I am curious as to what to do. I just started working and I am told I will be paid in the form of a check for?

Question

for 40 hours and then the rest would be cash. Is this tax evasion? He said that I would be tax free on the rest of the hours I am paid. I am really suspicious of this. I dont want to get in any trouble. What can I do?

Answer 1

I can show you some cases with Revenue that shows such similar instances that such payments may be considered "under the table" payments. Now let us say for example, in this case we do not know the entire situation. So can we automatically assume that it is tax evasion. Certainly not.

If the employer is to claim it as wages paid, pay the Social Security and Medicare taxes on it, etc. and otherwise then of course it would not be so under such cases. But which employer will do this I want to find them myself.

Many employers for example will pay the taxes on bonuses for example, this is not totally unheard of. Is it a bonus. I mean the employer may choose to pay the taxes on the wages being paid.

Of course FLSA (Federal Fair Labor Standards Act) indicates this one. You must pay the employee overtime if they work more than 40 hours in a 7-day period of time. This does even apply to people who are considered salaried employees. Should check with your State of course to see if such application does apply as with all applications. Easily done by referring such matters to the Department of Labor or Department of Labor and Industry or by other known names they may wish to refer to it as.

As an Accountant and one who does provide payroll services I will say that I do not believe such situations are always to be considered automatic tax evasion as for example they are going to pay the taxes on the wages received. Again, this is highly unlikely but not unheard of.

Looking to your statement it seems to me to be slightly curious of course and I would have to agree based on what I know of course, that yes this is such a case. Many do go unreported by the way as people do not want to lose their jobs for example. And many employers get away with it.

Take Walmart for example, up until some time ago, they were not paying overtime for instance and now they more or less do not even let you work overtime according to some sources I have spoken with.

I would say you should do what you should think is right for whatever situation but if you are working overtime you should be getting paid that overtime rate as most good employers, decent employers, and I know both kinds, good and not so good, respectable ones will follow the laws or the advice of their accounting or payroll staff. Personally I would drop such a client if they were not and were paying people under the table but then again, we are a respectable firm.

There are exceptions to every rule though and some cases do not require payment of overtime but I doubt they would apply to you but I will not assume they won't.

Overall in our opinion yes it does sound suspicious but as I stated it may very well be legit. I suppose you will know if you see the amount on your check. As to what you should do it remains in your hands of course but it is something best resolved with the Department of Labor if that is so. It will probably end up in the end with your losing the job and will the State or otherwise pursue charges. I never assume anything with these folks.

Wayne Barney
President
BC Business Services, Inc.

Answer 2

Lets say you make $10 an hour.
After 40 hours, each additional hour you should be paid $15.

If he is paying you $10 for the additional hours, he is robbing you of $5 an hour for every hour you worked after 40 hours.

In addition, the above answers are all correct.
You are participating in tax fraud.
Your income looks lower so you are going to get less $$$ in your retirement fund and you may not qualify for a loan because the only documented earnings you have are for the 40 hours a week.

All the way around, it stinks, and is not fair to you or the rest of us who pay taxes...

See my question on being taxed on tips that are taken out of my check, so I never really got them to begin with, but still pay taxes on them.

Time to find another job, hon.

Answer 3

It is illegal and will cost you money in several ways.
1. You won't have as much SS earnings so you will lose your retirement benefit for that.
2. If injured or unemployed it will look like you earned less money
3. When you try to buy a house or anything you will have lower income so may not quality.
4. IRS audits could put you in prison for tax evasion or put your boss in prison costing you your job.
I would tell him you find it unethical and wish to be paid correctly. I don't associate with unethical people it always bites you in the end.

Answer 4

You would owe taxes on ALL of your pay, not just the part that is paid by check. Your boss is advising you to do something illegal - the extra is NOT tax-free. He's just saying he's not going to put it on your W-2 at the end of the year, which is illegal for him to, and for you if you don't report it and pay taxes on it.

My guess is that he isn't planning to pay you overtime at time and a half, as required by federal law, for hours over 40. That's the only way I can see for him to benefit from the hairbrained scheme.

Answer 5

Yeah thats not legal, if you work over 40 hours you are required to get overtime pay, usually 1.5 times the normal hourly rate you make. You should not be paid in cash for your overtime. Ask why they do that and request they add the overtime cash to the check instead.

Answer 6

Yes, this is illegal, and tax evasion on his part. You can turn down the job and report him to the US Dept of Labor.

Answer 7

Of course it is illegal. They need to put the full amount on the check.

Answer 8

1. Report him to DOL and IRS
2. Find a new job