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I am retired and am working part time basically just to keep busy.  I am also collecting social security but, due to my age, I can earn as much as I want without it reducing my SS so that isn’t an issue for me.  I came across a job last Jan at a local business (a national franchise whose owner has just 1 store) where I can and do literally walk to work.  The hours are good, the job is relatively easy and I enjoy working there.The dilemma is this.  The owner refuses to pay me properly.  He only wants to pay me “under the counter” and by check.  I have been fighting him with this over the 10 months I have been working there.  I WANT TO show this income and be paid properly.  I have wrangled about 5 months “on the books” payments out of him but his other 2 employees (kids in their 20’s) have never been paid properly and don’t care (not my problem).  Going forward in 2014 he refuses to pay me “properly.”I don’t want to quit. It’s just too convenient.  My question is: Am ** I** “protected” from IRS issues if I simply report all the income (he pays me by check!!!) in January as misc income? I don’t care what happens to him for improper payroll procedures, just me.  I do have a federal EIN number from a part time business I had and I could even report it as income for that business.  I don’t really make enough there to even have to report estimated taxes but I do anyway.My concern is the legal (IRS, STATE) issues I may create FOR MYSELF working there.  Am I “safe” if I simply report everything I get paid from him? Since the dummy pays me by check (that is his cash) if he gets audited HE’S screwed. I just don't want to give up the convenience of this.

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Understood.   Nothing to do with an IRA (I can anyway because my wife still works although not for much longer).

MisterEd (Nov. 05, 2013 @ 7:04a) |

Someone posted your comment on this website, there are other good answers to your inquiry: http://www.dailypaul.com/3044... (more)

eddierd (Nov. 05, 2013 @ 8:37a) |

I would just state, part-time employment.  Good luck with your tax filings.

malamoose (Nov. 05, 2013 @ 9:53a) |

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You should probably be an employee, meaning the owner should be withholding taxes and paying payroll taxes on your wages. Read here    about the difference between employees and independent contractors. But if your employer refuses to treat you as an employee and you want to continue working there, I'd suggest putting the earnings on a Schedule C on which you will pay self-employment tax. Putting it as 'other income' not subject to SE tax could be an audit flag. You could report him to the IRS, but if you want to continue working there that's probably not the route you want to take.

If you report your income yourself then you should be fine.

MisterEd said:   I do have a federal EIN number from a part time business I had and I could even report it as income for that business.  I don’t really make enough there to even have to report estimated taxes but I do anyway
you will also have owe 14.2%(or whatever) for FICA tax, and additional for other taxes
 

vranaco said:   You should probably be an employee, meaning the owner should be withholding taxes and paying payroll taxes on your wages. Read here     about the difference between employees and independent contractors. But if your employer refuses to treat you as an employee and you want to continue working there, I'd suggest putting the earnings on a Schedule C on which you will pay self-employment tax. Putting it as 'other income' not subject to SE tax could be an audit flag. You could report him to the IRS, but if you want to continue working there that's probably not the route you want to take.
You are right.  I SHOULD be because I am.   He just doesn't want to pay taxes because he's paying the other 2 the same way.  He also should be providing me with a 1099 if HE considers me a private contractor since I make more than $600 which would prove (if he gets audited) that he's simply avoiding paying taxes.

Some smallish employers pay under the table. I had a job one summer at a pizzeria, the owner doesn't want to be hassled with a lot of paperwork, and his margins are so slim he was barely taking home any money himself.

In your case sounds like you are going to have to weigh the benefits of having a job that you can walk to with the drawback of no withholding and I assume no other benefits beyond getting paid in cash. Simply put, how much do you like your job, and how easily could you find another job?

In terms of the IRS, I am fairly certain that as long as you declare all the income you make, be it paid in cash, check or any other form, you will be obeying all relevant tax laws. Your employer is the one who could get into trouble. But again, that's his problem, and in my experience some people just can't handle the "paperwork" aspects of their business, competent as they may be with other aspects of the business.

Explain to him that all you want is a 1099 at the end of the year.
It will reduce the taxes he pays.

Couldn't you basically report him to the NLRB? The NLRB is essentially a free lawyer for you

I had a similar problem, OP. I had a girlfriend of several years who just didn't want to spend the night. She'd come over, we'd have amazing sex, and she'd leave. Anytime I would talk about marriage, she would freak out. She was by far the hottest girl I've ever dated and I wanted to keep dating her.

It was like all the best parts of the relationship with none of the bad parts. I feel your pain, OP. The only answer is to quit and find a job that sucks where you are able to pay your fair share in taxes.

This is a very simple "problem" to solve as vranaco posted...

