This article is part of a Q&A series on important employment law topics with attorney Kevin Wicka from The Tarantino Law Firm in Buffalo, New York. You can watch or read our entire conversation here.
I work at a children's party place. And I'm sure it works off the books. I get paid cash. Is that legal?
Kevin Wicka: I think there's a couple of problems going on with this particular employer. The first is just getting paid cash. Obviously, you have all sorts of tax issues. I'm not an accountant, but I can tell you, in general, if you're paying someone cash, you still are required to do your mandatory withholdings, there still have to be the proper insurances that are paid. To me, for most employers, using a payroll company, and I know it sounds like I'm just giving another plug here for Complete Payroll, but there are very specific rules as far as what employers have to have on their pay statements in order to be in compliance. And there are certain withholdings that they have to make sure they have.
They have to make sure they're withholding the proper FICA. You have New York State unemployment insurance. You have to have worker's comp insurance. If you could be audited by any of those entities, you have to be doing a payroll tax. All of those things have to be withheld and the employee has to receive a statement that says certain things on it as far as the rate of pay, their hours.
To be in technical compliance to do that on your own, cutting a check, for example, or just doing it by cash, it's really a challenge to ask an employer to do that without the benefit of having a payroll company that can do that for you. To me, it's just a no-brainer, in those situations, to make sure you're in compliance.
I don't know all the particulars of this particular employer. It sounds, though, like this one might be problematic for this employer.
CJ Maurer: Yeah. Yeah. The IRS will come after the taxes it believes it's owed.
Kevin Wicka: Not only the IRS, but the Worker's Compensation Board will.
If that employee is hurt and they don't have worker's comp coverage, that's a problem. If they are ... If they end up, for unemployment purposes, those contributions have to be made, so from the employee standpoint, too, it's not a good idea to be off the books because you don't have those important coverages. You're not contributing to your Social Security, as well. That's another issue. There are a host of issues with being off the books, cash only.