Of course it is legal. However, people will usually pay by credit card or check because the plumber wouldn't be allowed to carry cash with him.
For your convenience, cash and all major credit cards are accepted, including: Visa, MasterCard, Discover and American Express. Low-interest financing may give you the buying power to maximize your comfort system or plumbing remodel with the cost of money. It is usually less expensive to finance than to pay cash.
However, you must do so legally, and you must be prepared to prove that your cash payments to contractors were legal in the event that your company is audited by the California Employment Development Department (EDD) or the Internal Revenue Service (IRS).
The Contractor Asks for Cash or Upfront Payment
It is common for a contractor to require a down payment before starting a project. Be careful, however, if they ask for you to make the entire payment upfront, or to pay them in cash.
The short answer: yes. As mentioned, there is no federal law that mandates private businesses to accept cash as a form of payment. Ultimately, it's up to the business to decide whether or not they want to accept cash payments (unless there is a state or local law that says otherwise).
Business purchases
For work-related purchases, you need a paper trail. Paying by credit card ensures you have a record — critical for your business or your work's accounting department. Plus, you can take advantage of cash back and other perks with business rewards credit cards.
The reason for the contractor to accept only cash is a way of avoiding Income Tax. Normally, a big contractor would have a lot of projects and would have an accountant also to maintain his cash flow.
The exact deposit amount contractors ask for upfront varies and is especially dependent on the size of the project. For relatively small jobs, like a $16,000 bathroom remodel, contractors may ask for a 50% deposit. For large jobs, like a $100,000 full-home renovation, a 10%–20% deposit is more typical.
Protect yourself with proof of payment
If you pay a bill in cash, ask the party receiving payment to record it in their records and give you a sales receipt. The receipt should show your name, a short description of the product or service purchased, the transaction date, and the amount paid.
It's essential to understand the Cash Transactions Legality. While cash payments are legal, they require proper documentation for transparency and legality. A person or business that pays $600 or more to an independent contractor should issue a 1099 form regardless of the payment method, including cash.
If the homeowner refuses to pay the contractor, the contractor can then take legal action. Therefore, they have the option of backing out before the work is completed, which can prevent non-payment in many cases.
While some plumbers may still prefer to receive cash or check payments, there are several reasons why credit card processing can benefit the plumbing industry and improve customer satisfaction.
Plumbers don't expect tips but still appreciate it if you give them one. Most plumbers are paid by the hour or day, and don't rely on tips as part of their income.
Plumbing Requires Experience and Expertise
We could cut expenses (and therefore costs to you) by hiring less-knowledgeable team members, but that's simply not our model. Rather, we hire only the most skilled technicians—plumbers who will treat your home like their own and do their absolute best work, every time.
There are many less-than-noble reasons why someone might prefer to be paid in cash (trying to hide income from taxation, trying to hide income to avoid earning too much for government benefits, not having the legal right to work in the country, etc.) but the #1 reason for wanting cash is its reliability and finality.
Some employers pay cash under the table to avoid their employer tax obligation. They don't want to contribute taxes or sign up for workers' compensation insurance.
It's crucial to ensure that the contractor acknowledges receipt of the payment. This can be done through a signed acknowledgment or a confirmation email. This step helps avoid any disputes regarding whether the contractor received the payment or not.
RED FLAGS: A red flag indicates electrical lines, conduit, or lighting cable. Excavators need to tread lightly where red flags are placed to avoid any power outages accidentally caused by digging into a power cable.
Is it legal? While paying a contractor in cash isn't inherently illegal, if the transaction is found to be part of a larger scheme to evade taxes or launder money, it can lead to serious legal consequences, including fines and imprisonment.
Contractors typically accept cash, check, debit, and credit card payments. You can also use a home improvement or home equity loan to pay contractors. Contractors will specify payment schedules in their contracts.
Net 10, Net 30, or Net 60 (found on the invoice) simply indicates that the contractor's payment is due 10, 30, or 60 days from the date of the invoice, respectively. Risks: This is the most common payment term for independent contractors, and there are few risks associated with it.