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Paying your employees in cash???

Discussion in 'Starting a Lawn Care Business' started by spitfire3416, Feb 6, 2013.

  1. spitfire3416

    spitfire3416 LawnSite Senior Member
    Messages: 553

    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.
  2. Pietro

    Pietro LawnSite Senior Member
    Messages: 855

    I dont know if youll get anyone to admit to breaking the law...:hammerhead:

    BUT.....thats like having 2 sets of books. Workers comp can only be had for workers that you pay on the books. Otherwise you cant prove they work for you. Ive heard of people paying min wage on the books and then a few bucks more cash. Its unfortunate, but the tax on stuff gets out of control and this is how people (like your friend) try to recoupe profits. If the dept of labor or IRS found out, he could face fines I'm sure. Honestly, on a small level I dont see it happening, but you never know.
  3. nylesedwards

    nylesedwards LawnSite Member
    Messages: 86

    I have a small business (40 weekly customers) and I pay my employee in cash
    Posted via Mobile Device
  4. McFarland_Lawn_Care

    McFarland_Lawn_Care LawnSite Bronze Member
    Messages: 1,445

    IF someone DOES get hurt on the job he is screwed......Honesty is the best route.
  5. Will P.C.

    Will P.C. LawnSite Senior Member
    Messages: 966

    This is very common in this business and small businesses in general. It saves the owner big bucks and most employees would rather get paid in cash.

    Illegals, young workers, people with already destroyed credit/life aren't really concerned about showing taxable income to help their credit, buy homes/cars, etc. The lawn care business is a magnet for these types of workers.

    Misclassifying workers is another way around the IRS which is also prevalent but illegal as well.

    You get big enough to where the paperwork is out of control and you could be in some ****
  6. spitfire3416

    spitfire3416 LawnSite Senior Member
    Messages: 553

    he claims the workers comp will cover him in case anyone gets hurt
  7. sehitchman

    sehitchman LawnSite Senior Member
    Messages: 965

    One day they will be injured, file a claim with workers comp and then the investigation starts. He has never deducted witholdings, or paid the SS the employers or employee portion. No I9's on file or witholding form in the posession. So your friend says they are not employees, but the injured guy says he works for the guy. Now because of the permanent back injury the guy applies for SS disability because workers comp was denied. There is no record of SS payments. Since disability and SS are denied, one of the late night ambulance chasing attorney's is called. Your buddy is now being sued for a huge on the job injury and your friend is SOL. If they are told when to be at work, where to go, what to do, they are employees. All of this prompts a 7 year audit that bankrupt's your friend and he spends his life savings attempting to stay out of prison. Several years go by and he now attempts to get back into business, looks on LS for some good used equipment to start up with. Realizes that to be legit, the old way of mowing for $25 cash has now turned into $50 and it is reported.
  8. xclusive

    xclusive LawnSite Bronze Member
    Messages: 1,054

    All he has to say is he just hired them if they get hurt and he will be ok to submit a claim for workers comp.
  9. 205mx

    205mx LawnSite Silver Member
    Messages: 2,392

    But isn't he missing out big on the deductions?
  10. AlohaMowing

    AlohaMowing LawnSite Member
    Messages: 58

    If a disgruntled employee sues him for wages owed, how is the employer going to prove the employee already was paid? Those who cut corners may find it bites them in the butt.

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