“Can You Make it Cheaper If I Pay You Cash?”

For many contractors and customers alike, this phrase is a compelling one. The average person in today’s world likes a good deal and may be drawn to viewing potential purchases and sales from the lowest price point as an appropriate baseline. The buyer may immediately benefit by saving money on a purchase. As for the contractor, the benefit is there to an extent. He got the sale, although at a lower price than what had been asked. But he got the sale! Add to this the strong opinion held by many that the less the government knows about your business the better. The reasoning may be that ‘they waste enough of my tax money’. I will give my take on why I feel this is shortsighted and not the way to operate.

Does Anybody Really Get Hurt?

While the temptation to take cash payment without claiming it as income may seem worth it and even smart, how does it affect the parties involved? Does a series of ‘harmless’ undeclared transactions affect others indirectly? Our friend Ananias may save some money come tax time and do what his heart desires with money that Uncle Sam doesn’t hear about. But Mister Businessman puts himself and Ananias at risk of being found out if he declares the price he paid as a deduction. The IRS does not monitor every single transaction that takes place, but does have the wherewithal to examine 1099 tax forms, credit card transactions, loan applications, large purchases, bank account activity, and conduct audits where they deem appropriate. Staying under the radar would by and large mean dealing entirely in cash. This will affect one’s ability to accrue interest from money that could have been put into a savings account, certificate of deposit, or other investments. Also, the less social security tax paid in, the less one will receive in benefits when it’s time to begin collecting. Granted, many who would deal in secrecy believe they can, and sometimes really can, find ways to grow wealth without the help of conventional tools as mentioned above.

Playing By the Rules Is the Best Policy

Many maintain that right or wrong is one thing, perhaps implying that this is a matter of opinion. They will give more weight to the fact that breaking the law is far more of a concern. Regardless of what you believe is the weightier issue, if you break the law, you have to expect repercussions if you are caught. It is common experience that when even a minority of people act dishonestly, they usually ruin it for the majority of those who are honest. Stricter rules are created which, in a sense, penalize both those who do and don’t deserve it. That’s life as we know it. Besides the enjoyment of a good conscience, it makes sense for you to focus on bettering your business in ways that have a much higher return than saving a little in taxes on undeclared revenue. If customers know you as someone who is willing to deal ‘under the table’, might they actually have less respect for you than if you operate above board? I’ve found that when I politely decline skipping the PA state tax I’m required to collect for my services, people rarely if ever stop using me. I’ve sensed that the respect for honesty is present in those who asked for a better cash price.

How Operating On the Books Benefits Each Party

Besides the mutual respect each party will have for doing things on the ‘up and up’, accurate records and reports help each one plan and forecast appropriately. They help government agencies know where best to allocate funds for public services and economic development.

Here is an article from a well-known authority on taxes. Fear of being caught is one thing discussed, but also the overwhelming majority consider it their civic duty to pay their fair share of taxes. Of course, there are many legal ways to minimize one’s tax liability. Whether you feel it favors the wealthy or you don’t take that stance, the tax code as it exists has been put in place by Congress and is enforced by the IRS. It is there to follow and also to utilize for any existing tax advantage.

Does Operating On the Books Affect Pricing?

For sure, there is a cost built in to conducting a business legally and ethically. This can be observed when comparing prices that are stated by a company that follows the rules and those working for ‘beer money’ as the saying goes. The common adage ‘you get what you pay for’ usually applies here.                                    The following situation is purely hypothetical- however it carries a common set of events that do occur when shady business tactics are in place.

When Ananias cleans your windows, he is likely giving you a pretty sweet deal, since nobody needs to know it ever happened. Ananias doesn’t believe in having employees. It’s too much to keep track of and too much paper work. If he gets a little too busy, he’ll just ask a buddy to help out for a day and pay him cash under the table as well. You as a homeowner might be fine when it’s all done, as long as Ananias and maybe his kid or buddy did a good job and didn’t damage any of your property or themselves. They might do great work and are clean and polite. But if issues arise, you might not have any success getting Ananias to cover damages, seeing that he doesn’t have the proper insurance and says he can’t afford it out of pocket. He may or may not be able to, but he’s happy to consider you a one and done, and block your number. “Next“!

Now, if you may happen to find out from your research that Ananias charges the lowest prices in the area for professional results. You’d also find out that other companies price your same house at a higher amount, maybe significantly higher. The difference is that other companies to a greater or lesser extent are conscientiously factoring in costs that keep them compliant and you safe from headaches. Add to that the sincere desire to adequately take care of their precious employees who are on the front lines, cleaning your windows, gutters, siding, and so on. So, on a tangible level, when you go with a company operating ‘on the books’, you are paying a fair amount for labor, materials, insurances, and other legal requirements. Oftentimes, companies who have higher prices are providing an enhanced experience that is worth a bit more up front. You may have discerned from reviews on Google, Yelp, Facebook and the like that this company walks the walk and they make your experience risk-free. Most agree this is well worth it. Yes, some people will go to a restaurant that delivers so-so quality food if it means getting huge portions and plenty to take home and finish the next day. Many, however, are happily willing to pay more for great tasting dishes and great service and atmosphere. The  full experience is a memorable event as much as is the amazing taste of the New England Clam Chowder.

Please remember, then, that when we are always looking for a great deal, however we can get it, we are bound to hurt ourselves eventually.

Dan Wagner Window Cleaning has been serving northeastern Pennsylvania and parts of Upstate New York since 1986.

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Dan Wagner, Owner of Dan Wagner Window Cleaning