A vendor asks our HOA to pay in cash. What should the board do?

By OurHOA · General information · Revised November 1, 2026

Should an HOA pay a contractor in cash? Why boards turn down cash discounts, what the 1099 and W-9 rules still require, and policy wording to use instead.

Part of the HOA board handbook: treasurer and money.

The short answer

Say no, politely, and offer to pay by check or bank transfer on the same day the work is approved. The association spends other people's money, and every dollar has to leave a trail that an owner, an auditor or a judge can follow. Cash leaves almost none. A cash discount of 5 or 10 percent looks like savings until the board has to prove the job was paid, answer an owner's records request, or fill out a 1099 for a vendor it never got a W-9 from. The request usually comes from a small operator: a tree crew, a handyman, a fence repair outfit, sometimes a long-time landscaper who has started offering a "cash price." Most of them are not running a scam. Some are. The board does not need to guess which, because the answer is the same for both: the association pays by traceable means only, and that rule is written down so no director has to argue it on the spot. Rules vary by state and by your declaration, bylaws and board policies. This guide is general education, not legal or tax advice. Ask the association's CPA or attorney about a specific payment.

Why cash is a bad fit for association money

A check or an ACH payment creates a record at the bank that nobody on the board controls. Cash creates a record only if someone writes one, and the person writing it is usually the same person who handed over the money. That is the arrangement internal controls exist to prevent. State law assumes the association can show where its money went. Florida section 720.303(4)(a)10.a lists accurate, itemized and detailed records of all receipts and expenditures among an HOA's official records, and section 720.303(4) requires official records to be kept at least 7 years unless the governing documents require longer. In Texas, section 209.005(m) requires an association of more than 14 lots to adopt a document retention policy that keeps financial books and records for seven years. Colorado section 38-33.3-317(1)(a) requires detailed records of receipts and expenditures affecting the operation and administration of the association. A cash payment also cannot be stopped. If the crew takes the money and leaves half the trees standing, a check can sometimes be stopped before it clears, and a card payment can be disputed with the issuer. Cash gives the board a small claims case against someone whose full name it may not know.

A cash price does not change the tax paperwork

Some vendors pitch cash as simpler for everyone. It is not simpler for the treasurer. The IRS reporting rule for Form 1099-NEC turns on what the association paid for and how much, and the reporting threshold for nonemployee compensation paid in 2026 is $2,000. For payments after 2026, the IRS says to check Publication 1099 for the inflation-adjusted figure. The IRS instructions carve out payments made by credit card, payment card and certain third party networks, which go on Form 1099-K from the payment company instead. Cash is not on that list. So the treasurer still needs the vendor's legal name, address and taxpayer identification number on a Form W-9 before the first payment. If a payee does not provide a correct TIN, the IRS says the payer may have to begin backup withholding at the current rate of 24 percent. Telling a vendor who wanted cash to avoid paperwork that the association is holding back a quarter of the payment is not a conversation any treasurer wants. Have the W-9 talk before the work starts. Form 1099-NEC is due to the recipient and the IRS by January 31.

What a cash-only demand tells you about the vendor

Treat "cash only" as a reason to look harder, not as proof of anything. The Federal Trade Commission's home improvement scam page lists it plainly: scammers ask you to pay for everything up front or only accept cash. The same page tells consumers not to pay the full amount up front and to hold the final payment until the work is done. Before the board signs anything with a vendor who raised cash, run the checks you would run on anyone: 1. Get a written estimate with the business name, address and phone number on it. 2. Ask for a certificate of insurance naming the association as certificate holder, and confirm it with the agent. Our guide on checking a vendor certificate of insurance covers what to look for. 3. Look up any license the work requires. In Florida, section 489.128 makes a contract entered into by an unlicensed contractor unenforceable by that contractor, so check the license before the work starts. In Texas and Colorado, ask the city or county building department what permits and registrations the job needs. 4. Ask for the W-9. A vendor who will not fill one out has answered the question for you.

Proof of payment on larger jobs

On a repair or improvement job, paying the contractor is only half of the closeout. The other half is making sure nobody who worked on the job can file a lien against association property for money the contractor never passed along. That proof is built around a traceable payment. In Texas, section 53.281(b) says a waiver and release of lien is effective only if it substantially complies with one of the statutory forms in section 53.284, is signed by the claimant, and, for a conditional release, evidence of payment to the claimant exists. The section 53.284 forms are written around a check: the conditional waiver becomes effective on receipt of a check in a stated sum, once the check has been endorsed and paid by the bank. Florida section 713.20(7) lets a lienor who signs a waiver in exchange for a check condition it on the check clearing. A cleared check or a bank transfer confirmation is the evidence those statutes have in mind. A handwritten note that says "paid cash" is a much weaker exhibit. For any job big enough to carry lien risk, pay by check or transfer, collect the conditional waiver with the payment, and collect the unconditional waiver once the payment clears.

How to answer the vendor

Most vendors who ask for cash want to be paid quickly and without chasing. Give them that, by other means. Sample reply: "Thanks for the quote. The association can't pay in cash; our policy requires a check or bank transfer for every payment, and we need a W-9 on file before the first one. If you can send the W-9 and an invoice, we can pay within [number] days of the work being inspected. If there's a discount for prompt payment, we're happy to take it by check." That last line matters. A vendor who offered 10 percent off for cash is often glad to give some of it back for fast, certain payment by check, and the board keeps its records. If the vendor refuses anything but cash, thank them and call the next name on the bid list. Note the exchange in the vendor file so a future board knows why the association stopped using them.

Policy wording and a motion

Put the rule in the board's payment procedures so it applies to every director, including the one who has used the same handyman for years. Policy paragraph: "Payment methods. The association pays vendors only by check drawn on an association account, by ACH or wire from an association account, or by an association credit or debit card within the limits set by the board. The association does not pay any vendor in cash and does not reimburse a director, officer or volunteer for cash paid to a vendor on the association's behalf, except as approved by board vote and documented with a signed receipt and a completed Form W-9. No payment is made to a vendor until a Form W-9 is on file." Motion: "Moved that the board adopt the payment methods policy presented at this meeting, effective [date], and direct the treasurer to send a copy to each current vendor with its next payment." Our guide on approving and paying HOA bills shows where this fits in the larger approval process.

Mistakes boards make

Letting a director pay the vendor in cash out of pocket and then submitting a reimbursement. The association now has a receipt from its own director and nothing from the vendor. Pulling cash from the association account to pay a crew. A cash withdrawal on the bank statement with no vendor invoice behind it is hard to explain to anyone later. Taking the cash discount just once, for an emergency. Emergencies are when controls slip, and the one exception becomes the habit. Skipping the W-9 because the job was small. Small jobs add up, and the treasurer finds out in January that one vendor crossed the threshold across four invoices. Arguing the point with the vendor in the parking lot. Point to the written policy and move on. The policy is there so nobody has to win that argument.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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