Paying a contractor in cash

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gophermobile
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Paying a contractor in cash

Post by gophermobile »

My wife and I just purchased our first home, and we are looking to get about $80-90K worth of improvements done on it prior to moving in. We have selected a contractor that was very detailed and well reviewed, and we like our interactions so far. They have offered us a 5% discount for paying in cash, though it was not a required to do so. The total cost would be broken up into about 9 payments spread along the construction time.

This is in Southern California - and I've checked that they are licensed and bonded. I've never done this type of work or spent this much, but it seemed hard to turn down the savings since the alternative was a check. Is this a bad idea? Are there any red flags here? It seems like most general contractors are subbing a good part of their work either way. From reading online it doesn't seem like a bad idea as long as we get receipts after each of the payments. The other worry I have is just lugging $10,000 in cash from the bank to the contractor every week several times.
runner540
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Re: Paying a contractor in cash

Post by runner540 »

Keep in mind you'll want a clear record of the work being paid for for your cost basis and to show future buyers.
I understand a discount for cash or check vs credit card, but for cash vs check seems sketchy.
Makefile
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Re: Paying a contractor in cash

Post by Makefile »

Perhaps they would still give the discount for a cashier's check?

I suppose it depends on whether they are giving the discount for not having to deal with bounced checks, or a less ethical reason...

When you mention 10,000, if that is just a metaphor for installments, fine, but if you're referring to staying under the currency transaction report threshold, definitely look up "structuring" as there are some disproportionate penalties for any series of transactions that "looks" like you are trying to withdraw more than 10,000 in a series of < 10,000 transactions.
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lthenderson
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Re: Paying a contractor in cash

Post by lthenderson »

I have paid in cash though not in that amount and had no problems. I just requested a receipt and always made sure I was on the right side of the equation, i.e. outstanding work left to do could still be done for less than the amount of cash left to pay in case they bailed. 5% of 90k is a pretty nice chunk of change.
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gophermobile
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Re: Paying a contractor in cash

Post by gophermobile »

Makefile wrote: Mon Nov 04, 2019 1:39 pm ...
When you mention 10,000, if that is just a metaphor for installments, fine, but if you're referring to staying under the currency transaction report threshold, definitely look up "structuring" as there are some disproportionate penalties for any series of transactions that "looks" like you are trying to withdraw more than 10,000 in a series of < 10,000 transactions.
Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
Makefile
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Re: Paying a contractor in cash

Post by Makefile »

gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
runner540
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Re: Paying a contractor in cash

Post by runner540 »

Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
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dm200
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Re: Paying a contractor in cash

Post by dm200 »

No. Amounts this large would, in my opinion, be foolish to pay in cash. Many, many reasons.
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gophermobile
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Re: Paying a contractor in cash

Post by gophermobile »

runner540 wrote: Mon Nov 04, 2019 1:49 pm
Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
So here's the specific payment schedule:

-------
$1,000 deposit due to hold schedule
$9,800 due on day 1 of construction start up (demo)
$9,800 due on day 5,10,15,20,25,30
$7,632.23 due on day 35
$5,142.82 due upon day 40/completion/city sign off/owner walk
-------

I'm thinking the payment schedule would be the same even with check, so would that really change anything? And, not to sound dismissive of the point, but is it just a potential shady thing for them to be using those payment amounts? Beyond that I'm not responsible for their tax-dodging if that is what they are actually doing?
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dm200
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Re: Paying a contractor in cash

Post by dm200 »

Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
Yes, indeed. Multiple payments of $9.800 in cash does not pass the "smell test" for "structuring" - which is a very bad thing for anyone to be guilty of.
Last edited by dm200 on Mon Nov 04, 2019 1:57 pm, edited 1 time in total.
delamer
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Re: Paying a contractor in cash

Post by delamer »

So the contractor meant literal cash?

Usually it’s cash as in a check, rather than a credit card or financing.

