Paying Employees Under the Table

And why you don’t want to do it.

Handling your business’s finances can get confusing. Figuring out tax deductions, reporting employee’s income, keeping records and all of the other things you have to figure out when managing payroll can be a pain in the backside. Some businesses opt to avoid all of that by paying their employees under the table (or paying them off of the record) by giving them cash to avoid reporting and paying taxes. Unfortunately, if you are caught doing this, each party may find themselves in a world of trouble.

Penalties for Employers
You as an employer are reliable for paying employment taxes for your employees. You have no way around paying them, according to Uncle Sam. If the IRS finds out you have paid an employee under the table, you not only will have to pay all of the money yourself but you will potentially face legal trouble, including potential jail time. Jail sentences may even be lengthy, depending on how long you have paid your employees under the table and how much tax money is owed.

Penalties for Employees
Employees who willfully do not report all of their earnings to the IRS are also at risk – especially if they are ever audited. If the IRS finds out they have received more money than they reported when filing their tax returns, they will not only face fines for their taxes but also potential jail time.

It goes without saying that if one party gets caught, the other party will as well. So if you pay employees under the table, your risk is almost doubled.

Do not make the mistake of falling prey to the idea that paying your employees off the record is a better and easier idea. If you are overwhelmed by the thought of dealing with everything payroll entails, we are available to help!