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Nov 09

Is Paying Cash Unethical?

Posted by: Steve Marr

Tagged in: Untagged 

From time to time someone asks the question about whether making cash payments to someone is unethical? Some hold the perspective that the only reason to pay cash is to help somebody avoid taxes.

In my businesses, occasionally someone has wanted to pay in currency rather than by check. In these instances I make the appropriate entries in my bookkeeping system so that it becomes part of my taxable income. Then, when required, I expect to receive a 1099 IRS reporting form at the end of the year.


For some individuals cash speaks louder than a check. I was negotiating to purchase something from a Craig’s list advertisement. When price negotiations seemed stuck, I took $300 out of my wallet and told the seller I would pay the cash immediately if we could agree to the price or I would just keep looking. He took the cash. Maybe I was wrong but I believe when the seller actually saw the cash, it had an impact that closed the deal.

I am concerned that my business actions are ethically responsible and don’t help others avoid taxes. For example, I had a client who paid cash to a family member so that he didn’t have to report the expense and the family member didn’t report the income. My client was paying a lower wage because of the cash payments to avoid social security and Medicare taxes. Clearly this was unethical and the practice needed to stop.

Another personal example involved a person who worked for a nonprofit, and I was responsible for administrating finances. The person requested cash payments because the bank we used did not have a convenient branch. Paying $1500 dollars in currency required issuing a 1099 through the organization. The person became very upset with me when I issued the 1099. I explained that this was required under IRS regulations and I would not violate the law. When the rant continued about what I had done, I explained that we paid cash as requested but the person who received it should know that a 1099 was required. The only reason for not receiving a 1099 would be to avoid paying the necessary taxes.

I don’t believe that paying cash is a sin nor does it aid and abet tax evasion. The issue is how each of us treats cash payments. If we agree to pay in cash to receive a lower price and do not issue a 1099, I believe we have stepped over a line of integrity. The same is true when we receive cash payments and fail to report them. We have a responsibility to book them and include them in our tax return at the end of the year.

Paul provided some guidance when he wrote, “This is also why you pay taxes, for the authorities are God’s servants, who give their full time to governing. Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor.” (Romans13:6-7, NIV) I don’t like paying taxes nor do I agree with how tax money is always used. However, I believe as Christians, we must pay what is due and work through the political process to either reduce taxes or ensure the money is put to good purpose. Cash payments by themselves are not unethical unless the recipient or spender treats it unethically.  Integrity always matters.

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