1. Report the earnings on your tax return as self employed income. You'll pay whatever regular tax rate + self employment taxes (@14%). You'll then be able to deduct certain expenses related to you working... like 1/2 of your self employment taxes (that @ 14%).

2. Know that you most likely aren't being covered by workers comp or unemployment... because he isn't reporting you as an employee.

3. That's it. Period. Done. No need to hassle him for any paperwork or ask some government agency or attorney swat team to swoop in and ruin his business (and your job).

vranaco said:   You should probably be an employee, meaning the owner should be withholding taxes and paying payroll taxes on your wages. Read here     about the difference between employees and independent contractors. But if your employer refuses to treat you as an employee and you want to continue working there, I'd suggest putting the earnings on a Schedule C on which you will pay self-employment tax. Putting it as 'other income' not subject to SE tax could be an audit flag. You could report him to the IRS, but if you want to continue working there that's probably not the route you want to take.  

You don't have to use Schedule C. Just use Other Income on the 1040 and fill out Schedule SE for the SE taxes.


  • If he pays you off the books, it means he can not take a tax deduction for your pay.  If he does not care about a sizable tax deduction it means he is not paying taxes on his business profits.  Either because he is not filling a business tax return or he is telling the IRS his business makes no profits.
  • It is possible he will be informing the IRS about your income.  You can not know for sure.
  • You don't need a EIN or a business in order to report the income as self-employment income.
  • You have to report this as on Schedule C, because you owe FICA taxes.
  • If he is willing to cheat the IRS out of some taxes, it would be logical to assume that he would also be willing to cheat you.  It would be hard to prove he is cheating you if there are no records.  I knew someone who pay his employees "off the books"... two of his employees stole money from the cash register... kind of hard to prove if you don't have proper records.

BradMajors said:   

  • If he pays you off the books, it means he can not take a tax deduction for your pay.  If he does not care about a sizable tax deduction it means he is not paying taxes on his business profits.  Either because he is not filling a business tax return or he is telling the IRS his business makes no profits.


Or maybe because a small business with three employees, like the OP describes would be paying $2k to $5k per year to a payroll service and accountant to handle the paperwork to issue checks and W2s. Plus $500 per year per employee for unemployment insurance. Plus some other kind of business employee liability insurance. Plus the employer share of FICA taxes of 7.5%.

If this business owner has three part time employees that he pays a total of $30k per year to then by not declaring them as employees, he might be saving more money than the tax write off. Or maybe the owner has some general employee sharing program that lets him put significant portions of employee salary into 401ks, completely deferred from federal and FICA tax and is giving his wife and kids no-show jobs.

Regardless, the OP's best solution is to tell the owner to pay him in cash, not a check, and then stop worrying about backtaxes since there won't be a papertrail.

woowoo2 said:   Explain to him that all you want is a 1099 at the end of the year.
It will reduce the taxes he pays.

  Tried that ....  didn't work.  By the way, he's an accountant by trade (not related to the business) so he knows what he is (not) doing.

Kanosh said:   Some smallish employers pay under the table. I had a job one summer at a pizzeria, the owner doesn't want to be hassled with a lot of paperwork, and his margins are so slim he was barely taking home any money himself.

In your case sounds like you are going to have to weigh the benefits of having a job that you can walk to with the drawback of no withholding and I assume no other benefits beyond getting paid in cash. Simply put, how much do you like your job, and how easily could you find another job?

In terms of the IRS, I am fairly certain that as long as you declare all the income you make, be it paid in cash, check or any other form, you will be obeying all relevant tax laws. Your employer is the one who could get into trouble. But again, that's his problem, and in my experience some people just can't handle the "paperwork" aspects of their business, competent as they may be with other aspects of the business.
 

  
The part I underlined above is ALL I am concerned about.  I like the job because of it's convenience.  At my age (almost 70) it's not like I have a huge selection of opportunities.  The gas savings (no driving to work) and the convenient hours are why I want to keep it.
 

nasheedb said:   Couldn't you basically report him to the NLRB? The NLRB is essentially a free lawyer for you
I could also report him to the IRS or the State tax authorities but why would I want to do that?  Maybe if he fires me I'd consider that. 

BradMajors said:   

  • If he pays you off the books, it means he can not take a tax deduction for your pay.  If he does not care about a sizable tax deduction it means he is not paying taxes on his business profits.  Either because he is not filling a business tax return or he is telling the IRS his business makes no profits.
  • It is possible he will be informing the IRS about your income.  You can not know for sure.
  • You don't need a EIN or a business in order to report the income as self-employment income.
  • You have to report this as on Schedule C, because you owe FICA taxes.