I wouldn’t do it. It’s a way for the contractor to circumvent taxes.
runner540
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Re: Paying a contractor in cash

Post by runner540 »

gophermobile wrote: Mon Nov 04, 2019 1:55 pm
runner540 wrote: Mon Nov 04, 2019 1:49 pm
Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
So here's the specific payment schedule:

-------
$1,000 deposit due to hold schedule
$9,800 due on day 1 of construction start up (demo)
$9,800 due on day 5,10,15,20,25,30
$7,632.23 due on day 35
$5,142.82 due upon day 40/completion/city sign off/owner walk
-------

I'm thinking the payment schedule would be the same even with check, so would that really change anything? And, not to sound dismissive of the point, but is it just a potential shady thing for them to be using those payment amounts? Beyond that I'm not responsible for their tax-dodging if that is what they are actually doing?
Checks in any amount provide a clear record of who's paying whom when and for what. Cash is untraceable which is why you and they are risking bank issues with these amounts. No one on this thread thinks it's a good idea. Google what we are talking about.
Makefile
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Re: Paying a contractor in cash

Post by Makefile »

gophermobile wrote: Mon Nov 04, 2019 1:55 pm So here's the specific payment schedule:

-------
$1,000 deposit due to hold schedule
$9,800 due on day 1 of construction start up (demo)
$9,800 due on day 5,10,15,20,25,30
$7,632.23 due on day 35
$5,142.82 due upon day 40/completion/city sign off/owner walk
-------

I'm thinking the payment schedule would be the same even with check, so would that really change anything? And, not to sound dismissive of the point, but is it just a potential shady thing for them to be using those payment amounts? Beyond that I'm not responsible for their tax-dodging if that is what they are actually doing?
Not a lawyer and don't understand the depths of structuring, but my naive understanding is that seven cash withdrawals of $9,800 in a 30-day time period, alone, is sufficient to be charged with the crime of structuring a $68,600 withdrawal.
z91
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Re: Paying a contractor in cash

Post by z91 »

If the guy is legit (licensed/bonded) and you trust them, it's not a big deal. Given they aren't requiring you to pay by cash and take a discount means to me that it's legit. Of course do your own due diligence.

I got a substantial discount on construction work paid in cash. Had receipts signed by both sides for a paper trail.

I asked the contractor directly why the discount was so big and he simply didn't want to float any money. Since he was a GC he was just overseeing the work. He would either pay out his subs with my cash, or go to the bank and pull cash out of his account to pay them out.

It's all to make his life easier. I only paid once the work was done, and he signed my receipts (and our milestone contract) to acknowledge that payment was received. I wouldn't worry about structuring as that's on the GC, not you.

Yes, the cash is untraceable but one can easily work around that (ask them to go to the bank with you and pay them there, where they have cameras at every angle). If you validate their ID and they have no issues on their record I'd say go for it.
Northern Flicker
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Re: Paying a contractor in cash

Post by Northern Flicker »

This is a major red flag. Don’t pay in greenbacks or check. Find another contractor.
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Watty
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Re: Paying a contractor in cash

Post by Watty »

runner540 wrote: Mon Nov 04, 2019 1:31 pm I understand a discount for cash or check vs credit card, but for cash vs check seems sketchy.
+1000

The only reason to get paid in paper cash like that is that they are doing some permutation of tax fraud.

Even if you are OK with that I would be reluctant to do business with them since if they are willing to do tax fraud then they are also likely willing to rip me off too.
gophermobile wrote: Mon Nov 04, 2019 1:29 pm The other worry I have is just lugging $10,000 in cash from the bank to the contractor every week several times.
That is a very valid worry. There is no telling who else will know that you will have $10K in cash and might rob you.

In addition to people related to the contractor someone like a teller at the bank could tell someone when you pick up the money. At some branches you may need to make advance arrangements to pick up a large amount of cash so that you do no take all the cash they have on hand so there may be plenty of opportunity for word to spread that you will be making a large cash pickup.
Last edited by Watty on Mon Nov 04, 2019 2:06 pm, edited 2 times in total.
chw
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Re: Paying a contractor in cash

Post by chw »

Cash payments are sketchy at best. Basically the contractor will underreport that income to the IRS (which will likely benefit him much more than the 5% discount he is offering.

As others have mentioned, you also may have issue down the road with showing payment was made- though written receipt may mitigate the issue depending what the receipt may be needed for.

