What To Do If Your Employer Pays You Under the Table

Being paid in cash is not automatically illegal, but being paid “under the table” – with no taxes withheld and no official records – almost always is for regular employment. In these arrangements, employers typically avoid payroll taxes and reporting requirements, and workers lose key legal protections and benefits.¹² This article explains what under-the-table pay really is, why it is risky, and how you can safely report an employer who refuses to follow the law.

Understanding Under-the-Table Pay

Under-the-table pay (also called off-the-books pay) generally means your employer:

• Does not withhold income tax, Social Security, or Medicare from your wages
• Does not report your earnings to the Internal Revenue Service (IRS) or state tax agencies²
• Does not issue required forms such as a W-2 or, for many contractors, a 1099
• May not carry workers’ compensation or other mandatory insurance for you³

Paying cash itself is legal. The problem is when the employer uses cash to hide wages and skip payroll taxes and employment laws. According to IRS guidance, failing to report wages and withhold employment taxes is a form of tax evasion and can lead to serious civil and criminal penalties.²

Why Employers Use Under-the-Table Pay

Employers who choose off-the-books pay typically do so to cut costs or avoid scrutiny. Common motives include:

• Evading payroll taxes: Avoiding employer contributions for Social Security, Medicare, and unemployment insurance²
• Skipping wage laws: Dodging minimum wage, overtime, or recordkeeping obligations under laws like the federal Fair Labor Standards Act (FLSA)⁴
• Dodging insurance costs: Not carrying required workers’ compensation or disability insurance³
• Hiding other violations: Concealing unsafe conditions, immigration violations, or other unlawful practices⁴

These choices might save the employer money in the short term, but they expose both the business and the worker to serious legal and financial risks.

Risks to Employees Paid Under the Table

Working off the books often harms workers far more than they realize. Even if the immediate cash seems attractive, the long-term costs can be significant.

1. Tax and Legal Consequences

Workers are legally required to report all income they earn, even if the employer does not withhold or report taxes. The IRS can impose:

• Back income taxes on unreported wages, plus interest and penalties¹²
• Accuracy-related penalties if the IRS believes you substantially understated your income
• In extreme cases, criminal charges for tax fraud when there is clear evidence of willful evasion²

In many audits, the IRS may treat workers as partially responsible for the unpaid taxes, especially if they knowingly failed to file accurate returns.

2. Loss of Safety Net Benefits

When earnings are not reported and payroll taxes are not paid, workers usually cannot rely on key public benefits tied to documented work histories:

• Social Security retirement and disability: Future benefit amounts depend heavily on reported lifetime earnings; unreported pay can reduce or eliminate eligibility.¹
• Medicare: Eligibility is linked to your work history and Medicare taxes paid over time.¹
• Unemployment insurance (UI): If you lose your job, your UI benefit calculation typically uses reported wages; off-the-books pay often does not count.¹⁵
• Workers’ compensation: If you are hurt at work, you may have trouble proving your wages or even your employee status when there are no records.³

3. Weaker Wage and Workplace Protections

Employment laws still apply to most workers even when they are paid off the books. However, enforcing those rights becomes much harder if there is no paper trail.

• It is more difficult to prove minimum wage or overtime violations without pay stubs or time records.
• Without documentation, pursuing unpaid wages in court or before a labor agency may require more evidence and witness testimony.
• Some workers feel less safe reporting harassment or unsafe conditions because they fear exposing the under-the-table arrangement.

Consequences for Employers Who Pay Under the Table

Employers who pay off the books can face serious penalties under federal and state law. Depending on the situation, enforcement agencies may seek:

• Back taxes and interest: Paying all unpaid payroll taxes and related interest, sometimes for multiple years¹²
• Civil fines: Substantial fines for failing to withhold and deposit employment taxes, and for filing false or missing forms³
• Criminal prosecution: For willful tax evasion, the Internal Revenue Code allows for criminal charges, which can lead to prison sentences and heavy fines²
• Liability for unpaid wages: Agencies or courts may order payment of unpaid minimum wage, overtime, and other earned compensation, often with additional damages
• Loss of licenses or contracts: Some businesses risk losing professional licenses, government contracts, or other approvals after serious violations.

In guidance to employers, the IRS has identified paying employees cash without proper reporting as a significant form of employment tax non-compliance that it actively targets through audits and investigations.³

How to Recognize If You Are Being Paid Under the Table

Not every cash payment is illegal, but warning signs of an under-the-table arrangement include:

• You never completed a Form W-4 (for employees) or similar tax paperwork
• You do not receive pay stubs or any written record of your wages
• Your employer tells you not to report the income or says they will not report it
• You are denied workers’ compensation coverage because your employment was “not on the books”
• You are treated like an employee (set schedule, supervision, ongoing work) but are paid entirely in cash with no year-end tax form

If several of these apply, there is a strong chance that your employer is not complying with tax and employment laws.

Steps to Take Before Reporting Your Employer

If you believe you are being paid under the table, consider taking the following steps to protect yourself and prepare:

1. Gather Evidence

Because under-the-table work often leaves few official records, it is important to preserve whatever evidence you can:

• Keep a personal log of dates worked, hours, and amounts paid
• Save text messages, emails, and messages about your pay or schedule
• Take photos or copies of any handwritten receipts or notes showing payment
• Note names and contact information for co-workers who could confirm your work

2. Consider Speaking With the Employer

Some workers decide to ask their employer to move them “on the books” and begin proper payroll reporting. If you choose this approach, it may be safer to:

• Make the request in writing so that you have a record
• Stay calm and professional, simply stating that you want taxes withheld and official records kept
• Be aware that an employer who reacts angrily or threatens you may be engaging in other violations as well

Many workers, especially those with uncertain immigration status or limited job options, may decide that direct conversation feels unsafe. In that case, skip this step and seek outside advice.

