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"All Cash Business"


rjpapageorgio
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Hmmm, I hear this phrase all the time, but what does it really mean???

If your thought process is to NOT claim what you make off of these machines, I can tell you that you are hurting yourself more than you think.  I used to have this same simple mentality, before I became a business owner 10 years ago.  The truth is that the biggest tax breaks and benefits come from owning your own business.  If this is a part-time business for you, well then a couple hundred dollars a month probably won't matter much in the big picture, but if this is a full time business, then here are some good reasons you should claim every dime you make.

1) Leverage is priority #1! If you go to buy a car, home, boat, or whatever requires a loan, you are going to have a hard time proving your income, unless you do a bank verification loan (meaning they look at your deposits on your monthly statements), which it turn puts you in the risk category so you pay a higher interest rate.  Hm,m that few dollars you saved by not claiming your cash, just cost you another 2% on your 30 year mortgage.

2) Realize that at some point there is going to be a paper trail, unless you plan on walking around with a ton of quarters in your pocket.  It's not if you get caught, its when?  Now factor in the penalty to the IRS.  It's just not worth it.

3) Selling the business.  How will you prove your income, without tax forms and bank deposits?  The payoff will be much larger when you go to sell if you have documented everything.  I constantly search for business opportunities, and 75% can’t prove their income or keep terrible records.  Not Good!

4) Owning a business and filing taxes puts you in a much, much, much lower tax bracket.  Imagine only paying 10%-12% on your income a year instead of the 20%-25%.  You also can deduct things like your home (if you have an office), a portion of your electric bill, water bill, laundry, phone bill, insurance, gas, car payment, machine purchases, product purchases, and on, and on...

If you do the math, the self-employed always come out with the advantages.  It's funny, because I'm in real estate, and people always come to me wanting to buy a home so they can be a part of "The American Dream.† I always tell them that "The American Dream" is based on capitalism not home ownership! :)

RJ

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RJ,

What a great post. There is alot of great information in it that will help answer a lot of new vendor questions.

It is very easy to think that not reporting cash income will only help you however when you think about all that it affects, you really do not come out ahead!

Your mortgage scenario is a perfect example of how a penny saved is worth much more than a penny earned!

Thanks,

Steve

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  • 1 year later...

all cash biz means exactly what it says,no one will be paying u with a check or credit card.

I agree with u RJ.

AS FAR AS TAXES GOES IT COST more for me to pay my bookkeeper then the actual taxes owed sometimes.

you may have to give a portion of profits to the goverment but there are advantages too.

I go to the city often on my day off for several reasons but I deduct that whole trip (gas mileage)just by going to sams club and getting vending suplies(along with my personal stuff on a seperate recipt).

also it`s not worth the fine and or jail time one might face when they get caught.

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As old as this thread was, it does have great points and deserves to be brought up. Thanks Antonio. I'm working at getting all my legal paper work up to snuff. I have what may be a special situation in having what appears to be a sales tax that applies to vending if the item vended would normally be taxed for sale -- a category which includes candy.

Perhaps I misunderstood the tax code, but I also could not find a minimum price before the tax kicked in. I find paying 6% commission off my gross very unpleasant, but even then there are huge advantages for documenting the gross income of my business. I'll want to do more research when I get larger to look for ways out of that of course. However it's NEVER worth risking jail time. I'd rather be completely legit and use that as grounds for claiming a lower interest rate or less points required on my mortage. It also gives me better grounds when I'm looking for a day job to supplement my income. (I'm really looking to have a career for me, and a career for my money. My money is going into vending.)

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Great post RJ!  I have the same mindset and hope to be full time by the end of the year, and that is one of the many reasons why.  With a new fiancee, moving in together, renovating a house, and planning our future, I have to grind it out basically doing a full-time job plus vending 10-20 hours a week until I'm in a better position (hopefully by the end of the summer).

I am an accounting/businessman type and love "doing the math"!

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