# Tax Credit 30% scam?



## contractorjay (Dec 22, 2009)

I had a couple clients ask me if the 30% tax credit could be applied to both the window material + labor cost. I explained to them that the 30% tax credit can only be applied to the actual window cost, not the labor cost. They were telling me some contractors were charging them for just the window and free installation. To be specific...

My estimate for 10 windows-
200 for window cost
200 for labor
total = 4000.00
tax credit = 600

Other contractors for 10 windows-
400 for window cost
0 for labor
total = 4000.00
tax credit = 1200.00

what is going on here? could someone explain?


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## dougchips (Apr 23, 2006)

What would prevent you from making more on your window and less on your labor?

Let's say company x makes a widget that cost them $1.00 and they sell it to company y for $100 and company y resells the item for $300, what is the cost of the widget? You are buying a window for let's say $200, who says how much you can sell it for?

I think the free install is a red flag down the road for an audit but I guess if those companies are making enough off of the windows they can afford to put them in for free.


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## contractorjay (Dec 22, 2009)

how would the irs audit these companies that are participating in such activities?


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## SLSTech (Sep 13, 2008)

contractorjay said:


> how would the irs audit these companies that are participating in such activities?


Pretty easy - they audit a HO, find the receipts that they must keep
They then see what said company pulled & audit them
They then have a list of every HO that they are then going to audit also


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## contractorjay (Dec 22, 2009)

How are companies offering free installations without being audited?


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## SLSTech (Sep 13, 2008)

contractorjay said:


> How are companies offering free installations without being audited?


The paperwork hasn't been turned in yet - they might do a few quick high profile ones next year as a warning / damage control when the press catches it & sit on the rest for a couple of years - I mean as soon as they can based on there backlog


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## RandyB1986 (Jan 2, 2009)

Hey....I dont see a problem with this. If a homeowner is willing to buy a installed window for $400 that cost me $150, sure.......I will install it for free!

Who wouldnt?

And what is illegal about this?

I mean afterall....they are paying YOU $400 for the window, right?


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## Sam60 (Apr 29, 2006)

My guess is it wont ever be a problem and IRS wont make it an issuse.
What about appliance rebates and a lot come with free delivery and installation.
No rebates involved but I have even seen one time carpet sales advertised with free installation.
Even years ago some in my area would advertise windows with free installation.
Who are you to say what the other company should charge for the window and if they want to give free labor.
Even if we dont like the idea, it can still be considered a common business practice.


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## contractorjay (Dec 22, 2009)

hmm sounds interesting. anyone else participating in free install?


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## IHI (Dec 25, 2004)

Wait until tax time next year....there's going to be some piiiiiiiiiiiiizzed off homeowners that took advantage of this "tax credit":whistling

but we got work from it though, so i'm "playing dumb" and just not offering anymore information that's needed to make the sale.


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## abacab (Sep 16, 2009)

This is why I hate government programs, even when I benefit (but haven't a whole lot). The corruption increases ten fold, and the ones who really benefit are the dishonest ones. These people have learned that they can do almost anything and the govt will never catch on. Now we got a huge new entitlement program, healthcare


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## IHI (Dec 25, 2004)

We, as well as many guys in my area saw a big influx of replacment window calls since people THINK they're going to get a 30% tax credit. I was nieve myself the first few months until we had a very large window job i was working numbers on that was well into the $20K range just for the windows alone, these were professional folks and wanted the real life scoop on this tax credit so i told them i would investigate and get back with them. So i had my accountant check into it for the real life story. The homeowners did'nt do the job after they found out the gobberment scam aspect of it so i just play dumb and dont offer insider info unless i'm asked directly for it. Kind of shadey on my part, but at the same time i have families to feed so i'm not going to offer information voluntarily that would for sure stop all the improvements folks want to do.

As for the free installations, i see that as a loop hole the witty guys are just using/exploiting for their benefit. When the dust settles, business is business and there's a reason some honest guys are out of work/hurting because pride is getting in their way.


