When your boss pays you under the table, the law doesn’t recognize you as an employee, which means you miss out on a number of benefits and legal protections. Getting paid off the books doesn’t get you in trouble as long as you meet all your tax responsibilities. Your “employer”, however, could be in trouble with various government agencies if caught.
Is paying under the table at work legal? It is not generally unlawful, but most of the time paying under the table violate wage and pay stub laws that often result in employees filing lawsuits for millions of dollars.
Employer risks and rewards
If your employer normally controls what tasks you perform on a daily basis and how you complete them, you should be paid off the books as an employee. This doesn’t mean you can’t get paid in cash, it just requires your employer to withhold income, social security, and Medicare taxes from each payout. Your employer is also responsible for making corresponding Social Security and Medicare contributions and paying federal unemployment taxes. By paying it under the table, your employer saves you a substantial amount of money on these taxes and is able to avoid the accounting burden that paying these taxes would otherwise require. But given the penalties your employer faces for not withholding tax, paying employment taxes or filing for you the consequences can be very costly for them.
Problems with the Income Tax
Regardless of how you earn income, you have an obligation to report all money you earn and pay the appropriate tax on it. If you don’t, you could get in trouble with the Internal Revenue Service if they take your income. Some of the consequences you may have to deal with include a penalty for failing to make estimated tax payments during the year (as a result of the employer’s failure to decline), accuracy-related penalties if you fail to report all these companies. The payments from the table on your tax return, as well as interest on the full amount of back tax and penalties you owe. And if you don’t file a return, you even face penalties for failing to declare.
Disadvantages of “pay under the table” to the employee:
Since your cash wages are probably not reported by your boss to any government agency, you have the following disadvantages:
1. In an effort by your boss to save money, your boss withheld the Social Security and Medicare payment on your behalf. Basically, your boss didn’t pay your share of your social security and Medicare taxes, so at your retirement age you won’t be eligible for any social security benefits;
2. Since your wages were not reported to any government agency, there is a high probability that your boss will not pay any federal or state unemployment insurance on your behalf. Once you are fired or resign for any reason, you may not be eligible for unemployment benefits;
3. Since you were paid in cash, your employer probably did not include your wages in the legally required workers’ compensation insurance, with which all employers in the state of California must comply. In the event of a work injury, the workers’ compensation claim will be denied because you are not included in your employer’s insurance coverage.
4. In the event of an on-the-job injury your state disability claim will be denied because your wages were not reported to the Employment Development Department because State Disability Insurance (DSI) never received any payment for your wages.
