I was recently involved as an expert witness for a contractor who was not getting paid for work completed.
The hardest part of this case will be proving the actual expenses for the job. You see, the contractor wrote a number of checks at his bank and other stores for cash, then turned around and paid subs and some of his day laborers with cash.
Not only does this make proving expenses difficult, but guess who else will probably get involved? Did you say the IRS?
Don’t pay cash for anything. Write a check. Or use a credit card. How much will you save by trying to dodge taxes? Very little. How much will you lose if you end up in an attorney-match with a client, and you don’t have documentation? A lot. And it gets worse when the IRS steps in.
Checks should always be written from your company account, with your company name on it and with a brief description on the memo line. Now you have a paper trail.
And if you are a sub – don’t accept cash! Do you think the IRS will only investigate this contractor? No, they will work their way down the line to find out who else is trying to dodge them, and why.
Play by the rules (even the ones you don’t like) if you want to survive. As an added bonus – you’ll sleep better at night.