Basically, if you pay in cash in the manner suggested, you are likely helping to perpetrate defrauding the IRS.
z91
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Re: Paying a contractor in cash

Post by z91 »

Makefile wrote: Mon Nov 04, 2019 2:02 pm
gophermobile wrote: Mon Nov 04, 2019 1:55 pm So here's the specific payment schedule:

-------
$1,000 deposit due to hold schedule
$9,800 due on day 1 of construction start up (demo)
$9,800 due on day 5,10,15,20,25,30
$7,632.23 due on day 35
$5,142.82 due upon day 40/completion/city sign off/owner walk
-------

I'm thinking the payment schedule would be the same even with check, so would that really change anything? And, not to sound dismissive of the point, but is it just a potential shady thing for them to be using those payment amounts? Beyond that I'm not responsible for their tax-dodging if that is what they are actually doing?
Not a lawyer and don't understand the depths of structuring, but my naive understanding is that seven cash withdrawals of $9,800 in a 30-day time period, alone, is sufficient to be charged with the crime of structuring a $68,600 withdrawal.
Nobody cares how much you withdraw; it's the large cash deposits that would raise flags.
ClassySDLivin
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Re: Paying a contractor in cash

Post by ClassySDLivin »

Besides the financial issues already raised (potential loss of a wad of cash, structuring issue, etc.) you should also be leary of automatically pay based on the projected completing timeline. If you agree to pay on the 5th, 10th, etc. and the workers don't show up for 5 days (which happens all the time, especially with sub contractors) you are still obligated to pay without performance (it appears). Better to set it up based on % completion (e.g. walls go up = xx% paid, city approves = xx% paid). For this amount of money you don't want to be the one having to harass the contractor to complete the work, especially if there is no liquidated damages clause that penalizes him if it goes past a certain date.

Good luck.
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Re: Paying a contractor in cash

Post by Makefile »

z91 wrote: Mon Nov 04, 2019 2:05 pm
Nobody cares how much you withdraw; it's the large cash deposits that would raise flags.
Dennis Hastert?
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dm200
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Re: Paying a contractor in cash

Post by dm200 »

ponyboy wrote: Mon Nov 04, 2019 2:08 pm
runner540 wrote: Mon Nov 04, 2019 1:49 pm
Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
Its interesting...most people complain about paying excess taxes or paying taxes on money that has already been taxed. Yet when someone is possibly trying to prevent paying taxes upon taxes, people think its out of the norm.
In my opinion, because of the very large sums involved, there are many other issues/risks well beyond the tax issue.
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Re: Paying a contractor in cash

Post by delamer »

Northern Flicker wrote: Mon Nov 04, 2019 2:04 pm This is a major red flag. Don’t pay in greenbacks or check. Find another contractor.
We have a contractor that we use frequently that we always pay by check.

Credit cards are not an option, nor do they offer financing.
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gophermobile
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Re: Paying a contractor in cash

Post by gophermobile »

runner540 wrote: Mon Nov 04, 2019 1:58 pm ...
Checks in any amount provide a clear record of who's paying whom when and for what. Cash is untraceable which is why you and they are risking bank issues with these amounts. No one on this thread thinks it's a good idea. Google what we are talking about.
If I talk to them and ask them to just make the payments over $10,000 would you still see that as an issue? They have 108 yelp reviews with 4.6 stars and plenty of detailed feedback, plus the licensed and bonded, I'd really be surprised if they are trying to do something overtly illegal.

But if majority does think it's still a bad idea even with over-10k payments I'll just pay check and forget the savings.
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Re: Paying a contractor in cash

Post by ponyboy »

dm200 wrote: Mon Nov 04, 2019 2:10 pm
ponyboy wrote: Mon Nov 04, 2019 2:08 pm
runner540 wrote: Mon Nov 04, 2019 1:49 pm
Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
Its interesting...most people complain about paying excess taxes or paying taxes on money that has already been taxed. Yet when someone is possibly trying to prevent paying taxes upon taxes, people think its out of the norm.
In my opinion, because of the very large sums involved, there are many other issues/risks well beyond the tax issue.
Explain to me how OP could be at any risk whatsoever for paying in cash? They would be paying for a service. What the contractor does on that end is irrelevant to OP. Is it illegal to withdraw $9800 in cash from a bank every couple weeks? If you have the money in your account, is it illegal?
runner540
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Re: Paying a contractor in cash

Post by runner540 »

ponyboy wrote: Mon Nov 04, 2019 2:08 pm
runner540 wrote: Mon Nov 04, 2019 1:49 pm
Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
Its interesting...most people complain about paying excess taxes or paying taxes on money that has already been taxed. Yet when someone is possibly trying to prevent paying taxes upon taxes, people think its out of the norm. Whether is ethical or not, contractor is smart imo. OP would be saving money and so would the contractor for not having to give up 1/4 of it to uncle sam.
This forum does not support being "smart" if it means tax fraud (contractor not reporting income and/or paying workers with cash under the table)
Last edited by runner540 on Mon Nov 04, 2019 2:15 pm, edited 1 time in total.
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celia
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Re: Paying a contractor in cash

Post by celia »

The proposed payment schedule is flaky. It should be based on parts of the job being done for each payment (ie, demo, grading, pouring cement, etc with lien releases from each sub-contractor) instead of calendar days. What if each step takes twice as long (weather, illness, whatever)? Then you have paid up most of the money before most of the work is done. If the job isn't finished in 40 days, you've given him all the money except for $5,000!


