Paying off-books can get attention of IRS

Can They Do That?

Your Money

October 17, 2004|By Carrie Mason-Draffen

My employer recently let me go for "poor job performance." Even though my supervisor claimed I was a lousy worker, they paid me cash off the books for working a Saturday. Is this legal? If not, is there an agency to contact?

You're linking unrelated issues. Companies don't generally make a distinction between productive and nonproductive employees in determining how to pay them. And the Internal Revenue Service doesn't care about the method of payment as long as the appropriate taxes are deducted.

"There is nothing wrong with compensating an employee in cash, but employment taxes are owed regardless of how the employees are paid," says the IRS in an April news bulletin.

However, companies that pay employees in cash raise a red flag because sometimes the employers simply want to avoid taxes.

"Paying employees in whole or partially in cash is a common method of evading income and employment taxes," the publication says.

It's interesting that you're disputing the payment method but not your dismissal. Perhaps this experience could serve as a catalyst for you to work on your job performance the next time around.

Meanwhile, if you need more information about whether you were paid legally, contact the IRS at 800-829-0433.

Carrie Mason-Draffen is a columnist for Newsday, a Tribune Publishing newspaper. E-mail her at yourmoney@

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