My first job when I was 16 was a dishwasher. I got payed by check every two weeks for most of my career there expect for these few couple times when I would be handed it all in cash. I was confused as why he was giving me cash and not my normal check. At the time I thought it meant I was working under the table but I had no idea if that was legal or not. So now I’m wondering Is it illegal to work under the table?
The answer is yes, it is illegal for both the employee and the employer to participate in under the table work. When an employer pays their employees under the table, they do not withhold taxes from their paychecks or report their income, which is against the law. As for the employee, if you are paid under the table and do not report that income to the IRS, you are also committing tax fraud.
What Does “Under The Table” Mean?
Let’s say your boss isn’t the fondest of paying taxes. So they offer to pay you under the table, which means that they will not withhold taxes from your paycheck or report it to the IRS.
You would usually receive your payment in cash, and have to claim that income on your own when filing taxes. Your boss is trying to avoid paying their fair share of taxes, while also avoiding any legal consequences for not properly paying their employees or reporting income. However, both parties can face serious consequences if they are caught participating in under the table work.
What is Considered Under The Table Work?
Under the table work is not limited to just cash payments. It can also include bartering or trading services without reporting it to the IRS.
For example, if you do a renovation project for your neighbor and they pay you by giving you free lawn care for the summer, that is considered under the table work because it was not reported as income.
Another example could be, a friend offers to pay for your dinner but instead of using cash or a credit card, they offer to give you a massage in return. Even though it is not cash or physical goods, the exchange is still considered under the table work because it is not reported as income.
It is important to note that there is a difference between under the table work and being paid as a independent contractor. Independent contractors are responsible for their own taxes, but they still need to report their income and pay taxes on it properly. Under the table work means purposely avoiding paying taxes on that income.
Consequences of Working Under The Table
Because under the table work is illegal, both parties can face serious consequences if they are caught participating in it.
For the employer, they could face fines and even criminal charges for not properly paying taxes or accurately reporting income. As for the employee, they could also face fines or penalties for not reporting their income and participating in tax fraud.
What is the Difference Between Under The Table Work and Being an Independent Contractor?
Many people may confuse working under the table with being an independent contractor, but there is a clear difference. As an independent contractor, you still report your income and pay taxes accordingly, however as a freelancer or self-employed individual you may receive 1099 forms instead of W-2 forms. In contrast, working under the table means that neither party is reporting the income or paying taxes.
Why Would Someone Work Under The Table?
There can be many reasons for someone to participate in under the table work.
For employees, it may be:
- Not having the proper work authorization
- Needing extra cash and not wanting to report it on their taxes
- Not knowing that under the table work is illegal.
For employers, it may be:
- Trying to cut costs by not paying taxes or properly compensating their employees
- Not wanting to deal with the paperwork and hassle of properly paying their employees
- Being unaware of the legal consequences.
The interesting thing is that sometimes people don’t even know it’s illegal. It’s been such a common term tossed around that it’s become a norm around older business owners.
What Should I Do if Offered Under The Table Work?
If you are offered under the table work, it is important to consider the potential consequences and risks for both you and your employer. It is ultimately up to you whether or not you want to take the offer, but it is important to be informed about the legality and potential consequences of participating in under the table work.
To sum it up, is it illegal to work under the table? The answer is yes. Both the employer and employee can face penalties for not reporting income and paying taxes accordingly. It is important to consider the potential consequences before agreeing to participate in under the table work.