The company I work for pay cash and still issue W2?

Question

The company I that I will start working for will pay cash to me everyw week and still issue a W2 to me for tax purpose.
It is confirmed that I am an employee. Does that make sense? Have any one had of this?

Answer 1

Did you fill out a W-4 for withholding? Are you receiving a statement with each pay showing withholding, Social Security, and Medicare? Do you have to sign for your pay? Do you fill out a time sheet?

It is possible this is a legitimate operation, but probably not.

If you choose to keep this job, assume you are an independent contractor, set aside at least 25% for taxes, and keep track of your expenses.

I strongly urge you to keep a written record of the date and amount of each payment. If you have a time sheet or sales record if paid on commission, keep copies of that.

It is common for dishonest contractors to give their independent contractors 1099s for more than the actual payment. This allows the contractor to take a bigger deduction than he is entitled to, escaping income taxes, and at the same time sticking you with taxes on money you never received.

Answer 2

The IRS defines an employee as someone who works when, where, and how their employer asks them to. Employees generally work a set schedule at a set location, with a limited amount of time off (there are execptions, but this is the usual arrangement.)

Independent contractors are allowed a lot more freedom than employees. Usually they are professionals or specially trained in a particular field of expertise. They can have several different customers and have more flexible schedules. Sometimes seasonal workers are treated as independent contractors because they come for a particular job and then leave when it's done. A good example of an independent contractor is a plumber. You call him when you need him and you expect him to get the job done, but you don't generally tell him how to do his job or when he can go home.

The benefit of being an employee is that your employer is required to pay 1/2 of your social security and medicare tax (about 7.4% of your gross salary). There are lots of employers out there who want to treat their employees as independent contractors so that they can avoid paying this extra tax. This is a problem because 1) it is illegal and 2) it puts an extra burden on the employee when they need to come up with that extra 7.4% at tax time.

You MUST find out if you will be receiving a W-2 or a 1099 at the end of the year. If you are going to be receiving a W2 then your employer should pay thier 1/2 of your payroll tax as well as withhold federal (and state if needed) income tax from your pay. They can still do this even if they pay you cash. However, they should give you a pay stub that shows how much they withhold.

If you are going to be receiving a 1099, you will need to start making quarterly, estimated income and self-employment tax payments to the IRS. Make sure that the amount you send in for 2007 is at least 90% of the amount of tax that you owed in 2006. It would be a very good idea to visit with a CPA and have him/her help you calculate your estimated payments.

Good luck!

FYI: Federal tax law requires you report ALL1099 income on your tax return, even if it is less than $10,000. However, if it is less than $400, there is no self-employment tax due.

Answer 3

I've had two jobs, both back in the 60's, where I was paid cash. One was a retail store (Kresge's, forerunner of K-Mart), and the other believe it or not was a high school. Both paid legally, took out taxes, and issued W-2's.

Checks are obviously much more common.

As long as proper records are kept, proper taxes withheld and remitted properly, paying cash rather than checks is legal. You should still get something each pay period showing the gross and the deductions.

Answer 4

They can pay you in cash if they want. You have to ensure that they are withholding the proper amount of FICA taxes for you and are withholding the appropriate amount of Federal and State Taxes. When you get paid the cash, I would ask for a reconcilation of the gross wages and taxes withheld to arrive at the amount of $$ that you recieved. Then at the end of the year, make sure that the W-2 agrees with the amount that you received during the year.

Answer 5

I have been a tax accountant for 27 years and specialize in forensic accounting (detecting criminal activity). As many before me have said or implied, it is highly unusual for a legitimate business to pay its employees in cash--unusual but not entirely unheard of. For instance, many times farm workers will be paid in cash because they don't have bank accounts.

The advice from others concerning getting pay stubs and keeping your own records, and so forth is correct and sound. However, given my specialty, I would add a word of caution to what others have said.

An employer who pays employees in cash quite often is involved in illegal activity and may be engaged in "skimming" or keeping 2 sets of books. You certainly don't want to get arrested because the people you work for set you up.

Answer 6

It is very unusual for a business to pay cash on their payroll. MAKE SURE you get a paystub each week detailing your gross pay, withholding for federal and state taxes, etc.

When a business pays workers cash, usually it is to avoid paying payroll taxes & workers comp, etc.
Ask the other employees if they're getting paid that way and if everything in on the level.

Answer 7

The W2 form is confirmation of the fact that you earned money and how much you earned. Whether it was paid in cash or by check doesn't matter. They are following the rules set by the IRS in reporting your income.

Answer 8

It sounds to me like your employee is trying to give you a 1099. It looks very similar to a W-2. But it is the form used to report cash workers, which to the government is considered independant contractors. Now the reason I know this is because I woked a cash job and the owner was paying me cash, but then at the end of the year he issued me a 1099, I thought it was the same thing as a W-2 but it was'nt. Now once you get this W-2 it is your responsibility to pay the taxes on it because your employer have you listed as an independant contractor. Now when you pay your taxes at the end of the year you will also have to pay an extra tax on top of F.I.C.A., Federal Withholding Tax, and State Tax. You will now have to also pay a Self Employed tax, because you are listed as a independent contractor. Now the good thing is if your 1099 earnings is under $10,000 then you don't have to file the taxes on the income.

Answer 9

This may sound very basic, but make sure it is a W2 not a 1099 they will be giving you.

Answer 10

they can't do that legally. they must take your information and take taxes out each paycheck, otherwise how are they going to prove to the irs that you ever worked there? check out www.irs.gov there's alot of information on there. the company you work for can face huge fines if they are operating illegaly and you don't want to mess with the irs if you're a business owner.