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Is There a Penalty for Paying Employees Under the Table?

Employer paying employee illegally

Most employers pay their employees via direct deposit or a paper check. Some, however, prefer to pay “under the table” with cash. You may have heard this term, but what does it really mean. And most importantly, is it legal?

Under the table compensation involves the payment of cash with neither the employee nor employer paying taxes. It may sound like a win-win situation, but it can come with serious consequences for either person.

Paying an employee in cash is not illegal. However, when cash payments are not recorded, and taxes are not taken out by the employer, it becomes a legal issue. If you are a company who pays employees under the table, and you are caught, you could face serious penalties. You will have to pay back the taxes you owe. On top of that, you will face penalties for tax evasion, which includes up to five years in prison. If you are an individual, you could be forced to pay a fine of as much as $250,000. For corporations, this amount is $500,000.

As a company, you could face other charges as well. For example, if you are paying in cash to help your employee avoid paying for child support, you could face charges for child support fraud. You could also get in trouble for not filling out new employee paperwork properly.

You may think the government will never find out, but chances are, they will. For example, if your employee is laid off and files for unemployment, this will trigger an audit. The same situation applies if your employee is injured on the job and files for workers’ compensation.

Lack of Protection for Employees

When an employer pays under the table, employees suffer as well. They may not have to face the legal consequences that employers do, but they lose out financially in the long run. If they are paid under the table, they cannot collect unemployment benefits. Therefore, if they are laid off, they have no income coming in. If they are injured on the job, they cannot file a workers’ compensation claim.

Being paid under the table will affect them come retirement. They will not be able to receive Social Security benefits, since no income will be reported. If they become disabled, they will have no benefits available to them. They won’t even have Medicare health insurance. This means they will likely not be able to retire as planned. They may have to work the rest of their lives.

Contact a New York Labor Law Attorney

If you are getting paid under the table, you’re not paying taxes, which can lead to serious consequences from the IRS. Plus, you are missing out on benefits such as workers’ compensation, Social Security, Medicare and disability.

It is important that you receive legitimate payment for work performed.  If you are one of the many employees reporting getting paid under the table, the experienced New York labor law attorneys at Ricotta & Marks, P.C. can make your work situation legit. Give our office a call at (347)-464-8694 to schedule a consultation.

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