1) He's an accountant.  He knows what he's doing re: deductions etc.
2) Not a chance in hell.
3) I'm aware of that, it was just added info.
4) Understood

The owner is evading payroll tax, and also income tax because it is most likely that he is hiding income. That is why he is not interested in paying wages and doesn't need a deduction to offset unrecognized income. He is also likely not paying sales tax. In effect, he is money laundering. He is also cheating the corporation that sold him the franchise out of royalties. If this is a cash business, he may have other illegal activities that he uses the business to clean his dirty money.

If he is audited, he will claim that he paid you much more than he did, and in cash. How will you prove otherwise? You may be subject to additional taxes and penalties which could be taken from your government checks.

If you work there and claim all of your income as self-employement, good luck but you are dealing with a person who will be quick to throw you under the bus when the federal or state taxing authorities, the state labor board, or the franchise corporate headquarters wise up to his crooked operation. It would only take a phone call from one of the 20-somethings looking for unemployment benefits or workers compensation.

Added later in response to OP:  If he is audited and then issues you a 1099 for more than you were paid...what are you gonna do?  I've seen it happen and the recipient is pretty much stuck.  So, keep really good records, I have advised people in your situation to make copies of all checks.

ninasgramma said:   The owner is evading payroll tax, and also income tax because it is most likely that he is hiding income. That is why he is not interested in paying wages and doesn't need a deduction to offset unrecognized income. He is also likely not paying sales tax. In effect, he is money laundering. He is also cheating the corporation that sold him the franchise out of royalties. If this is a cash business, he may have other illegal activities that he uses the business to clean his dirty money.

If he is audited, he will claim that he paid you much more than he did, and in cash. How will you prove otherwise? You may be subject to additional taxes and penalties which could be taken from your government checks.

If you work there and claim all of your income as self-employement, good luck but you are dealing with a person who will be quick to throw you under the bus when the federal or state taxing authorities, the state labor board, or the franchise corporate headquarters wise up to his crooked operation. It would only take a phone call from one of the 20-somethings looking for unemployment benefits or workers compensation.

  I agree with almost everything you say, and that is what has concerned me but as far as a claim that if he is audited he paid me more in cash than I reported I think he'd have a very difficult time proving that. In fact, ANY EMPLOYER could claim that even if someone was paid ON the books. It would make no difference.  THAT specific item doesn't concern me. 

I am a retired IRS agent. I have seen this many times, employees or others being paid off the books. I applaud your ethics in wanting to report the income. I know it is difficult in dealing with your current employer in trying to have him give you a 1099, etc. I would recommend you report the total income on your 1040 and state return as miscellaneous income and pay the appropriate income taxes. You will need to identify the source of the miscellaneous income. I agree with other OP's posts. Your employer has his own responsibilities in handling his business affairs and his bookkeeping aspects. Unfortunately with todays resources involving the IRS field activities, the failure of your employer not properly treating the wages paid to you and other employees might be too small for them to even use any resources to examine his accounting and tax activities.

Sounds like you have a dream job. Why rock the boat?

whodini said:   Sounds like you have a dream job. Why rock the boat?
 
Rocking what boat?  I'm trying to do just the opposite, besides I certainly wouldn't call a $9/hr job a "dream job."  I just want to report my income properly yet keep my convenient part time post-retirement job without causing problems. A job that keeps me, at 69yrs old busy & active and pays for some nice dinners out.  

malamoose said:   I am a retired IRS agent. I have seen this many times, employees or others being paid off the books. I applaud your ethics in wanting to report the income. I know it is difficult in dealing with your current employer in trying to have him give you a 1099, etc. I would recommend you report the total income on your 1040 and state return as miscellaneous income and pay the appropriate income taxes. You will need to identify the source of the miscellaneous income. I agree with other OP's posts. Your employer has his own responsibilities in handling his business affairs and his bookkeeping aspects. Unfortunately with todays resources involving the IRS field activities, the failure of your employer not properly treating the wages paid to you and other employees might be too small for them to even use any resources to examine his accounting and tax activities.
  Good advice and thanks (of course, this is "The Internet" so I really don't know if you are who you say you are) but despite that it sounds like what my plan will be.  My only question is, when you say "identify the source of the miscellaneous income" do you mean actually list the specific place I am employed or just say "part time work?"

Have you asked him to pay you in cash?

dishdude said:   Have you asked him to pay you in cash?
  Makes no difference to me although it probably would be smarter for him.  Either way it is my intent to show it as income.  I want to show income (as little as it may be) for many reasons.

The taxes issue should be fairly straight forward for you fed or state. In your position I would be more concerned with workers comp. insurance in case of an on the job injury. from a cut finger to robbery if you are not " on the books" the bills would be yours.

