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View Full Version : paying empl. cash vs. check


gway
03-02-2001, 06:22 PM
all right ive been in buis now for almost 8 years and all this time ive been paying out $$ and i want to finally make the step up and get on the right track and start putting my workers (illeagals) on the books im just worried that this is gonna eat at my bottom line and i want to know if im being stuppid by paying out cash all these years and will it be ok or is it very difficult makeing the switch...HELP...

LoneStarLawn
03-02-2001, 06:34 PM
How will it eat at your bottom line? You will just have to purchase checks to pay your employees. Unless you were not paying the half of the taxes towards the employees FICA etc. If you are running an illegit business it can run into a brick wall if any official finds out. I would begin now to get your business in the right direction.

MikeGA
03-02-2001, 06:38 PM
On your books, How were you accounting for the wages you were paying out. Were you deducting them from your gross wages, or were you paying personal income tax and ss tax on it?

smithf36
03-02-2001, 06:39 PM
I suggest getting with an accountant and going over the numbers. I would start paying it legal. It will cost you more, sort of. Figure how much you paid your help in cash. Then figure that you could have deducted that amout as an expense and not have paid taxes on all of that $$$. It didn't take long for me to realized that what I trying to save, actually cost me a little more by not being able to write it off. That's just the way I look at things.

Joe

[Edited by smithf36 on 03-02-2001 at 11:42 PM]

gway
03-02-2001, 06:42 PM
lonestar~

sorry i didnt meen eat my bottom line what i meant was i pay myself and my partner by check and we deduct the correct $$ but when it comes to my employees weve always paid cash and now i wanna get on the straight and get them in the books but i was worried about all the deductions and my partner is afraid of all the $$ well be paying out in taxes!! ex: if an emp makes 500 in a week what is the amount approx that well be taking out and paying in taxes for all 7 emp.??

gway
03-02-2001, 06:48 PM
OK...one more thing...what if these emp do not have ss# to my knowledge. if they do present them to me most likely they me be from some guy out in ohio or something...do they need ss# for them to be on my books ??

MikeGA
03-02-2001, 06:49 PM
What kinda business setup have you and your partner got? a partnership, corp, etc? I would get with an accountant because I think the wages your employees are getting boil down to being taxed at your business level (by not being deducted from the business income)or at the employee tax level.

OBRYANMAINT
03-02-2001, 06:54 PM
yes you need some info on them and part of it is the ss# wont really cost you more in dollars just your time in more paper work which is actually more dollars... i agreee with others go see acct one with experience with similar business ask other scapers in your area who they use

LoneStarLawn
03-02-2001, 06:56 PM
It will cost you more money...you will be paying taxes on them. But you need to become legit. If they are illegal immigrants I would suggest getting legal workers. I think someone posted that each employee would cost you about 35% more (includes taxes etc). So if his/her wages is $10 then your total cost would be $13.50.

[Edited by LoneStarLawn on 03-03-2001 at 12:25 AM]

awm
03-02-2001, 07:25 PM
For real he is just doing what some in all trades do.I know one who pays part in pot.If its a day job or temp thing
hes paid and I DONT KNOW HIM.But for regulars I just
dont need to worry that much.Do those right.

tazman
03-02-2001, 07:28 PM
I have a payroll company take care of all the paperwork for my employees. Cost me about $20/month for 2-3 employees. You are taking a big gamble not having your guys legit. The properties I do require that I am covered by insurance and my employees. If one of your guys damages a customer's property or accidently hurts/kills a customer, and they are not covered by your business insurance, kiss your kazoo goodby. To be covered by business insurance they need to be on payroll. This also separates you from the non-professional landscape business, which is a good selling tool. I have received business by showing I am bonded, insured and pay L&I. It is going to cost you alittle more, but you will make more money in the long run by being professional in running your business. It is not worth the risk. Just my opinion and good luck in what ever you decide.

gway
03-02-2001, 09:00 PM
thanx taz...

i just need to get started in the right direction and take it from there. starting with a good acct. mine just blows and hes wasteing my time and our $$. dont get me wrong my co is inc. and we are fully covered as far as co ins goes, but that is for our eq and our vehics NOT our emp. if i had an acct who would sit me down and go over all the beakdowns and soforth and deductions i would feel alot better about it right now i dont know where to start!!!

