(NC)—Your neighbour Al has just had a really nice deck built and he's going to give you the builder's name. Better still, the builder works for cash, no receipts, and offers a great discount. However, shortly after Al's deck is installed, it starts to fall apart. With no contract, no guarantee, and no warranty, Al has no choice but to pay someone else to do all the repairs at substantial additional cost.
Don't fall victim to this common trap! If you are thinking about a home improvement project this season, consider the following:
1. It is not a better deal: If you pay cash, you have no warranty, no recourse for poor workmanship, and you have the added risk of liability if an injury takes place on your property. Poor workmanship can lead to costly repairs and corrections by a duly licensed contractor. In the end, you'll pay more than if you had hired that licensed contractor in the beginning.
2. Your insurance will not pay: Typically your homeowners' insurance policy will not cover damage claims if the work was performed under the table and/or by an unlicensed contractor.
3. Get it in writing: Make sure a written contract is in place and ask for proof of Workers' Compensation or equivalent private liability insurance to cover injury as well as any damage that could occur in your home. This will protect you from being held liable for an injury in your home, as well as damage to your home and to the worker's equipment.
4. Participating in the underground economy hurts everyone: The underground economy hurts all of us. Those who do it avoid their tax responsibilities at your expense and place an unfair burden on all law-abiding taxpayers. Unpaid taxes mean less money for programs such as health care, childcare, education, employment insurance, and pensions.
Contractors should know that operating in cash and failing to keep records does not make them immune to taxes. If their lifestyle isn't in line with the income they are reporting and they can't explain the difference, the Canada Revenue Agency (CRA) can assess taxes based on indirect or alternative methods of calculating their income.
If you've ever been tempted to take advantage of a great cash deal with no paper trail, it's worth knowing that the CRA dedicates significant resources to sectors of the economy where cash transactions are most common, such as the home renovation sector.
More information is available online at www.cra.gc.ca/undergroundeconomy.