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Monday, September 14, 2009

Kiplinger's Personal Finance on Vendor Tax Shenanigans

I caught this small Q&A from Kiplinger's which addressed a recent question discussed on this blog regarding vendors who advertise their intent to defraud. I think it is worth reprinting.

Q: Recently, I asked my new dentist the cost of a procedure. I was quoted a certain price, and then I was offered a 7 percent discount for paying cash, to which I agreed. When the work was done, I paid in cash and waited for my receipt. The secretary responded, "You don't get a receipt--that's how the dentist can give you a discount." She as much said that he was planning not to report this as income. Am I at risk for participating in his tax evasion? What should I have done?

A: Many vendors offer cash discounts of a few percent for legitimate reasons,such as saving the fee that credit card companies charge them or not having to bill you and wait a few weeks for your check. But this is different -- a probable intent to defraud the government of taxes. You're not at legal risk, because the responsibility to report income honestly is entirely the dentists's. You should have insisted upon a receipt, and if you were still refused, you could have threatened to report the dentist to his professional licensing board. In any event, consider finding a new dentist.

It is likely that the person answering the question does not need to use up their FSA. If so, the person would have paid by check and got her receipt to submit for pre-tax savings, which likely in the neighborhood of 20% on up.

I concur with the advice to get a new dentist. . . . .


Anonymous said...

This dentist should be reported to the licensing board. A dentist that will cheat and lie this way can't be trusted to not also cut corners when treating a patient. He/she might use low grade materials when filling a tooth or novacaine or other medication past its expiration date or maybe fudge on sterilization procedures. Maybe he/she is telling someone they need work they don't really need just to make an extra buck.

SephardiLady said...

Thanks anon. I had some similar thoughts. Certainly few would walk away from a mechanic without receipt in hand.

Anonymous said...

SL: In most states, fraudulent or illegal behavior relating to a professional practice is reportable to and actionable by a licensing board even if the patient is not hurt. For example, fraudulent billing to medicare or medicaid or a private insurer can result in the loss of a license even if the care provided was supurb. It has to do with trust in the profession and the appearance of impropriety.

Charlie Hall said...

anon 9/14: Fradulent billing to medicare or medicaid is a federal crime, and health care providers have in fact been prosecuted for that. Loss of a license is the least of the problems such a person would face.