If it's a legitimate business, they should accept checks. If you pay using cash, you are supposed to report the amount to the IRS so they can know about the business's income. In the latter case, the IRS has a form the contractor should fill out before beginning that reports his business entity and its SSN and gives it to you so you have the needed information to file the 1099 to the IRS (and give the company a copy).

It sounds like the contractor is trying to avoid something, so ask why there is a cash discount? If he is evasive, that is your answer. If he just wants timely payments, a personal or cashier's check should cover that.
delamer
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Re: Paying a contractor in cash

Post by delamer »

ponyboy wrote: Mon Nov 04, 2019 2:08 pm
runner540 wrote: Mon Nov 04, 2019 1:49 pm
Makefile wrote: Mon Nov 04, 2019 1:46 pm
gophermobile wrote: Mon Nov 04, 2019 1:45 pm Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
It sounds like the contractor may be trying to avoid the 10,000 threshold on the deposit side.
+1 very weird and I would decline the discount and pay by check.
Its interesting...most people complain about paying excess taxes or paying taxes on money that has already been taxed. Yet when someone is possibly trying to prevent paying taxes upon taxes, people think its out of the norm. Whether is ethical or not, contractor is smart imo. OP would be saving money and so would the contractor for not having to give up 1/4 of it to uncle sam.
So it is OK to cheat on your taxes?

What evidence is there that the contractor is “trying to prevent paying taxes in taxes” in a legal manner?

There has only been one poster who have any plausible explanation for the contractor asking for cash that didn’t involve avoiding taxes.
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Re: Paying a contractor in cash

Post by Makefile »

ponyboy wrote: Mon Nov 04, 2019 2:13 pm
Explain to me how OP could be at any risk whatsoever for paying in cash? They would be paying for a service. What the contractor does on that end is irrelevant to OP. Is it illegal to withdraw $9800 in cash from a bank every couple weeks? If you have the money in your account, is it illegal?
Banks have to report cash withdrawals of more than $10,000 to the government.
If, the ultimate goal is to get more than $10,000 in cash out of an account without triggering one of those reports, by making multiple withdrawals of less than $10,000, then yes, that is a crime.
This is exactly how Dennis Hastert got caught. He was trying to withdraw his own money to pay it out as hush money.
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dm200
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Re: Paying a contractor in cash

Post by dm200 »

Makefile wrote: Mon Nov 04, 2019 2:21 pm
ponyboy wrote: Mon Nov 04, 2019 2:13 pm Explain to me how OP could be at any risk whatsoever for paying in cash? They would be paying for a service. What the contractor does on that end is irrelevant to OP. Is it illegal to withdraw $9800 in cash from a bank every couple weeks? If you have the money in your account, is it illegal?
Banks have to report cash withdrawals of more than $10,000 to the government.
If, the ultimate goal is to get more than $10,000 in cash out of an account without triggering one of those reports, by making multiple withdrawals of less than $10,000, then yes, that is a crime.
This is exactly how Dennis Hastert got caught. He was trying to withdraw his own money to pay it out as hush money.
Yes - I am in this type of business -
HomeStretch
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Re: Paying a contractor in cash

Post by HomeStretch »

That is a large amount to pay in cash and the $9,800 amounts are oddly just under the reporting threshold. You might have a hard time obtaining that much cash every week from your bank (ours makes us schedule large withdrawals!). That said, it’s legal tender so if you go that route get signed receipts and schedule payments to approximate work completed so you aren’t paying a lot of cash in advance of work being done.

For the payments due on day 5, 10, 15, etc., be sure the signed agreement:
(1) ties those payments to specific work deliverables by that date so the cash flow approximates the cost of the work, and
(2) IMO there is not enough $ due on the back end of the contract/work schedule.

