Cash business question?

Question

Lets say someone has a cash business or receives cash payments for services rendered. Do they just mark on their taxes that they receive extra cash, then they can put it in a bank or wherever; or is it more complicated than that? We are talking amounts in excess of $10,000.

Answer 1

Any income earned in the US and not taxed by an employer requires that the taxpayer pay quarterly estimated taxes, either as an individual or business. Failure to do so will result in a penalty at tax time, even if you pay then. The individual states usually follow the IRS lead in this matter, and that means you must file TWO estimated tax returns if your state has an income tax. They all have a business tax in place.

Answer 2

The short answer is most of the time they don't. A check cashing business is essentially making very high risk short term loans. It may not seem like much but if you charge someone 2.5% to cash a check, some charge more, and the check clears in two days that's an effective yearly rate of over 8000%. They can afford some losses. In the case you mentioned I believe if the lady recieved her cash from the check cashing place and then the check was denied she owes the check cashing place, especially if she also cashed the second check. The person presenting the check is ultimately responsable for the checks value. She would have a case against the insurance company for any fees she had to pay for the returned check but she owes the check cashing place for the money they didn't receive. They will go to court and they will get a judgement. and if someone decides that she knew the check was going to have a stop payment on it she could go to jail.

Answer 3

The last I knew of this in regards to this topic in Canadian business, banks are to report any deposits of $10,000 or over, which means that you will be audited from the time that you received this income until you failed to report it and pay taxes. If you do not record this on your accounting records at the appropriate time and also report this on your tax return (T1 for Proprietorships or Partnerships or T2 for Corporations), you are pretty well guaranteed to be audited for back taxes, interest, and penalties under the Canadian Income Tax Act! That's not all, if the items that your are selling are not what is called "Zero Rated", you may also be liable for GST under the Excise tax Act and, furthermore, you may may also looking at other taxes like Provincial tax and any other realted payments like WCB and employee benefits too if you have company benefit plans!! This could be just the beginnnig- what about company profit sharing plans, contracts with shareholders (if you're a corporation), and so on...

Answer 4

Ever hear of a thing called tax fraud? If you dont report that money as income when you go your taxes then you are commiting tax fraud. People work "under the table" so they don't have to claim the money because there is no proof that you recieved it but when your talking about money in the amounts you mentioned your probably gonna get busted unless you do it by the laws.

Answer 5

I am pretty sure the point of a cash business, in Canada anyways, is to keep it off of the taxes, but I could be wrong sorry

Answer 6

You have to account for any business transaction, credit or cash. What do you mean by "extra cash"? It needs to be accounted for and then taxed for the state you do business in.

Answer 7

Being a small business owner in Washington and a Full Time Soldier I learned the hard way with the IRS about not claiming ALL income with a business. Please be aware that most small business's will be Audited by the IRS every 5 years. Please get with an accountant and claim your income. It will save you money in the long run