From the BiggerPockets Blog

 BiggerPockets Blog »

Jump to Forum View All

Click a category below to view different forum categories.

BiggerPockets

General Info

BiggerPockets Q&A, Site Questions, & Announcements

1514 topics, 14412 posts — Last Post 04/24/14, 05:53PM

BiggerPockets Exclusive PRO Area

117 topics, 841 posts — Last Post 04/23/14, 08:28AM

New Member Introductions

11000 topics, 86710 posts — Last Post 04/24/14, 09:56PM

Real Estate Success Stories

400 topics, 6221 posts — Last Post 04/24/14, 05:13PM

General Real Estate

General Real Estate

Buying & Selling Real Estate

6008 topics, 47315 posts — Last Post 04/24/14, 10:18PM

Renters

651 topics, 5873 posts — Last Post 04/24/14, 03:20PM

Get Foreclosure Help - Help Stop Foreclosure Forum

317 topics, 2561 posts — Last Post 04/23/14, 08:28PM

Home Owner Association (HOA) Issues & Problems Forum

238 topics, 1611 posts — Last Post 04/23/14, 04:02AM

Do it Yourself

660 topics, 6334 posts — Last Post 04/24/14, 08:31PM

Reviews & Feedback

Real Estate Deal Analysis and Advice

3718 topics, 29817 posts — Last Post 04/24/14, 09:08PM

Real Estate Guru, Book & Course Reviews and Discussions

1140 topics, 11616 posts — Last Post 04/24/14, 08:58PM

Ask About A Real Estate Company

743 topics, 7348 posts — Last Post 04/24/14, 03:12PM

Real Estate Investing

Real Estate Strategies

Wholesaling

5647 topics, 44019 posts — Last Post 04/24/14, 10:14PM

Rehabbing and House Flipping

3354 topics, 31121 posts — Last Post 04/24/14, 08:41PM

Real Estate Development & New Home Construction

554 topics, 4696 posts — Last Post 04/24/14, 09:03PM

Innovative Strategies

705 topics, 6044 posts — Last Post 04/22/14, 04:06PM

Tax Liens, Notes, Paper, & Cash Flows Discussion

869 topics, 6706 posts — Last Post 04/24/14, 08:29PM

Rent to Own a.k.a. Lease Purchase, Lease Options

700 topics, 4961 posts — Last Post 04/24/14, 11:26AM

1031 Exchanges

143 topics, 1063 posts — Last Post 04/24/14, 11:10AM

Foreclosure Investing

General Foreclosure & Pre-Foreclosure Forums

1693 topics, 11322 posts — Last Post 04/24/14, 10:10PM

HUD, VA, and Tax Sales

416 topics, 3103 posts — Last Post 04/23/14, 02:29PM

REOs

1217 topics, 10604 posts — Last Post 04/24/14, 07:13AM

Short Sales

1539 topics, 13154 posts — Last Post 04/23/14, 08:25PM

Landlord & Tenant Forums

Landlord & Rental Property Questions

7260 topics, 71291 posts — Last Post 04/24/14, 09:37PM

Mobile Homes & Mobile Home Park Investing

639 topics, 5146 posts — Last Post 04/24/14, 05:13AM

Investor Basics

Starting Out

7739 topics, 60737 posts — Last Post 04/24/14, 09:18PM

Investor Psychology

434 topics, 6132 posts — Last Post 04/24/14, 09:03PM

General Real Estate Investing

4733 topics, 37341 posts — Last Post 04/24/14, 09:51PM

Real Estate Investor Marketing

1740 topics, 14165 posts — Last Post 04/24/14, 05:08PM

Commercial Real Estate

Commercial Real Estate Investing Forum

1414 topics, 9022 posts — Last Post 04/24/14, 04:12PM

Multi-Family and Apartment Investing

1125 topics, 9421 posts — Last Post 04/24/14, 10:04PM

The Business of Real Estate

Real Estate Technology and the Internet

Real Estate Technology, Social Media & Blogging

645 topics, 4913 posts — Last Post 04/24/14, 12:21PM

Business Basics

Goals, Business Plans & Entities

836 topics, 7599 posts — Last Post 04/24/14, 08:45PM

Real Estate Finance & Legal

Financial, Tax, and Legal

Tax, Legal Issues, Contracts, Self-Directed IRA

2806 topics, 20152 posts — Last Post 04/24/14, 08:36PM

Property Insurance

312 topics, 2059 posts — Last Post 04/24/14, 10:22AM

Personal Finance Discussion

330 topics, 2754 posts — Last Post 04/22/14, 12:06PM

Loans, Mortgages, Credit Lines

Private & Conventional Lending Discussion

2854 topics, 19852 posts — Last Post 04/24/14, 09:30PM

Creative Real Estate Financing

1222 topics, 8875 posts — Last Post 04/24/14, 10:28PM

Crowdfunding Real Estate

35 topics, 463 posts — Last Post 04/19/14, 06:24PM

Real Estate Professionals

Real Estate Professionals

Real Estate Agents

1219 topics, 8057 posts — Last Post 04/24/14, 10:08PM

Bankers, Lenders, and Mortgage Brokers

442 topics, 1931 posts — Last Post 04/23/14, 09:04PM

Contractors

268 topics, 1689 posts — Last Post 04/24/14, 05:05PM

Local Real Estate

Local Real Estate

Local Real Estate Networking & Recommendations

2023 topics, 11777 posts — Last Post 04/24/14, 09:52PM

Americans & International Real Estate

162 topics, 572 posts — Last Post 04/24/14, 03:31AM

Foreigners Buying in the USA

62 topics, 409 posts — Last Post 04/10/14, 06:27AM

Canadian Real Estate

66 topics, 442 posts — Last Post 04/24/14, 09:50PM

Marketplace

Real Estate Marketplace

Real Estate Marketplace

15102 topics, 54176 posts — Last Post 04/24/14, 10:05PM

Real Estate Events and Happenings

169 topics, 2629 posts — Last Post 04/24/14, 10:28PM

Off-Topic

Off Topic

Off-Topic

2909 topics, 32451 posts — Last Post 04/24/14, 07:22PM

Housing News & Real Estate Market

923 topics, 8398 posts — Last Post 04/24/14, 09:05PM

BiggerPockets Real Estate Investing Summit

97 topics, 1752 posts — Last Post 04/23/14, 04:51AM

BiggerPockets Resources

Forums » Do it Yourself » Paying a sub-contractor in cash

Paying a sub-contractor in cash

13 posts by 12 users

Signup


