A huge mistake that comes up in business is something that doesn’t actually seem like it’s a big deal at all.
And that is, paying employees or independent contractors in cash. That’s cash money, you know, like dead presidents.
Here’s why. The all-powerful Internal Revenue Service, can can disallow the deduction entirely. Meaning, if you paid contractors like 50 thousand in cash, because I don’t know, maybe they’re not legal. Can I say that? Maybe the politically correct term is “unauthorized worker”.
Anyway, if you paid contractors in cash, the IRS can argue that you have nothing to evidence your cash payment, therefore you can’t deduct the expense on your taxes. This would effectively increase your taxable income by $50 thousand dollars. That’s about $15 thousand more in taxes you would have to pay the IRS.
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Do you have questions about Uncover the Huge Mistake Business Owners Make – Revealed by an Expert CPA? I’m an Illinois-licensed, Registered Certified Public Accountant with over 25 years of experience. I’m dedicated to providing outstanding tax and accounting services to individuals and small businesses in the Chicago area.
Disclaimer: Any accounting, business or tax advice contained in this article, is not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax-related penalties. If desired, I would be pleased to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired consultation services.