While paying cash for renovations may translate to a lower cost for the consumer, is the risk worth it especially with all the shady contractors out there? Not only is it wrong ethically but it could prove to be wrong from a financial point of view.
The real test of any type of transaction is whether your contractor will give you a receipt for the work. If there is no receipt, the work is likely not being reported as income. It is legal to pay cash. It is the contractor's obligation to report it and pay the tax.
Many countries have a huge underground economy when it comes to renovations and home repairs. What characterizes that economy is payment in cash and the fact that nothing is in writing.
Just try to sue somebody for shoddy or unfinished work when you have no contract. You are also likely dealing with people who have no insurance and no workman's compensation. There is no comeback if they wreck your house. If they get injured, you are the one who could get nailed. You could even end up losing your house.
These should be reasons enough to stay away from a cash deal, but for some the temptation to save money can be too much.
Regardless of the size of job, treat every transaction in a business-like manner. Keep accurate records. Make copies of check or credit card transaction and get a receipt. A receipt is even more important if you are paying cash.
Being diligent in your record keeping will help you resolve any billing disputes. The risk of not doing so can bring a project to a halt and even cost you thousands of dollars in litigation fees.
Select a reputable contractor who can lay out the estimated cost of the project before any contact is signed and money is exchanged. Don't let anyone entice you with a lower price paid under the table.