3. Talk to a Legal or Tax Professional

Before making a report, it is wise to get confidential advice about your specific situation. You can consult:

• An employment lawyer familiar with wage and hour law
• A tax professional or enrolled agent who can explain how to correct your own tax filings
• A nonprofit legal aid organization or worker center, especially if you have low income or are in a vulnerable position

These professionals can help you weigh the risks and benefits of reporting, and may also help you recover unpaid wages or secure safer working conditions.

How to Report an Employer for Under-the-Table Pay

Several government agencies can receive complaints about employers who fail to report wages or comply with labor laws. Which one you contact depends on your objectives.

1. Reporting Tax Violations to the IRS

If you want to report an employer for failing to withhold and pay employment taxes, you can submit information to the Internal Revenue Service. The IRS provides dedicated forms and hotlines for suspected tax fraud and employment tax evasion.²

• Provide as much detail as you can, such as the business name, address, how you were paid, and the approximate amount of unreported wages.
• You may be able to submit the report anonymously, although including your contact information can help if the IRS needs clarification.
• Reporting does not relieve you of your own obligation to file accurate tax returns; you may still need to amend past returns to include under-the-table income.

2. Filing a Wage or Labor Complaint

If your main concern is unpaid wages, minimum wage, or overtime violations, you can generally file a complaint with:

• The U.S. Department of Labor’s Wage and Hour Division for federal wage and hour issues
• Your state’s labor or workforce agency for state law violations

These agencies can investigate and, in some cases, recover unpaid wages on your behalf, even when you were paid in cash or off the books. They may request your personal notes, messages, and any other evidence of work performed.

3. Reporting Other Violations

Depending on what is happening at the workplace, there may be additional agencies to contact, such as:

• State workers’ compensation boards if you are injured and denied benefits due to off-the-books status
• Occupational safety and health agencies for unsafe working conditions
• Civil rights agencies if you experience discrimination or retaliation

Protecting Yourself When You Report

Many workers worry that reporting their employer will make things worse. While reporting always involves some risk, there are steps you can take to protect yourself.

• Anti-retaliation laws: Many employment and labor statutes make it illegal for employers to fire, demote, or harass workers for filing a good-faith complaint or cooperating with an investigation.
• Confidential or anonymous complaints: Some agencies allow you to keep your identity confidential or report anonymously, especially for tax fraud or safety issues.
• Document retaliation: If your employer takes negative action after you complain, keep detailed notes and records; these may support a separate retaliation claim.
• Seek legal help quickly: Time limits (statutes of limitations) apply to many employment claims. Contact a lawyer or legal aid promptly if you experience retaliation.

Practical Tips for Workers in Under-the-Table Jobs

If you are currently working off the books and cannot immediately change jobs, consider these strategies to reduce harm:

• Track your income carefully so you can report it on your tax return, even if your employer does not
• Save part of each paycheck for potential tax bills, since no taxes are being withheld automatically
• Keep copies of any schedules, messages, or notes that show you are working, in case you later need to prove your wages
• Look for alternative employment where you will be properly documented and protected
• Consult a tax professional about how to file or amend returns without putting yourself at unnecessary risk

Frequently Asked Questions (FAQs)

Q: Is it illegal for me to accept under-the-table pay?

Accepting payment itself is not automatically a crime, but you are required to report all income to the IRS and pay any taxes due, regardless of how you are paid. If you knowingly fail to report income over time, you could face penalties for underpayment of tax or, in serious cases, tax fraud.¹²

Q: Can I still get unemployment if I was paid off the books?

Unemployment insurance benefits generally depend on your recorded earnings with your state agency. If your employer never reported your wages, it may be difficult or impossible for the state to credit that income when calculating benefits, though some states allow you to present additional evidence of your work history.¹

Q: Will the IRS punish me if I report my employer?

Reporting your employer to the IRS does not automatically trigger penalties against you, but it also does not erase your obligation to file accurate tax returns. If you have unreported income, you may need to file or amend returns and could owe back taxes, interest, and possibly penalties. Speaking with a tax professional before reporting can help you understand your exposure.²

Q: Can my employer fire me for complaining about under-the-table pay?

Many labor and employment laws protect workers from retaliation when they raise concerns about wage violations, safety, or other legal rights in good faith. Whether firing you is unlawful depends on your jurisdiction and the specific facts, so document everything and consult an employment lawyer or legal aid group if you suspect retaliation.

Q: Is any under-the-table work ever legal?

Certain small, occasional payments – such as casual babysitting or odd jobs for neighbors – may fall below reporting thresholds for the payer, but the person receiving the money is usually still required to report the income on their tax return. For regular employment, especially in businesses with multiple workers, failing to withhold and report payroll taxes is generally illegal.⁴

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Author

Sneha TeteBeauty & Lifestyle Writer

 

Sneha is a relationships and lifestyle writer with a strong foundation in applied linguistics and certified training in relationship coaching. She brings over five years of writing experience to waytolegal,  crafting thoughtful, research-driven content that empowers readers to build healthier relationships, boost emotional well-being, and embrace holistic living.

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