The underground economy of unreported income, from working jobs “under the table” is estimated at a whopping $2 Trillion by MoneyMorning. So is it a good idea to work under the table, at least to get your feet wet in the working world? Ultimately, no. In the long term we advise taking the legal route in your employment. However, working under the table can have its advantages short term.
What is Getting Paid “Under the Table”?
Some of the most readily available jobs to teenagers are paid in cash, and not reported to the government. These jobs are referred to as “under the table”,”off the books”, or “cash-in-hand” jobs. Just because you are paid in cash, does not mean that you’re working under the table, however. To be considered under the table, it has to be unreported employment – where both you and your employer choose not to file taxes or report your employment with the company to the IRS.
According to Findlaw, employers are legally required to report employment for any employee making over $1800 per year. This is about $35 per week. If you are within this range, find a new job. There are plenty of higher paying jobs for teens out there.
You most likely know someone that has a job like this, if you don’t already yourself. While these types of jobs are extremely common, they are not legal. Just like all things in life there are pros and cons to working off the books. A lot of times these employment opportunities come from a family member or referrals from friends. So if you find yourself in a situation like this, consider both sides, and think of the future.
Advantages of Working Under the Table as a Teen
There is one obvious advantage to working under the table – no taxes! There are also no legal restrictions such as maximum hour limits. So you could find yourself in a great position to make a lot of money in a short time. This is common with seasonal jobs like landscaping or snow removal. Without paying taxes, Social Security, or other deductions, you can count on getting your check in full, in cold hard cash. But can you really “count on it”?
Disadvantages of Working Off the Books Jobs
By working under the table, you’re playing a game of trust with your employer. Ignoring individual scenarios, the cons greatly outweigh the pros when it comes to unreported employment. In the eyes of the government, these workers aren’t really employed at all. With that being said, your employer can essentially do whatever he or she wants – including requesting excessive hours, random pay changes, or firing you without any notice.
You do not build official employment history.
Like we said earlier – as far as the government is concerned, these workers are unemployed. So what? Well, when it comes time for things like getting approved for an auto loan, or applying for your next job, you’ll have no past employment to show for.
Without this type of job history, you’ll also find it very challenging to build credit history once you turn eighteen. As you can see, holding this type of job for too long can cause you problems down the road.
You have no legal protection.
You’ve probably heard of things like unemployment and workers’ compensation, right? When you still make some money after you no longer have your job or if you get hurt on the job. These don’t exist when you’re working off the books. Just think about it, who’s there to enforce it when your employment is hidden from the government?
You miss out on all benefits and 401(k) opportunity.
As a teenager, benefits may not be a dealbreaker for you when it comes to finding a job. You’re most likely still under your parents’ insurance and don’t have to worry about that for years to come. But they’re still important to consider.
And what about 401(k)? This, you do need to worry about, and as soon as possible. Investing as a teenager is the absolute best thing you can do to better your financial future and securing an early retirement (yes, you should be thinking about that too).
Consequences of Working Under the Table as a Young Adult
Along with the disadvantages of unreported income, there are also risks. Realistically, most of the time the IRS has bigger issues to concern themselves with than your cooking job at the local restaurant. However, there is the possibility of facing legal repercussions for holding one of these jobs. Even if you are paid in cash, you are still obligated to pay taxes on the full amount you’ve earned. Otherwise, you could face charges for either failure-to-file or accuracy penalties, according to the IRS.
Even with legal trouble aside, there are other risks you need to consider. What happens if your boss decides not to pay you? Even though as an employer, he or she is breaking the law by employing under the table workers, you have no legal right to that money. You also run the risk of losing your job suddenly by your employer’s choice, or if they run into legal trouble themselves.