Can we pay cash to the construction contractors?

We are getting some construction work done in our business. This is costing about $20K. And the contractor is asking for the payments in cash. Is it legal to pay cash to the contractor. If so, would I be able to report these expenses in my tax returns? He said he will give me the receipt for the payments we do. I got good references of this contractor about the work. Also, I saw his work in other place. I understand that he wants to save some money by not reporting this income. But I am wondering if that would be of any problem for me reporting these are expenses in my tax returns?

Can we pay cash to the construction contractors?
Absolutely not.


If the transaction is under $10,000 then it is the contractor's responsibility to report it as income and there is no problem. If it is over $10,000 than it is your responsibility to report the cash transaction on the IRS form 8300. Cash transactions of over $10K are not illegal, but unreported cash transactions are illegal (for you). You could face sever penalties.





Like I said, under $10K it would be OK. It's his responsibility. Also it doesn't help to give him three payments under $10K. Don't believe him.





Likewise, you should never carry $10K on a plane or in a car. The government has the automatic right to confiscate the money, and you have to prove to them that you obtained it illegally. It doesn't help if you have it as a mix of travelers checks and different currencies.





In your case you are not selling a car for $20K. You not only want to do the transaction but you want to put it on your tax form.
Reply:While it's legal to pay in cash you should not pay for something that expensive in cash for numerous reasons. Getting robbed on the way from the bank is one damn good reason for not handling that amount of cash.





Tell him that it's your policy to handle transactions of that size in certified funds. He can choose the bank if he wishes, or you can ACH the funds directly to his bank, but it won't be a briefcase full of cash. Cash Transaction Reports (CTR) are going to be filed by your bank either way so keep it all open and above board. While it's not your responsibility to pay his taxes or make sure that he does, conspiring to hide the transfer of funds can have breathtakingly heavy penalties for all parties concerned.
Reply:1. I don't like cash because it can turn into he said/you said. Then how do you PROVE you gave him the money?





2. You don't file a form 8300 (that's for RECEIVING cash, not PAYING cash), you file a form 1099-Misc. You don't pay ANYTHING until you have a signed W-9 showing his SSN.





3. Why do you "understand that he wants to save some money by not reporting this income." Uh, gee, you pay your taxes, right? Why shouldn't he pay his? (And even if you cheat, I don't.) The IRS is going to see your 1099-Misc to him and ask him about it. When he claims you didn't pay him that much, they come back to you and ask for proof that you paid him. No proof, no deduction for you.





4. If your state has a sales tax on services, you are also allowing him to cheat the state.
Reply:You can pay cash, it's legal. If you trust that the work will be done well and correctly, and you get a valid receipt. you can use it as a business expense. Truthfully, I would check with your accountant to see what he or she advises. I wouldn't pay more than a deposit if you pay with cash, until the whole job is satisfactorily completed to your specifications.
Reply:You can make payment in cash, but the contractor is required to report this income. However, when you give so much money in cash to a person, then you may have to report it as it is over $10,000.


To be safe and keep your accounting proper pay by business check.
Reply:Sure, you can pay him in cash. And yes, if it is reported to the IRS you both may be in hot water. But HEY! The s**theads that are working for the Feds in the Middle East are doing the same thing, so what the spit, go for it.
Reply:honestly.. Give it to him in case, as long as you have the documentation you are all set. And by you doing him this favor by saving him a good %, you should talk him into taking 200-300 off of the price for doing him a favor ( its better than nothing).. I forgot to mention.. My father and brother are contractors... they will go for the deal trust me* lol as long as you have reciepts and amounts on paper its as good as anything
Reply:Cash is legal tender. But have him fill out s W-9, and give him a 1099, or you too are hanging out legally.