Some small businesses refuse to take credit cards due to the risk (and wealth) of fees that come with them. Chargebacks being one of the prime issues, where, if you exceed a certain amount, you’ll be end up being blacklisted from the credit card company. Additionally, as it’s “credit” you can also be hit with interest rates if you’re awaiting payment. For some entrepreneurs, the simplest solution is to just operate as a cash-only business. Of course, the IRS typically scrutinizes these businesses more as cash can be hard to track and easily lead to fraud.
Of course, if you’re being accurate and detailed with your accounting, then you don’t need to worry about being audited or shut down. Making detailed contracts and having a separate bank account with plenty of notes and details ensures that if you’re audited, you’re covered.
Remember that you can count on taxes to come for you regardless of your intent. What this means is, if you’re not keeping detailed books, you could end up being audited and paying more.
The fraud risk is high enough that the IRS often targets these types of businesses.
What Can You Do?
Unfortunately, repeatedly businesses find themselves in court because they can’t prove where the money has come from and they can’t confirm they’ve paid the appropriate amount to the IRS. This results in some businesses being forced to close.
If you run a cash-only business, review your accounting records and double-check what you report on your taxes this coming year. Do everything by the book or hire one of our esteemed CPAs for guidance.