My job was larger ($450k).
(1) I tied final payment to all town inspections completed and issues remedied, Certificate of Occupancy issued with a copy to me, and receipt of signed releases from subcontractors.
(2) I tied initial payment at start of work to 1st week’s materials being delivered to my house, permits being posted and receipt of certificates of insurance from GC and all subcontractors.
My contractors were awesome and had no issues with those contract changes.
Last edited by HomeStretch on Mon Nov 04, 2019 2:29 pm, edited 3 times in total.
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JoeRetire
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Re: Paying a contractor in cash

Post by JoeRetire »

gophermobile wrote: Mon Nov 04, 2019 1:45 pm
Makefile wrote: Mon Nov 04, 2019 1:39 pm ...
When you mention 10,000, if that is just a metaphor for installments, fine, but if you're referring to staying under the currency transaction report threshold, definitely look up "structuring" as there are some disproportionate penalties for any series of transactions that "looks" like you are trying to withdraw more than 10,000 in a series of < 10,000 transactions.
Sorry, I should not have generalized. It's 7 payments of $9800 and three smaller payments to make up the remainder.
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Re: Paying a contractor in cash

Post by TomatoTomahto »

Watty wrote: Mon Nov 04, 2019 2:05 pm
runner540 wrote: Mon Nov 04, 2019 1:31 pm I understand a discount for cash or check vs credit card, but for cash vs check seems sketchy.
+1000

The only reason to get paid in paper cash like that is that they are doing some permutation of tax fraud.

Even if you are OK with that I would be reluctant to do business with them since if they are willing to do tax fraud then they are also likely willing to rip me off too.
gophermobile wrote: Mon Nov 04, 2019 1:29 pm The other worry I have is just lugging $10,000 in cash from the bank to the contractor every week several times.
It is legit to give a discount for a check; credit card fees are a drag for contractor. Insisting on cash would steer me away.

I’m not often paraphrasing Ross Perot, but didn’t he say something like “if you’ll lie to your wife, why would I believe a word out of your mouth?” If you’re willing to lie to the government, well then, lying to me is easy.
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ralph124cf
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Re: Paying a contractor in cash

Post by ralph124cf »

In southern California, ALMOST all of the subcontractors will be using illegal aliens as day labor, and these laborers expect to be paid in cash each day that they work.

Ralph
Wellfleet
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Re: Paying a contractor in cash

Post by Wellfleet »

I've hired companies ranging from a one person operation to regional companies. Some have offered a cash discount, assume that means payment by check. None have ever requested U.S. Currency as payment.
mhalley
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Re: Paying a contractor in cash

Post by mhalley »

Banks are also on the look out for these amounts just below the limit. Having multiple transactions will probably trigger this.
Structured Transactions
Banks must also report transactions that are less than $10,000 when they believe that the dollar amount of those transactions was specifically chosen to avoid triggering the Bank Secrecy Act. Federal regulations refer to these as "structured" transactions. Withdrawing $9,990 will probably raise a red flag as a potentially structured transaction. In fact, any transaction, regardless of the amount, that the bank deems suspicious can trigger a report.
https://finance.zacks.com/federal-banki ... -1696.html
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llama
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Re: Paying a contractor in cash

Post by llama »

I recently had a contractor offer a discount for cash for a job of several thousand dollars. The discount was exactly the amount of the sales tax (can't have been a coincidence since the tax is a odd amount of x.1%). I asked if check qualified but was told, no, cash only. Check and credit card were the same to him.

I paid by credit card and got my usual 2% cash back.
mak1277
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Re: Paying a contractor in cash

Post by mak1277 »

mhalley wrote: Mon Nov 04, 2019 2:45 pm Banks are also on the look out for these amounts just below the limit. Having multiple transactions will probably trigger this.
Structured Transactions
Banks must also report transactions that are less than $10,000 when they believe that the dollar amount of those transactions was specifically chosen to avoid triggering the Bank Secrecy Act. Federal regulations refer to these as "structured" transactions. Withdrawing $9,990 will probably raise a red flag as a potentially structured transaction. In fact, any transaction, regardless of the amount, that the bank deems suspicious can trigger a report.
https://finance.zacks.com/federal-banki ... -1696.html
Right, but why would the OP have to worry about this? He could just withdraw the entire amount from the bank if he wanted. Again, the OP can just say "I'm paying for some work on my house". It's not the consumer's job to make sure the contractor doesn't cheat on his taxes.
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Watty
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Re: Paying a contractor in cash

Post by Watty »

One more thought.

