Need some Advice.

[GrassRoots Lawn Care]

My brother and I started in the lawn business last year and I have handled the accounting and finances. I have kept excellent records and work with a great CPA. We take full advantage of all write-offs and such but declare 100% of our earnings, its just worth the peace of mind for me.

We are now planning to split the business into two seperate LCO's. I will continue to handle my accounting the same way but he is planning to run 1/4 of his income under the table, not all cash income, but checks written personally to him he plans to cash at the counter of the customer's bank. I have warned him against this, with the rational that he will eventually get caught. But I can't tell him by what means. By what means does the IRS track these funds or do they? I am still against this and need proof to persuade my otherwise well-intended brother and partner. I have looked up info at http://www.irs.gov and multiple SOHO web sites with no luck. Thanks in advance for the help.

[LoneStarLawn]

The only way to get caught is by getting audited. Meaning that some people will get away with this, but if caught it could lead to imprisonment and loss of business. The penalty out ways the reward.

[65hoss]

If he ever get audited they could catch him if they really desired. When they get your drivers lic. # and thumb print on the check its in the computer if the IRS ever went looking.

[Randy Scott]

As desirable as it may be, you gotta try and do it by the books. I know it pisses some people off when everyone else screws the government and your doing it by the books, but you would think that a guy could sleep a little better at night with a clean conscience. No worrys of getting caught. Seems like an awful lot to throw away if you get caught. It might just be easier to rob a bank to get money then to waste time trying to run a business if you want qiuck easy money. It sounds like you two have a pretty decent business going so far and you're paying the bills, why screw it up. Just my thoughts, good luck either way.
Just a quick little story, I'll make it fast. A guy I know owned and ran a autobody shop. Made good money, gooooooood money. Lots of cash jobs, it was like a joke, everybody new him and his ways. Retired early, 45 yrs. old, sold the business, just does more odd jobs now for fun and a little extra money, cash naturally. Well his daughter took ill, got sick. Not really sure what's with her, doctors can't really say, kinda like she just can't function in society. She now is taken care of by her father and partially the state. Some people make the statement that, if there is a GOD, maybe certain dishonest people get what they deserve. Do you get what I'm saying, without trying to be some religious freak. I just think alot of people get what they deserve. Maybe so, maybe not. I guess I just take pride in myself in being honest. Again, good luck with your brothers choice.

[1MajorTom]

Call me stupid or paranoid, but I don't think you should have posted that here. You never do know who is actually reading this stuff.

I understand your brother is only thinking of doing this, so no harm done, but some things are better left unsaid.

[Randy Scott]

Dangit Jodi, you said all that needed to be said. Here I go ramblin' on for ten minutes and you had the perfect comment. I gotta go to bed, obviously my brain is already sleeping!

[1MajorTom]

:) Randy.

Nah, you might as well stay up a bit longer. It's ok. You can admit it. Lawnsite can become addicting at times.

[Randy Scott]

One more reply before getting to far off track here, I would hate to see you moderators come down on me. I have never been on a computer before I got this one four months ago never had to use one, just at work for paint formulas but then I used the same few areas day in and day out. Anyways, my wife always gives me crap about being addicted to this thing and this site and calls me a "computer geek" now, it's kinda funny. I think she's being beat out by this thing, I won't let her know though.LOL



Randy

[MJ]

Don't know for sure, but I've heard the main method of catching this kind of stuff is comparing what you declare as income to your lifestyle. Hard to buy a $1m house on an income of $16,000. Also to look at your bank account, checking account, etc and compare to declared income. Seems to me, that most companies it would be too time consuming too keep straight what was declared, not declared etc compared to the tax money you'd save. Also, if you had a job on the books as completed and paid, but couldn't show a cooresponding bank deposit they'd have you. Just some thoughts.

Mick

[TJLC]

I never could never understand how people can get away with this. My checks are made out to my business name. They go in my business account. Period. I go strickly by the book. I don't want to have to look over my shoulder. It's just not worth it to me. Heck, dummy me I record cash as income! Maybe I'm too honest, I don't know.

[GrassRoots Lawn Care]

To Jody and Randy,

I can see where you are coming from on posting that type of matter in a public forum. I'm not too concerned though, as a partnership & Corp we have kept it 100% legal and I plan to run my business the same. And I also plan of convincing my younger brother to do the same.

Several people have told me (in person and online) that the fingerprinting is tracable. Well, I don't know how true that is, but it will fuel my arguement none the less. About the driver licenses being attached with the dispersed income, I will ask my CPA about that, if true that will undoubtably persuade him. Thanks.

[GrassMaster]

Hello Everybody:

I've been audited a few times, twice both times are the only times I used a CPA. Dick & Janes Bookeeping is the way to go! Saves you big bucks.

From what I understand they kinda target certain professions time to time, so they can kinda keep a grasp on things. Of course others do turn you in for, I'm not sure now maybe 10% of what IRS gets out of you, they get. The other way & most used way by IRS is when there is a drastic change in your income. That's why I boof so hard about using the CPA's both times because they showed me that I wasn't paying enough taxes & then they come up with all those wierd write offs. All sends a red flag to IRS & they know that (CPA's), but it makes them more money so they don't tell you that. LOL, they are always there to help you?

Anyway when they do audit you, in most cases they catch you. If they do audit you go to them, Please do not let them come to you. They can tell a lot about you just by looking at yo stuff & yo life style. Keep them away from yo property. That's why they want to come to you most of the time.

The person that cheats on his taxes most of the time fails to cover his tracks. What does he do with this cash. Most of the time he does something with it & he gets caught.

Lots of times they buy their beer, food, gas or something else that's a dead giveaway. When the IRS drills down hard on you they look at your grocery bills, gas & yo toys. Wheather it be a boat, jet ski or what ever.

You must have proof of how you bought everything. Now this guy that supposingly cheats on his taxes. Does he deposit all of his paycheck in the bank. If he does, how in the world does he buy that other stuff & he never cashes a check for cash. Let me see everything he buys he writes a check for? NO I do not think so. Neither does IRS?

The IRS has all kinds of things that in general they know about folks, Example: Like on the average what a family of 4 would spend a year for cloths, food, doctor bills & etc...

If you cheat you get caught, but if you wanta play just make sure you got the extra money if you need it. That's all they want is the money.

You can try to spend it on beer, extras for your toys, going out to eat, little extra on vacations & so forth. Just again make sure you got the extra cash.

Speaking of Bodyshops, they are big target. I worked for a few cutting their grass. Show me a Bodyshop man that lives in a $500K home & I show you a man that makes maybe $50,000 a year. LOL, They have real hard time selling their business too. Because they only make $30K to $50K a year but they want enough for their business that they should be making at least $150,000 or more a year. The guy I worked for him & his Son both are in prison. They lost it all, because of no reserve.

Most of them live in the Boondocks & most of them build their houses them selves as to hide their income.

BTW, IRS settles for less than what you owe, just keep a reserve? :-)

[GrassRoots Lawn Care]

What factors influence your chances of being audited?