Paying your employees in cash???

[Steve]

WOW! Found workers classified wrong, had to pay back taxes, interest, and penalties. Was this a wrong classification w2 vs 10-99 or was this with the job code that effects the workman's comp fees?

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[wandfsmall]

Lawn care business tips

I am also from IL and luckly Obama Care does not directly affect you until you get over 20 employees. From what I see from my commercial cutters that have or have had employees they make more without them. Originally Posted by RoughCut My 2 cents again. Here's what I do. I work alone,any job I can't do I hire it done. I have never had a problem of going behind my back and stealing a customer. At first I took every Job, now I only take jobs that pay well, and customers pays on time. If for any reason I need help, I trade services, no money is exchanged. With the new health care laws that are coming, I don't want any employees. At the end of the year I may not have a large gross income as larger companies,but my profit % is higher. In my state ( IL) we can op out on worker comp, and get a refund . It took me 35 years to learn this. Should have listened to my dad and gone to collage.

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[thom]

Originally Posted by greenscaper123

I have a friend who owns a small landscaping business and he pays his two employees in cash. I always thought this seemed kind of silly because than how can you claim that money spent on labor as a deduction, right? But what he does is, he makes sure he has enough cash coming in from his customers to cover his labor costs. So if he's paying out roughly $3k a month in labor, he makes sure he's pulling in $3k a month in cash. That way he never draws money out of business account. Same thing goes for his other business expenses. Stuff like, commercial insurance, mower payements, insurance etc. he pays out of his business account along with his own pay, and makes sure he has enough money coming in "on the books" to cover those costs. I'm pretty sure he has workers comp though in case someone gets hurt. Does anyone else do this or know of anyone it's backfired on? I keep telling him he's crazy but he's been doing it for a long time with no problems.

There isn't anything wrong with using cash to pay payroll.
But good record keeping is a must.His employees should
sign a document for the wages they receive, which
will also show all deductions.

[RoughCut]

This was a 1099 issue. IRS classified them as employees.Now I keep detailsd records. Everything is backed by paper. Every dollar is accounted for.The last 10 years I have had no problems with the IRS.Every dollar that comes in , I pay tax on. If I use cash for equipment, I loan money from myself and pay myself intrest. Sounds dumb, but it works out real will for me. Plan is when I retire, will sell on contract to keep my monthly income.

[jsslawncare]

No, he is saving money by not paying payroll taxes. But I'm no accountant.

[Steve]

This was a 1099 issue. IRS classified them as employees.Now I keep detailsd records. Everything is backed by paper. Every dollar is accounted for.

What advice do you have for those just getting started, in order to avoid as many of these problems as possible?

[RoughCut]

Hire an accountant at first. Have them show you how to set up payroll, and book keeping. Then buy a accounting program (software) and do your own if you're comfortable with it. Most accountants have software ,so it just plugging in numbers. With todays computers and software it is easy to keep your own books and do your own taxes. As a small business owner it is easy to get on a roller coaster with 1 year paying alot of taxes and then the next getting a refund. When you know every month what your profits or loss are, then you can adjust your expenses, to stop the roller coaster ride. I started doing my own book work and taxes. I know where I am every 2 weeks, so I have no surprises at the end of the year. I am no accountant , but could be now, after all I went through.

[tk4454]

I have one guy that helps me, I plan to pay taxes this year, i pay him cash, cant i technically hire him as a sub contractor, and he does his own taxes, just to cover my own ***, but pay taxes on the money i make?

[RoughCut]

The IRS has a detailed list that classifies sub contractors. If you stay within the guide lines,yes you can use them as subcontractors. I know that they have to have their own equipment and do work for other customers, just to name a few. Ask an accountant they can give the list. Or maybe the IRS website.