Is it Worth Paying Employees Under the Table?
Is it Worth Paying Employees Under the Table?
Let’s face facts, it can get confusing handling a business’s finances. Payroll alone includes having to figure out things like figuring out tax reductions, keeping records, reporting employee’s income, etc and so on. The good news is that there is a way to avoid all of that. You can just pay your employees under the table. For those unfamiliar with the term, paying an employee under the table means they get paid off the record. You give them cash for their time instead of an official paycheck. No taxes, no reporting, and no confusion. This is more commonly found in smaller businesses. There is a catch though, if you are caught paying your employees under the table, a whole world of stress is going to land on your shoulders.
Why do we pay taxes? Because taxes are kind of like the rent we have to pay to live in this country. They pay for our infrastructure, our schools, our government funded programs, and much more. Not everyone likes paying them, but simply put, taxes keep our country in motion. When you don’t pay taxes, you are not doing your part to help keep America moving forward. If that rousing speech didn’t convince you that paying employees under the table isn’t worth the risk, this next part sure will.
Penalties of Not Paying Taxes
You are reliable for the employment taxes that have to be paid for your employees. There is no way around paying them. If you pay an employee a regular paycheck, the taxes will be taken out from what they earn. If you pay an employee under the table and the IRS finds out about it, you are going to have to pay all that money yourself, and then some. Sounds bad right? Well that is just the beginning. It can get far worse than just paying the taxes with your own money. There is also the fact that paying employees under the table is illegal, and carries the same risks as any illegal activity.
Can you really get put in jail for paying employees under the table? Absolutely, in fact it is not an uncommon site to see employers face jail time for it, along with paying fines for it outside the taxes that they owe. Sometimes the jail sentences can be lengthy as well, depending on how long you have been paying employees under the table, and how much tax money wasn’t paid because of it. In Massachusetts, for example, groups found paying their employees faced a possible 57 years in prison.
What Happens to Employees
The part that is worse than what happens to you, is what can happen to your employees. They know they are getting paid under the table, and yet are not reporting it to the IRS. This is kind of like being guilty by association. It gets more severe if they ever get audited. If the IRS finds out they have been getting paid more than they are reporting when they are filing their tax returns, they face fines for the taxes, along with potential jail time. It goes without saying if one gets caught, the other gets caught as well. So if you pay employees under the table and get caught, the employees are likely to go down with you.
Even if you get away with it, you are still hurting your employees more than you are helping them. Because they are getting paid off the record, when they apply for loans for homes, cars, or just in general, there will be no record of pay stubs, something that many loan companies look at. When it comes time to retire, the entire time they were getting paid under the table isn’t going to show up on their social security payments, meaning they might end up with less retirement payouts.
We can understand the temptation of taking a short cut and paying employees under the table, and hopefully you now understand the extreme risks of it. Luckily, there is another way that you can do payroll without worrying about all the complicated parts of it. Vision H.R. has an experienced staff that can handle your payroll effectively, make sure your employees get paid on time, and keep detailed records of your payroll. All you have to do is make the money. Visit Vision-hr.com today for a free quote.
