A Cash Business

Ever wonder how many business around you deal primarily in cash? And if they do that to facilitate not reporting their income for tax purposes? This has some interesting ramifications....

Of course we all know that failing to report any income for tax purposes is income tax fraud. (Some people mistakenly think you are not required to report income below some threshold, such as $600.) Sometimes people think about such tax fraud as simply cheating the IRS (or FTB or whatever your state authority is called). In reality, you cannot cheat the IRS - they are just a business office. You can only cheat your neighbors and other citizens who end up paying your share.... But I digress....

Some "cash businesses" have discovered that they hurt themselves more than they helped. Many of these owners are nearing retirement and figured to sell their business in order to finance their retirement. The problem is, their business will not sell for much. Why? Because it has not been reporting much income. Buyers insist on seeing filed tax returns to determine the value of the business. If it was not reported, then it doesn't exist. Otherwise it is taxable.... (And you thought I was heading into the "no credits" area for Social Security.)

But there are other problems too. Over the last 2 months we've watched with horror the problem in our Gulf states due to the oil spill. This is not the place to address whether such drilling is appropriate or not, but we will take the position that a company is responsible for the damage it causes. One of those restitution moves is to compensate the citizens of that area for lost wages, earnings, or however they buy their groceries or pay their rent or whatever. I'm not sure how smooth the mechanism that BP set up is working, but again that's not the issue here. It turns out that a lot of business in that area is done on "cash." That's right, a good part of that is not being reported. Whether that is unreported revenue for a business or unreported wages to the employees, it is not in the system. You guessed it - not recorded? Doesn't exist. And why would you expect BP to pay compensation for what was never lost in the first place?

This of course is making a terrible situation even worse. But frankly, the people in the area did choose to operate outside the law. They have been cheating the citizens of the US, so now do they want us to compensate them for doing that? What a mess!