How to pay contractor, who to make check out to?

Hello

I hired a contractor to do some work, the work is complete and I got a bill. The amount is $800. On the invoice at the bottom they wrote in ink make check payable to "john smith", the owner. Not the name of the company.

I guess they are doing this to avoid taxes.

The issue is, I would like to make the check out to the business's name as this work involved a permit and was done over a dispute with a neighbor so I want a record incase there are any further legal issues between me and my neighbor. Should I just make the check out to the companies business or to the owner?

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Hmm. A couple of ways to go on this.

You could call him and say that if he wants this to be off the books, then offer me a substantial discount.

or, (and I'd tend to do this for the reasons you cited)

You could call him and just let him know that you don't feel comfortable doing this off the books because of permitting and other legal reasons, and let him know you'll be sending the check in the company name.

Reply to
Abe

Just curious... couldn't you put "John Smith of ABC company" in the payee field and the invoice # in the memo field?

Reply to
Noozer

Make it payable to their request. A lot of businesses have checks made out to the owner. Dentist is one example. More power to them if they can avoid taxes and never get caught.

Reply to
Phisherman

Is that how you operate? The contractor completes the work to your satisfaction, then you try to back-end in a discount by squeezing the guy?

Sheesh. No one cares about who's name is on the flippin' check! As another post mentioned, just reference the invoice number in the memo area on the check.

R
Reply to
RicodJour

Having checks made out to you personally is a pretty dumb tax avoidance scheme. There will be a trail of cancelled checks for years, which would make an excellent and irrefutable evidence in a tax case. And as you point out, it's not unusual to pay some businesses in the name of the owner.

I don't see how any of this relates to permits or proof the work was done. If permits were pulled, they are on record. There should also be a contract or at least a receipt for the work done, which will be marked paid. The fact that a check was written out on that date for that amount to the owner completes any evidence you need that the work was done and paid for.

Reply to
trader4

I agree. If the work was done by this man, why not write it out however he wants it written? who really cares how he does his banking or his taxes? It probably makes it easier on him... maybe allows his wife to make the deposits or whatever... it's irrelevant

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Reply to
longshot

It doesn't matter what you do, but if you make the check out to the company, you are done. If you make it out to the person, you are supposed to issue a 1099 to the person at the end of the year -- so the person can't avoid taxes.

Reply to
Pat

Well, if you made a check out to my company name I couldn't cash it because I don't have a bank account in my company name. I suppose I would pay less taxes in that case, since I would not have been paid; though I would have to sue you.

Why not avoid all that and just pay him? I did just get a company credit card; I thought that was pretty cool.

Reply to
Toller

Bad practice --

See my reasoning in other response for why I'd choose the same way. That you're not professional enough to run a business isn't my concern. If you're going to represent yourself as a business, I'm going to deal with the business. If you want to deal as an individual, come and represent yourself that way to me and I'll send a 1099 at year end.

Fee for that probably costs more than the checking account would...

Reply to
dpb

Big friggin deal. The guy has a checking account in his name. It does not mean he is avoiding taxes at all. There are tens of thousands of small businesses that have a DBA and it is just simpler to have the check made to their name.

How do you "deal with a business"? Every business I've ever dealt with was comprised of individual people and that is who I dealt with. If you'd rather deal with an answering machine or a desk, that is up to you. It is the integrity of those people that make a business good or bad, not a piece of stationery with a logo.

Reply to
Edwin Pawlowski

Everyone seems to think this guy is trying to avoid taxes but it might just be that he registered his business name, or not, and doesn't have a corresponding bank account. It's not uncommon for someone to call there company something and then not have all of the bank accounts and stuff in a separate name. It would have been easier to call his company "John Smith Contracting" though.

Reply to
HotRdd

Careful. If he is trying to avoid sales taxes, some areas put the onus on the customer to ensure that they are paying the taxes and theoretically could come to you to prove you paid the tax, however unlikely.

At least you HAVE an invoice, and the invoice has a request for the check to be paid to his name, if anyone questions you, you can pull the invoice and prove that you paid it to the name requested on the invoice.

Most problems occur when there is no invoice and no paper trail showing the connection between the contractor and the person you paid. You can never prove you paid the bill.

Reply to
EXT

I'd love to see where this is written

Reply to
longshot

wite the check out to the company name ... don't say anything about it to him. if he brings up the issue, then he will have to either tell you why or try to BS his way around it. If he owns the company, there is no reason that he can't deposit the check. If he doesn't own the company, he should get his money from them, not you.

Reply to
Knit Chic

Unfortunately that love will go unrequited. The onus is always on the contractor to collect he tax.

In NY we have Certificates of Capital Improvements, which, when properly filled out and signed by both parties, absolves the contractor from having to collect tax. There are definite requirement about what constitutes a capital improvement, and does not require the payment of tax, and repairs, which do.

Note to the OP: Call your contractor and ask if you paid tax on that $800 of work. If not, please remit the tax you owe immediately.

R
Reply to
RicodJour

In NYS, you would also not owe sales tax if it is a service, not a product. If you buy roses for your yard, you pay sales tax on it. If you hire a landscaper to plant them, but not to provide any physical things, then it is a service and there is no sales tax. If you pay the landscaper to provide the flowers AND plant them, then you owe sales tax on both the flowers and the labor.

However, in either case if the "sale" is over some number (I think $600) and you are paying an individual, you need to issue a 1099.

Rico might know more about this than I do, but there might also be differences in insurance coverage for workers comp., disability, liability, etc. etc.

Reply to
Pat

Having a invoice w/ a business name and handwriting a request for a check made to an individual doesn't seem like high integrity to me.

But, that's me and how I run my own business...ymmv.

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Reply to
dpb

Your contract was with the company, not the owner of the company. They are totally different entities.

Make the check out to the company. That way there can never be any argument as to your payment. All he has to do is to endorse the company check over to himself, or to "Cash", and cash it or deposit it in whatever bank a/c he likes.

No problem

Reply to
Walter R.

I never made a check out to a dentist that I didn't put Dr. on it.

Cheri

Reply to
Cheri

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