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## bwalley (Jan 7, 2009)

I haven't done any window jobs since the rebate has taken effect, but I always sell windows installed, I measure up the house, talk to them about what kind of windows they want and give them one price for everything, I don't break it down by cost of windows, and then installation, it is a lump sum bid.

If I buy a window for $200 that is not the price my client gets it for, so why would I break it out?


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## IHI (Dec 25, 2004)

bwalley said:


> I haven't done any window jobs since the rebate has taken effect, but I always sell windows installed, I measure up the house, talk to them about what kind of windows they want and give them one price for everything, I don't break it down by cost of windows, and then installation, it is a lump sum bid.
> 
> If I buy a window for $200 that is not the price my client gets it for, so why would I break it out?


IF you ever do work for insurance/mortgauge companies you will be required to break it down-not like you will have to break it down for the government tax credit however, just a per opening price and all that's included in that per opening price.

IF you have customers wanting windows to participate in this rebate, you will be required to break it down because they are NOT crediting permits/lumber/materials/labors/landfill fees to get the window installed..they are ONLY crediting the actual windows themselves, and there will be specific lines when filing taxes to enter in this information for window cost only.


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## bwalley (Jan 7, 2009)

IHI said:


> IF you ever do work for insurance/mortgauge companies you will be required to break it down-not like you will have to break it down for the government tax credit however, just a per opening price and all that's included in that per opening price.
> 
> IF you have customers wanting windows to participate in this rebate, you will be required to break it down because they are NOT crediting permits/lumber/materials/labors/landfill fees to get the window installed..they are ONLY crediting the actual windows themselves.


I don't work for insurance companies because of the way they want things broken down.

If I sell a window job and the client wants a break down that is fine, I will not be selling the windows at my cost though, it is none of their business or the governments business how much I pay for windows.

The government or the client can not buy the windows from my supplier, unless they have a contractors license.

I sold a couple of A/C systems that qualified for the energy tax credit, and the units were not broken down, they were given an installed price, how is that any different than the window jobs?


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## carolinahandyma (Jan 6, 2006)

The IRS will eventually catch up with those boosting the price of materials and offering free installs. Typically, the IRS will look at what the market-rate is for a product. So when the market rate for a window is $200 and someone is selling it for $400 they will get wise to that problem and will likely go after the homeowner and the contractor. When in doubt check with your CPA.


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## bwalley (Jan 7, 2009)

carolinahandyma said:


> The IRS will eventually catch up with those boosting the price of materials and offering free installs. Typically, the IRS will look at what the market-rate is for a product. So when the market rate for a window is $200 and someone is selling it for $400 they will get wise to that problem and will likely go after the homeowner and the contractor. When in doubt check with your CPA.


I always mark up windows or any other product I sell and I never broke out installation before, if the IRS needs a break down, I will list it at $45 per opening, since a helper and I can do 2-3 openings and hour, that will look like a reasonable number, but there will still be mark up in the windows.

Do the rules say there can be no mark up on the windows?

Since this is the same energy tax credit that is being used to get a 30% rebate on A/C systems, am I expected to give an equipment price and an installation price?


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## SLSTech (Sep 13, 2008)

bwalley said:


> I always mark up windows or any other product I sell and I never broke out installation before, if the IRS needs a break down, I will list it at $45 per opening, since a helper and I can do 2-3 openings and hour, that will look like a reasonable number, but there will still be mark up in the windows.
> 
> Do the rules say there can be no mark up on the windows?
> 
> Since this is the same energy tax credit that is being used to get a 30% rebate on A/C systems, am I expected to give an equipment price and an installation price?


No - HVAC includes labor
I posted this before but here is a quick overview and links to most FAQ's
http://blog.sls-construction.com/?p=323


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## IHI (Dec 25, 2004)

There is no "penalty" saying you cannot mark up and resell the windows...that is standard business. The IRS does'nt care how badly you rake somebody over the coals with per window either...since the HO's were the ones smart/dumb enough to fall for the price. That'd be no different than thinking they'd crack down on the car dealers during the cash for clunkers rush...do you think stealerships sold cars at cost? heck no....and neither will we, the customer jsut gets a credit that 90% will never be able to use on what the product itself cost them.