If the contractor is trying to avoid creating a paper trail then you should make sure that all the needed inspections and permits are done correctly.
Dilbydog
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Re: Paying a contractor in cash

Post by Dilbydog »

I won’t chime in on the cash payment question, but please be certain to get lien waivers, both conditional and unconditional, with each payment. Not only from the general contractor but also any subcontractors or suppliers who may have placed a preliminary lien notice against your property. With cash payments direct to the GC (no joint check or check written directly to the sub/vendor) you absolutely need to formal evidence that anyone providing labor or material has been paid...
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Re: Paying a contractor in cash

Post by JoeRetire »

mak1277 wrote: Mon Nov 04, 2019 3:11 pm
mhalley wrote: Mon Nov 04, 2019 2:45 pm Banks are also on the look out for these amounts just below the limit. Having multiple transactions will probably trigger this.
Structured Transactions
Banks must also report transactions that are less than $10,000 when they believe that the dollar amount of those transactions was specifically chosen to avoid triggering the Bank Secrecy Act. Federal regulations refer to these as "structured" transactions. Withdrawing $9,990 will probably raise a red flag as a potentially structured transaction. In fact, any transaction, regardless of the amount, that the bank deems suspicious can trigger a report.
https://finance.zacks.com/federal-banki ... -1696.html
Right, but why would the OP have to worry about this? He could just withdraw the entire amount from the bank if he wanted. Again, the OP can just say "I'm paying for some work on my house". It's not the consumer's job to make sure the contractor doesn't cheat on his taxes.
Shh, not taxes - money laundering... I'm just sayin'
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mak1277
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Re: Paying a contractor in cash

Post by mak1277 »

JoeRetire wrote: Mon Nov 04, 2019 4:32 pm
mak1277 wrote: Mon Nov 04, 2019 3:11 pm
mhalley wrote: Mon Nov 04, 2019 2:45 pm Banks are also on the look out for these amounts just below the limit. Having multiple transactions will probably trigger this.
Structured Transactions
Banks must also report transactions that are less than $10,000 when they believe that the dollar amount of those transactions was specifically chosen to avoid triggering the Bank Secrecy Act. Federal regulations refer to these as "structured" transactions. Withdrawing $9,990 will probably raise a red flag as a potentially structured transaction. In fact, any transaction, regardless of the amount, that the bank deems suspicious can trigger a report.
https://finance.zacks.com/federal-banki ... -1696.html
Right, but why would the OP have to worry about this? He could just withdraw the entire amount from the bank if he wanted. Again, the OP can just say "I'm paying for some work on my house". It's not the consumer's job to make sure the contractor doesn't cheat on his taxes.
Shh, not taxes - money laundering... I'm just sayin'
Too bad OP posted this question...he can't play dumb at this point.
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JoeRetire
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Re: Paying a contractor in cash

Post by JoeRetire »

mak1277 wrote: Mon Nov 04, 2019 4:37 pm
JoeRetire wrote: Mon Nov 04, 2019 4:32 pm
mak1277 wrote: Mon Nov 04, 2019 3:11 pm
mhalley wrote: Mon Nov 04, 2019 2:45 pm Banks are also on the look out for these amounts just below the limit. Having multiple transactions will probably trigger this.
Structured Transactions
Banks must also report transactions that are less than $10,000 when they believe that the dollar amount of those transactions was specifically chosen to avoid triggering the Bank Secrecy Act. Federal regulations refer to these as "structured" transactions. Withdrawing $9,990 will probably raise a red flag as a potentially structured transaction. In fact, any transaction, regardless of the amount, that the bank deems suspicious can trigger a report.
https://finance.zacks.com/federal-banki ... -1696.html
Right, but why would the OP have to worry about this? He could just withdraw the entire amount from the bank if he wanted. Again, the OP can just say "I'm paying for some work on my house". It's not the consumer's job to make sure the contractor doesn't cheat on his taxes.
Shh, not taxes - money laundering... I'm just sayin'
Too bad OP posted this question...he can't play dumb at this point.
Sure, he can play dumb.

Or, he can avoid working with shady contractors.