Good advice throughout the thread.  You just need to declare your income properly (just keep track of all the checks in a little notebook or something), enter it in your taxes correctly and you're done - end of your responsibilities.  My wife is a piano teacher and gets paid "under the table" by everybody because there is no other way - she gets checks and cash every week, and writes it all down.  Think of yourself as a self-employed consultant.  I'm self-employed and have clients that don't issue me 1099's after literally writing me checks for $60,000.  It's not my problem, I declare the income. 

The one issue (but it's not YOUR problem other than you're not getting benefits) is that if you meet all the criteria of an employee (do you get to set your own hours?) then your "client" could run into some troubles, but if you're ok with the arrangement of not getting benefits, then it's nothing off your skin.

rentalman said:   The taxes issue should be fairly straight forward for you fed or state. In your position I would be more concerned with workers comp. insurance in case of an on the job injury. from a cut finger to robbery if you are not " on the books" the bills would be yours.
  That's one of the reasons I want to be "on the books" however we have excellent medical insurance as my wife works for the State.  There are some advantages to collecting through workmens comp but the chances of me being injured on this job are pretty slim.  However I believe that if the employer is not reporting me "legally" he is still on the hook or subject to lawsuit.

bluegreenturtle said:   Good advice throughout the thread.  You just need to declare your income properly (just keep track of all the checks in a little notebook or something), enter it in your taxes correctly and you're done - end of your responsibilities.  My wife is a piano teacher and gets paid "under the table" by everybody because there is no other way - she gets checks and cash every week, and writes it all down.  Think of yourself as a self-employed consultant.  I'm self-employed and have clients that don't issue me 1099's after literally writing me checks for $60,000.  It's not my problem, I declare the income. 

The one issue (but it's not YOUR problem other than you're not getting benefits) is that if you meet all the criteria of an employee (do you get to set your own hours?) then your "client" could run into some troubles, but if you're ok with the arrangement of not getting benefits, then it's nothing off your skin.

  If he gets into trouble that's his problem.  There are absolutely no (fringe) benefits from this job no matter how I'm paid. 

OP - A suggestion, if I may.
Why not look for a job in government, particularly local government. Something at your town hall or public library, for example.
Government employers do not discriminate based on age (nor should anyone else, but government usually follows age discriminate law scrupulously. Government work generally comes with good benefits and of course documented income for tax purposes.

The only downside is it takes a while to get hired, however I suspect you have the patience to wait them out and go through whatever hoops they may have.
And personally, when I'm at a town hall with a question or whatnot, I prefer dealing with older employees - they have a lot more life experience and can usually be more helpful than the younger employees as they simply tell things as they are.

OP, I wouldn't want you on my team.  Just a fact.

OP will soon have a lot more free time to enjoy his retirement.

Better call Saul!

With the New Affordable Care Act rules coming down the pike, I fear we will see more and more small business employers try things like this.

The Shape of Things to Come

Cheers

OP trying to bite the hand that feeds him.

Wizard83 said:   With the New Affordable Care Act rules coming down the pike, I fear we will see more and more small business employers try things like this.

The Shape of Things to Come

Cheers

  His employer is paying all 3 employees off the books -- no taxes at all, no FICA, no workman's comp insurance, no state taxes, nothing. The guy is committing major fraud, he's an accountant, so knows what he's doing is illegal. I seriously doubt such wholesale fraud has anything to do with Obamacare. The OP said the business is a national franchise -- most of those are pretty careful about vetting operators finances, so it is likely the guy is just greedy and freeloading on the rest of us. There is  a minor possibility he can't make it by playing by the rules, but then he should close up shop, not violate numerous employment laws. 

jigsaw1975 said:   OP trying to bite the hand that feeds him.
  The hand that feeds him is biting all the rest of us, and might end up biting the OP, too, when the rubber meets the road. 

jigsaw1975 said:   OP trying to bite the hand that feeds him.
  WTF are you talking about?

jumi said:   
Wizard83 said:   With the New Affordable Care Act rules coming down the pike, I fear we will see more and more small business employers try things like this.

The Shape of Things to Come

Cheers

  His employer is paying all 3 employees off the books -- no taxes at all, no FICA, no workman's comp insurance, no state taxes, nothing. The guy is committing major fraud, he's an accountant, so knows what he's doing is illegal. I seriously doubt such wholesale fraud has anything to do with Obamacare. The OP said the business is a national franchise -- most of those are pretty careful about vetting operators finances, so it is likely the guy is just greedy and freeloading on the rest of us. There is  a minor possibility he can't make it by playing by the rules, but then he should close up shop, not violate numerous employment laws. 

+99999 but that is another discussion.  I'm just trying to make sure MY ASS isn't exposed and (other than if he goes bust) I keep the job.    
 

Skipping 54 Messages...
I would just state, part-time employment.  Good luck with your tax filings.



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