QUESTION BY A BLOG READER:

My contractor suggested that I pay him cash for home renovation work and save money.  Is it a good suggestion?

REPLY BY MODERATOR:

The answer given here is aimed at home renovation scene and tax situation in Ontario, Canada.  The contractor is asking to get paid in cash to avoid paper trail of his income.  He wants to conceal part or all of income from this job to avoid paying taxes. 

He is promising to give the homeowner a discount (usually no GST), but he saves a lot more for himself if he does not pay the taxes he wound have to pay on a properly documented job. 

Why should homeowner refuse this seemingly generous offer from the contractor?  The homeowner may save some money, essentially by being an accessory to tax fraud, which is a criminal offence.

·         The homeowner exposes himself to prosecution by tax authorities. 

·         The homeowner will not have written documentation of the job and receipt for his payment. 

·         The homeowner may not be able to get follow-up service or warranty repairs from the contractor.  

·         Also, any manufacturer’s warranties (for example for installed windows) may not be honored by the manufacturer without proper documentation.

·         Furthermore, if the contractor was obtained through ReliableConnections.com contractor referral service, the homeowner must give up the benefits offered by ReliableConnections.com, including Reliable Cash Rebate and Reliable Assistance.

Simply by considering these factors, the homeowner should conclude that it is a bad idea to pay in cash.  Additionally, consider that the contractor is ready to commit a tax fraud (in collusion with his customer). What other fraud, dishonesty or shady business is he possibly involved in?  Can a homeowner trust a contractor who is willing to cheat on taxes and encourages others to do same, to treat his customers honestly?