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## bwalley (Jan 7, 2009)

IHI said:


> There is no "penalty" saying you cannot mark up and resell the windows...that is standard business. The IRS does'nt care how badly you rake somebody over the coals with per window either...since the HO's were the ones smart/dumb enough to fall for the price. That'd be no different than thinking they'd crack down on the car dealers during the cash for clunkers rush...do you think stealerships sold cars at cost? heck no....and neither will we, the customer jsut gets a credit that 90% will never be able to use on what the product itself cost them.


The cash for clunkers deal was big scam, the people who traded in their cars and got $4500 are going to get a 1099 for the $4500, not sure how that is legal since they traded in a vehicle.

The dealerships jacked up the price of the new cars, so these people traded in a vehicle and didn't get any real value out of it, now they have a 1099 coming and will have to pay taxes on it as income.

the cash for clunkers is costing the government about $24,000 per vehicle sold.

this is the same government that wants to run healthcare.

BTW all constrcution companies that employ 5 people or more will have to provide and pay for healthcare insurance for all of their employees.

That means a lot of people will end up losing their jobs.


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## Jake Stevens (Dec 10, 2007)

We sold many windows with the American Recovery Tax Credit. It does state you have to break down the window cost with sales tax and labor. The 30% is on the windows cost only, not the sales tax or labor. This is no way you can install for free. Unles you want Uncle Sam on your butt. It helped my window sales this last quarter. You can mark up your window cost to the HO that's not a problem. You can't sell 10 windows for $5,000.00 and say the labor is only $100.00 it will throw up a red flag. Good luck with that.


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## bwalley (Jan 7, 2009)

Jake Stevens said:


> We sold many windows with the American Recovery Tax Credit. It does state you have to break down the window cost with sales tax and labor. The 30% is on the windows cost only, not the sales tax or labor. This is no way you can install for free. Unles you want Uncle Sam on your butt. It helped my window sales this last quarter. You can mark up your window cost to the HO that's not a problem. You *can't sell 10 windows for $5,000.00 and say the labor is only $100.00 it will throw up a red flag. Good luck with that*.


Home depot and lowes sell carpet and they will install the whole house for $39.99, whats the difference?

They are making their money off of the carpet and pad, and obviously paying the carpet installer more than $39.99 to install it.


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## Sam60 (Apr 29, 2006)

Jake Stevens said:


> We sold many windows with the American Recovery Tax Credit. It does state you have to break down the window cost with sales tax and labor. The 30% is on the windows cost only, not the sales tax or labor. This is no way you can install for free. Unles you want Uncle Sam on your butt. It helped my window sales this last quarter. You can mark up your window cost to the HO that's not a problem. You can't sell 10 windows for $5,000.00 and say the labor is only $100.00 it will throw up a red flag. Good luck with that.


They have to ASK for the breakdown because it only applys to the cost of window. And if there is a labor charge it will not apply. But the key is it does not say you have to charge a labor charge. Or can they dictate what you can charge for your windows.


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## workpot (Aug 27, 2008)

*No 1099 for clunkers*

Acording to factcheck.org clunker credits are not income.


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## AustinDB (Sep 11, 2006)

will some of those guys claiming 100% product cost and 0 labor cost have to pay the sales tax on the difference?


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## Jake Stevens (Dec 10, 2007)

bwalley said:


> Home depot and lowes sell carpet and they will install the whole house for $39.99, whats the difference?
> 
> They are making their money off of the carpet and pad, and obviously paying the carpet installer more than $39.99 to install it.


They are not getting tax credits.


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## bwalley (Jan 7, 2009)

Jake Stevens said:


> They are not getting tax credits.


I understand that, but it is common practice in the contracting business not to show your real labor cost or to get the majority of your profit from the labor, that is why I do not break down materials separately from labor, it is a lump sum price.

When you start breaking things down, the client will start nit picking the contract.


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