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What ultimately makes working off the books illegal is that the business is not reporting the payments, regardless of whether or not the worker is reporting them on their own tax return. Since people who work under the table also tend to be under-banked, this can put them in an even more vulnerable position. Most companies that properly withhold taxes for their employees will issue paychecks that come with paystubs, or send this information electronically along with direct deposits. Since it’s cumbersome to calculate these amounts in cash, cash payments usually indicate tax and labor law violations. However, the employer still must comply with federal and state tax and labor laws regarding payroll taxes, withholding income taxes, mandatory fund contributions such as state disability insurance, and having worker’s compensation insurance in place.Ī receipt or pay stub should also accompany the cash payment, explaining how much was withheld from the employee’s wages and what each amount was for (e.g. Here’s what you need to know about working off the books, and what businesses and workers alike must be aware of.Ĭash is still legal tender and can be provided to an employee instead of a paycheck or direct deposit. While unreported employment arrangements are illegal, the power imbalance between the worker and employer can make it difficult for any recourse to be conducted.
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These conditions make this type of worker prone to exploitation, and employers take advantage of under the table work so that they can evade payroll taxes and having to buy workers’ compensation insurance among other mandated benefits. The most common ones are that the worker cannot obtain an “on the grid” job where one receives a paycheck with taxes withheld and a W-2 form received after the year ends, or they are undocumented and therefore unauthorized to hold W-2 employment but still need money. There could be several reasons why someone would take an under the table job, as commonly seen in construction, domestic work, and food services. There are several names for “working under the table”: working off the books, unreported income, the informal sector, and the more pernicious name that implies illicit activity, “the underground economy”, among others.