Verifying Cash Payments to Applicants for Tax Credit Units

October 23, 2008
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Q I manage a tax credit site, and one of our residents receives income in cash. I heard that such payments, which are made “under the table,” prevent the resident from being eligible for tax credit housing. Is this true?





A No, says Cheryl McMillon, a 25-year veteran of affordable housing management in Port Arthur, Texas. Nothing in the HUD Handbook, the Internal Revenue Code, or the 8823 Guide, makes a resident who receives income in cash ineligible for housing under the low income housing tax credit (LIHTC) program.




However, you may have a site policy indicating that applicants for units must verify all income they receive. For example, an applicant must give the name of an employer who will cooperate in completing necessary forms and in providing paycheck stubs, receipts, or other proof of income.




But automatically denying an applicant who earns income in cash or “under the table” may be too Draconian a measure. Perhaps the employer who pays in cash expects the earner to declare the income and pay the tax on it. All you can do is follow the rule that requires an applicant to verify income. If this requirement is not met, you have no choice but to declare the applicant ineligible.




Source: Cheryl McMillon, Property Manager, Rampart Apts., Port Arthur, TX