Dreaming of a cash based business?

Nov 10, 2022

Interested in starting or buying a cash based business ? I get a LOT of these requests from clients. Not so fast, the IRS may be on to you!

The General Accounting Office estimates that the individual income tax “gap”, being the income tax reported vs the income tax owed, is in the billions of dollars. The common theme is that taxpayers with the ability to determine their own reported income are underreporting.Cash based businesses get the highest attention from the IRS in looking for underreporting.

Why? Because cash transactions are anonymous, leaving no paper trail to connect the buyer and seller. Examples of high volume cash transaction businesses are grocery stores, convenience stores, restaurants, construction and trucking companies.

So, the IRS identifies issues by looking outside of the dollars reported. They look to the lifestyle of the business owner. Does it match the income being reported? If your tax return shows years of businesses losses however you live in a high income zip code, you will likely receive a notice for information from the IRS. They also look at industry averages. How does your business income and expenses as reported line up against other businesses reporting in the same industry?

Still interested in owning a cash based business? Reach out to me and let’s discuss the best strategy for you.

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