Payments in cash for services

[Tax Sleuth]

Does it violate any rules for a Circular 230 tax professional to be accepting payments from clients in cash for his or her services to them? Is this a good idea? Should a tax professional accept a payment in cash from a client if a client insists to pay this way?

[TaxGuyBill]

No, there isn't a problem with accepting cash. What would be wrong with that?

If the client has a business (and therefore the payment to you is deductible), it may not be a "good idea" from the client's perspective because cash is much harder to document in the case of an audit.

[JohnH]

Nothing wrong with accepting cash for services (provided you report the income, of course). But I think you can't ignore the implications of the situation insofar as you due diligence is concerned. Hope this isn't a self-employed client who also miraculously qualifies for EIC.

[DaveO]

We have several clients who always pay in cash. I give them a receipt for the money and deposit it like any other payment. In an audit, however, you may have to show proof of the source of cash if you pay bills in cash. I had a pretty tough audit recently with a client who paid cash for a significant amount of his expenses. The problem came because he did not operate in a cash based business and had no record of withdrawing significant amounts of cash from the bank. His mother had given him large cash gifts (but below reporting requirements) shortly before her death. He used these amounts in his business and the auditor attempted to disallow the deductions since his mother wasn't around to verify the gifts. Affidavits were secured from other family members verifying the pattern of gifts of cash and the day was saved.

[MDEA]

Cash payments

I take in over $50,000 a year in cash. Just make sure I go to the bank every day to deposit.

[Bonnie]

Since I do not accept Credit card payments, most of my payments now are in cash, but my tax program tracks all the payments of when and how payment was received. I keep immaculate records too of deposits and show which are checks and which are cash. The funny thing I've found over the past 10 years is that 10 years ago most of my payments were by check and few by cash. Now most are by cash and few by check. What has happened is that most people no longer carry or even own checks so they use cash to pay me. Maybe one day I'll break down and take cards but last I checked a few years ago it was just to costly for me to do so.

[spanel]

Since I do not accept Credit card payments, most of my payments now are in cash, but my tax program tracks all the payments of when and how payment was received. I keep immaculate records too of deposits and show which are checks and which are cash. The funny thing I've found over the past 10 years is that 10 years ago most of my payments were by check and few by cash. Now most are by cash and few by check. What has happened is that most people no longer carry or even own checks so they use cash to pay me. Maybe one day I'll break down and take cards but last I checked a few years ago it was just to costly for me to do so.

Try Square or Intuit if you use quickbooks. Both have Zero fees per month and only around 3% for each transaction.

Chris

[JohnH]

I added a note on my invoices that clients can pay me thorough PayPal. A couple of them have taken me up on that.