JimLewis
03-02-2001, 10:01 PM
If you make $10,000 one month and pay out $5,000 in under the table payroll, you still have $10,000 in personal tax liability.

But if you make $10,000 and pay $5,000 (plus a little bit more for your end of social security and a little for bookkeeping) in LEGITIMATE wages then you have a $5,000 tax write-off. Thus, you only pay taxes on the $5,000 you keep.

If you are paying under the table and it's a substantial amount, you are losing a lot of money.

My advice = see an accountant and hire a payroll service.

lawnboy82
03-02-2001, 10:54 PM
i have a guy on the books. he is illegal. i am helping him to get his green card. might i suggest: since you pay workers comp based on payroll, pay the guy some money on the books, that way you can deduct some, but pay cash too, it will keep them happier, and it keeps your costs down, you still have your workers comp certificates, but you dont have the increased cost if you pay everything on the books. so lets say you pay every week, 3 days cash 3 days check, you can figure it out for yourself, but that is what i am gonna do this year

lawnboy82
03-02-2001, 10:56 PM
forgot to mention: if they are gonna be on the books, if you have access to a photocopier, get the guy's drivers liscence, and ss card, or some other form of id, you should get a w2 and get photocopies of 2 forms of id. have them sign the w2, or 1999 whatever it is. if you have immigration come to you saying these guys are illegal just show them the photocopies and say that you were under the impression that they were legal and you are free and clear.

LoneStarLawn
03-02-2001, 11:07 PM
They need to fill out a W-4..

65hoss
03-03-2001, 03:20 AM
A good accountant cost $$$ but they are worth 10 times that if you need them or use them effectively. You need to find one ASAP.

Russ
03-03-2001, 07:22 AM
The amount of indirect payroll (taxes and WC) will vary from state to state(unemployment) and employee to employee I use the 35% of my direct payroll,what I actually paid the guy, as a basis for estimating my cash requirements for payroll ie.If Jack worked 50 hours at $10.00 per hour his gross pay would be $500, but I should plan on his cost to me as being 675.00 for that week. I use a payroll service and am glad I chose to.

JimLewis
03-03-2001, 12:59 PM
lawnboy82,

How can you afford to pay someone under the table so many days of the week? Every dollar you pay him is another dollar the IRS is going to count as earned income for you. Personally, I don't enjoy paying taxes on wages I paid to someone else.

If you are paying people under the table, you are saving money in the short run, but creating more taxes for yourself, which equate to you paying more money out than you saved - unless you don't pay taxes.

I am sorry to have to respectfully disagree, but I think you are giving "gway" bad advice. At the start of this thread he said he wants to get on the right track. Paying people under the table, even partially, is not the way to do it.

It is unwise for a vairiety of reasons. 1) It costs you more money 2) It's illegal 3) The penalties for being caught are severe both monetarily and otherwise.

[Edited by jimlewis on 03-03-2001 at 06:05 PM]

morturf
03-03-2001, 02:32 PM
I was amazed that not one person here mentioned the I-9 form. You have to have one of those on file for each start. Some states require you to file a form with them to make sure that the employee is not a deadbeat parent. Start a file, make a sleeve for each employee and keep all the relavent papers in there. Keep them for at least 5 years.

I don't know how much business you are doing but with 7 emps. but you need to get legit or you are gonna run into trouble. Guy here like you got raided by the INS midseason, IRS got into it. Pretty soon the guy owed like $120K in back taxes and penalties. I felt bad for him he even had to his Harley taken, just to show you that you can't hide behind an incorporation.

Do business above the table, it is the right thing to do.

JimLewis
03-03-2001, 08:16 PM
Well said morturf.

One thing I might ad is that it's easy to be audited. We've been audited 3 times now. And fortunately for me I was running a clean shop and the audits went well. But these guys are pros. They know what to look for. If you think you can keep them from finding out, you're in for a big surprise one day.