Or both I guess.
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hand
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Re: Paying a contractor in cash

Post by hand »

gophermobile wrote: Mon Nov 04, 2019 1:55 pm
So here's the specific payment schedule:

-------
$1,000 deposit due to hold schedule
$9,800 due on day 1 of construction start up (demo)
$9,800 due on day 5,10,15,20,25,30
$7,632.23 due on day 35
$5,142.82 due upon day 40/completion/city sign off/owner walk
-------

I'm thinking the payment schedule would be the same even with check, so would that really change anything? And, not to sound dismissive of the point, but is it just a potential shady thing for them to be using those payment amounts? Beyond that I'm not responsible for their tax-dodging if that is what they are actually doing?
You're nuts considering a payment schedule based on date not progress, and not tied to lien releases.
This feels like a contractor who has little / no working captial and is barely funding your work with your payments.

If there are any unexpexted overruns, contractor will not be able to accomodate without additional cash from you, and worse, is at risk of becoming insolvant if issues with any one of their other jobs.

Request for cash payments and just under $10k per payment is the icing on the cake.

There's nothing more expensive than a cheap job.
Northern Flicker
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Re: Paying a contractor in cash

Post by Northern Flicker »

delamer wrote: Mon Nov 04, 2019 2:10 pm
Northern Flicker wrote: Mon Nov 04, 2019 2:04 pm This is a major red flag. Don’t pay in greenbacks or check. Find another contractor.
We have a contractor that we use frequently that we always pay by check.

Credit cards are not an option, nor do they offer financing.
My point was to say not to pay this contractor by any method, but to find another contractor.
Risk is not a guarantor of return.
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Re: Paying a contractor in cash

Post by FoolMeOnce »

For the worry about <10k withdrawals, that is easily fixable: withdraw more than $10k. The contact does not obligate $9,800 withdrawals.

Still seems like a large project for physical cash payments.
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Re: Paying a contractor in cash

Post by FoolMeOnce »

hand wrote: Mon Nov 04, 2019 4:54 pm
gophermobile wrote: Mon Nov 04, 2019 1:55 pm
So here's the specific payment schedule:

-------
$1,000 deposit due to hold schedule
$9,800 due on day 1 of construction start up (demo)
$9,800 due on day 5,10,15,20,25,30
$7,632.23 due on day 35
$5,142.82 due upon day 40/completion/city sign off/owner walk
-------

I'm thinking the payment schedule would be the same even with check, so would that really change anything? And, not to sound dismissive of the point, but is it just a potential shady thing for them to be using those payment amounts? Beyond that I'm not responsible for their tax-dodging if that is what they are actually doing?
You're nuts considering a payment schedule based on date not progress
Yes, this is odd to me too. What if they complete nothing by the scheduled payment days? The renovations I've had done had payment schedules based on the completion of certain aspects of the job.
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SmileyFace
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Re: Paying a contractor in cash

Post by SmileyFace »

I would take the 5% discount and let him know you would be paying via cashier's checks for the discount (since they are pretty much the same as cash). A cashier's check won't bounce the way a personal check might - which is why I would assume he is giving the discount.
If he doesn't give the discount with a cashier's check I would cancel the job and get an honest contractor. If he is shorting tax payments he will likely also short you - someone who is unethical is unethical in more than one way. If this is the case - I would then report the behavior to the appropriate board.
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jabberwockOG
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Re: Paying a contractor in cash

Post by jabberwockOG »

ClassySDLivin wrote: Mon Nov 04, 2019 2:08 pm Besides the financial issues already raised (potential loss of a wad of cash, structuring issue, etc.) you should also be leary of automatically pay based on the projected completing timeline. If you agree to pay on the 5th, 10th, etc. and the workers don't show up for 5 days (which happens all the time, especially with sub contractors) you are still obligated to pay without performance (it appears). Better to set it up based on % completion (e.g. walls go up = xx% paid, city approves = xx% paid). For this amount of money you don't want to be the one having to harass the contractor to complete the work, especially if there is no liquidated damages clause that penalizes him if it goes past a certain date.

Good luck.
This. Set up an agreed to payment schedule in writing and signed by both parties with % payments to be made based on actual work milestones being completed and each phase passing inspection. This also makes it clear that permits need to be pulled and inspections performed on all work. Dates for payments are a bad idea.

A cash only guy may also want to skip permits. Don't agree to that on a project of that size.

I would not hesitate to pay cash for a discount on a $5k or under job. Paying all cash on a $90k+ job would make me a little nervous for many of the reasons already posted.
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Re: Paying a contractor in cash

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