I have a guy wants to be paid cash off the books on a job he is doing for me. Is this a problem for 'ME' ?? Whats the pitfalls of doing THAT??



SFR Investor · Wheat Ridge, Colorado


Its a red flag that they're not a legitimate contractor. If they're not paying taxes, they probably don't have insurance or proper licenses, either.


Jon Holdman, Flying Phoenix LLC


General Contractor · Knoxville, Tennessee


Jon could be correct, but their has to be more to it. I do lots of jobs for cash (side jobs) that are small and or low risk where I know that my workcomp and insurance will not be a factor. If this is a one time deal and is a relatively small project than I would say go for it, it will also create less paper work for you at tax time just put it in with misc. labor. But if he wants to make a career with you than he needs to be on the books. I have a few subs that ask for cash jobs now and then 9 times out of 10 it's nothing to do with taxes, they're usually divorced with kids and need living cash. Hope this helps, let me know how it works out.



Real Estate Investor · Ellicott City, Maryland


Do you plan to write off his work as an expense against any income/profit you make on this project?

If not, don't worry about it...

But, if you plan to claim this expense as a deduction, the IRS is going to insist that someone pays taxes on that money that was paid out. If you provide the contractor a 1099 at the end of the year, he pays the taxes. If you don't provide him a 1099, the IRS will expect YOU to pay the taxes.

That's the pitfall...


Small_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Telephone: 770-906-6358
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


HVAC Contractor · Philadelphia , Pennsylvania


If he is going to provide a discount for the cash then you have to weigh the discount against the loss of a write off.

I will pay cash without a receipt for items I buy on Craigslist, but then again when you pay 20 cents on a dollar who cares about write offs.

As far as paying subs in cash I no longer do it, most times the sub is a bum.
At this point in life I would rather pay the freight to have the job done right the first time.



SFR Investor · Rancho Cucamonga, California


I wouldn't pay cash. You lose the tax benefits.

If you do... get receipts and everything in writing. Pay upon completion.



Real Estate Investor · Chattanooga, Tennessee


It is not the end of the world to pay in cash from time to time. You still want to have a contract in force with the sub that outlines price, time frame, materials to be used, etc.. You can still pay him under the table but the contract will help to keep him honest.

Don't pay more than 10% up front and make sure you are dictating the terms of when he gets paid. I'm a GC in CA and between worker's comp expenses, business taxes, and all the other things big brother sticks his hand in your pocket for it can be difficult at times.

At the risk of sounding unethical, you may want to set up a separate personal checking account under your own name and pay out of that, not your business account. Don't co mingle the funds either or you'll get nailed for both.



Real Estate Investor · Fuquay-Varina, North Carolina


How much is the job? If it's more than just a minimal job, then I'd move on to the next contractor. For an example of why, just watch any episode of Judge Judy or People's Court :)



Real Estate Investor · Indiana


From time to time I pay Subs in cash but I always ask for a receipt/invoice to use on my end.



Real Estate Investor · Las Vegas, Nevada


Say it is a small job, but they slip and fall, because their not working on a contract, would their insurance come into play. Or could they sue and make you look like a demon?



Real Estate Investor · Ellicott City, Maryland


Originally posted by Anthony Larson:
Say it is a small job, but they slip and fall, because their not working on a contract, would their insurance come into play. Or could they sue and make you look like a demon?


Certainly you want contracts in place and verification that your contractors have both workmans comp and liability insurance...

This is completely independent of whether you pay them with cash, check, credit card, or live chickens...


Small_lishproplogoJ Scott, Lish Properties, LLC
E-Mail: [email protected]
Telephone: 770-906-6358
Website: http://www.123flip.com
CHECK OUT MY BIGGERPOCKETS BOOKS: http://www.biggerpockets.com/flippingbook


Real Estate Investor · Arvada, Colorado


My father is a sub contractor. I have been on jobs with him were they ask if he wants cash and he usually says 50/50. That way he is still able to pay the taxes and insurances but also has cash. It is also proven that he is working for you. I would make sure to get a receipt. That way the sub cannot come back and get you for the payments. Now most of the people that offer to pay in cash are friends or friends of friends that he has been working for, for a long time.



Multi-family Investor · Bellefonte, Pennsylvania


I'm a contractor and I also do sub work. I never take pay or pay in cash. It's a big red flag and it has the potential to get you into big trouble.

Any contractor that knows what they are doing, has insurance, licenses, etc would be glad to take a check. It's the ones that are not legit that want cash payments.

-Michael





Sign up