There is no such thing as "paying cash" in today's world!

This subject can be a touchy one for people. At Open Road Accounting and Payroll Solutions we occasionally get a new client who tells us they are paid "cash under the table" or that they pay some of their workers "cash under the table" Now its time for a discussion and the first statement we make is "there is no such thing".

Here's why; in todays world of electronic banking money is tracked everywhere it goes. Regardless of the situation, the last entity to touch that money electronically is the entity that pays the taxes on it, and too much taxes by the way!

What does this mean for someone paying workers under the table? First, you have to get the cash somewhere to pay those employees. Are you e-transferring them? That's not cash, you just created an electronic trail of where and when that money changed hands. Now CRA can track that money in an audit and determine that not only did you commit fraud by paying people under the table, but also that you had "employees" and should have paid all of the expenses related to that including CPP, EI, Vacation Pay, Severance Pay, etc.

Ok, so you will take the money out of the ATM and give them actual cash? Now you are the last person to touch that money, which means it will be charged to your shareholder draws and eventually end up on a T5 for you, meaning you pay taxes at a personal rate on money you didn't actually receive and should actually have been an expense for your business.

Oh, and one more thing, that expense for your business would have reduced the net income of the business, which would have reduced the taxes paid there!

So just a reminder: There is no such thing as paying Cash, and even if there was, it isn't actually a benefit to you!