patronized both of them quite often. Certainly the Chinese takeout place was not ringing up a lot of cash sales.
I suppose it depends on what type of work/renovation you’re having done. Contractors will often get a better price on materials so they can make a profit on the materials as well as the labour. That can be helpful for the consumer if there’s ever a “chicken/egg” problem with the finished product. Is the “material” defective or the “workmanship”. If one guy is responsible for the entire project that argument is substantially diminished.
Lol, that’s why I bought the paint. 1 gallon of ceiling paint, 5 gallons of wall paint for the 1.5 rooms (the bedroom and her walk in closet) and the laundry area. Still had paint left over, but as you note, not gallons worth!
How does that work? If they don’t have declared income, then who would lend them money? How would they know that they are good for it?
I did a google for “getting a mortgage without tax returns” and got a number of returns. They all look like pretty sketchy operations, and probably charge a significantly higher interest rate than a traditional lender.
So, maybe they can get that loan, but they are going to have to pay more for it. Whether that’s more or less than they cheated on their taxes is hard to say.
Also, seems as though, once you have proven to these lenders that you really do have a bunch of income that you aren’t declaring to the IRS, it’s pretty easy for the IRS to then ask for those records to see how much you have claimed to be hiding from them.
A woman I know did body piercing for years, accepting cash only and only declared income from a part time job she worked on the side.
She looked into buying a house. She had $65,0000 set aside for a down payment, but couldn’t document where she made the money. Banks/mortgage brokers wanted no parts of her.
She eventually worked out a scheme. Her sister (who had a more traditional lifestyle) bought the house as an investment and “rented” it to her sister. She (my friend) pierced her little heart out and gave her sister every cent she made, getting the mortgage paid off quickly.
Typically they have to put up a bigger down payment. The mortgage companies are prepared to accept that payments coming into a bank account that are not tied to a W-2, 1099, etc are income. They are least concerned about whether these are untaxed. If your “parents in the Philippines have supposedly been sending you $3000 a month” for four years, they are happy to assume that this will continue.
If you google “low doc, no doc mortgage” you will see lots of mortgage BROKERS who are offering this product. Yes, the interest rate is higher than a “conforming” mortgage, but nothing like a “hard money” loan. So one or two percentage points higher (plus higher fees and larger down payment) not a 11% or 12% rate either.
But her sister owns the house, not her. She could be screwed if there is a falling out or they could be facing a probate nightmare when one of them dies. How does this get resolved in the end?
Maybe- I got a no income verification loan over 30 years ago and didn’t pay a higher interest rate but I did put down about 35% at a time when a normal down payment was about 20%. ( I didn’t have unreported income, but I had been at my job for less than 2 years which was an issue back then). There isn’t any issue of the IRS asking the bank for records of income- because the bank doesn’t have records of any income you didn’t report to the IRS. If your parents deposit $3000 in your bank account every month, that’s not income. Those deposits are gifts that you do not pay taxes on.
I lost touch with her, so I don’t know the ending.
Summary
During a domestic dispute with her boyfriend the police were called. She hit a cop with a golf club!! She was found guilty, went to jail, but due to overcrowding she was released with an ankle monitor.
She asked me to come visit her, which I did on a weeknight. She was not handling home confinement well. When I told her I had to leave (it was 1 am, I had an hour drive, had to work in the morning) she didn’t take it well. I was actually afraid. I eventually left but never went anywhere near her again!
Based on cases I’ve seen: if conventional sister has a falling out then piercer sister can easily wind up out on the street, no equity, no ownership, and out the money she spent.
If conventional sister dies then the house might pass to conventional sister’s spouse or kids, and piercer sister can still wind up out on the street, no equity, no ownership, and out the money she spent.
I suppose that conventional sister could “give” the house to piercer sister but that probably has some uncomfortable tax situations. Maybe they had a “rent to own” contract.
That’s assuming they had an actual legal contract. Which is possible, and actually advisable in many ways, but who knows what the actual situation was legally?