The underground economy of unreported income, consisting of all wages earned from working cash jobs or “under the table” that is not reported to the government and taxed. How big do you think it is in the United States?
Investopedia reports this underground economy estimated at up to a whopping $2.46 trillion – 11% to 12% of the entire country’s GDP (gross domestic product).  You’ll have to take these numbers with a grain of salt because they’re hard to report accurately… you know, because it’s unreported income. Either way, it’s huge.
Anyways, you want to know if it’s a good idea to work under the table, at least to get your feet wet in the working world? Ultimately, no. Working for cash can be tempting and definitely has its fair share of perks, but it’s important that you know the risks involved before making that decision. Cash payment doesn’t necessarily equal “under the table” or illegal. There are some cash jobs that are perfectly legal and great ways to gain invaluable experience at a young age. But, get mixed up in the wrong situation and you could face some severe consequences.
What is Getting Paid “Under the Table”?
Some of the most readily available jobs to teenagers are paid in cash. These jobs are often referred to as “under the table”,“cash-in-hand”, or “off the books” 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 (Internal Revenue Service).
The minimum income needed to file taxes varies depending on how old you are and your filing status. According to H&R Block, you’re legally required to file taxes if you make at least $12,200 per year, filing as Single under the age of 65. If you’re below this range, you legally do not have to file a tax return. However, you’ll likely want to find a higher paying job eventually. Trust us, filing taxes is worth it, and there are plenty of good paying jobs for teens out there.
You most likely know someone that works a cash job. These types of jobs are extremely common for young adults to take on during high school or college to make a little extra cash without committing to a full time position. But when it comes down to it, if you’re not filing taxes at the end of the year, it’s 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
Weighing the pros and cons of working under the table if an opportunity presents itself to you is kind of tricky – many of the “pros” now, could turn into “cons” later. Working off the books will catch up to you eventually, so we would never recommend this as an avenue for long-term employment.
Some short-term perks and advantages to getting paid cash:
No taxes or other deductions
Anyone who has ever received a paycheck knows not to expect your salary’s worth… taxes and deductions can seem insane sometimes. So by not paying taxes you get more money in your pocket, but still not legal. Sorry.
Get paid instantly
This can be a positive for many cash jobs, but also comes with its fair share of uncertainty. Getting handed cash right at the end of your shift is a nice change from waiting every 2 weeks, but keep in mind that there’s nothing guaranteeing that cash.
No legal hour restrictions
You could find yourself in a great position to make a lot of money in a short time if you’re willing to put in some crazy hours.
Disadvantages of Working Cash 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.
You may face inconsistency in pay and working hours
Without the protection of employment laws, there is nothing stopping your employer from switching things up on you without any notice. That could mean pay cuts, lack of overtime pay, too many or too few hours, or requiring work on holidays.
We mentioned having no legal restrictions on hours as a potential pro before – you can see how it could also be a negative depending on the scenario.
There’s no minimum wage
Hopefully you wouldn’t take a job that pays too much less than minimum wage, but employment can be intimidating when you’re first starting out. We get it – we’ve been there. The fact is, there is no “minimum wage” when you’re working illegally.
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.
Your debt-to-income ratio
Along with not having proof of income, your debt-to-income (DTI) ratio will make securing financing through a bank or private lender near-impossible. You’ll still have bills – music streaming, phone bill, etc. But legally you have no income to pay for it. Regardless of if you have the cash or not, lenders focus on risk. When you have no legal income, you’re a big risk to a lender.
You won’t be eligible for workers’ comp or unemployment
You’ve probably heard of unemployment and workers’ compensation, right? These types of programs allow for individuals who are let go from their jobs or hurt to still make some money until they have the ability to work again. 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 deal breaker 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.
A 401(k) is one of the basic retirement accounts that most people have. At a young age you’re in the best spot to get the most value out of a 401(k) account. Learning how to invest 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).
Risks of Working Under the Table as a Teen
The list of disadvantages to working under the table above is pretty serious, but that’s just if you don’t get caught. 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 a job that earns unreported income. 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.
“Employees who do not have taxes withheld nor remit them personally, are still liable for these taxes and may not qualify for Social Security, Medicare, or unemployment benefits.” – IRS
Even with legal trouble aside, there are other risks you need to consider. What happens if your boss decides not to pay you at all? 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.
Consequences for Paying Employees Under the Table: The Employer’s Perspective
As an employer, the penalty for paying workers under the table and evading taxes can be far more severe. Getting caught by the IRS could definitely mark the end of a business – and the end of a job for its employees. This isn’t always the case of course, depending on the size of the business. However, many of the companies who choose to pursue unreported employment are smaller companies, who don’t have the financial backing to rebound.
Depending on the severity of the employer’s bad decisions and other factors, there may be lesser repercussions. It will also depend on if the tax evasion is classified as an “inadvertent error” or a “willful act”. Of course, if it’s deemed to be a willful act that was known and ignored there are greater consequences.
The Best Cash-Paying Jobs for Teens
Now you know all about working for cash!
- When it is illegal and considered “under the table”
- The Advantages
- The Disadvantages
- The Risks
Maybe you’re looking for a summer job between school semesters, or maybe just a part time job while in school. You’re armed with knowledge, so if you decide that a cash job is the right next step for you – here are some of the best cash-paying jobs that you can get as a teen.
Server / Bartender
Being a server or bartender may not be all cash, but depending on the restaurant or bar you work at, you could be looking at a nice amount of money to take home at the end of each shift. If you’re able to find a higher-end place with a lot of traffic, you can make great money. The other advantage is that many restaurants offer part time positions - which can make accommodating for school or other commitments much easier.
Working for cash as a babysitter is relatively low-risk, especially when working for someone you know personally. These jobs are often low on hours, which makes it great for collecting some extra cash without disrupting school or other activities. And if it turns out that you enjoy babysitting, it could lead into a full time career as a Nanny.
If you like working outdoors, this may be the perfect short-term job for you to collect an extra bit of cash. Full time landscaping and maintenance companies can be pricey, but yardwork is still a pain to do yourself as a homeowner. Handling odd jobs like lawn mowing, edging, yard cleanup, leaf cleanup, and snow removal can prove to be pretty lucrative if you’re able to gather a few nice clients.
Don’t mind cleaning? An independent cleaning service could be a great option for you. A lot of people start with cleaning for friends and family and then expand through word of mouth referrals. Depending on the extent of what you’re cleaning and as you gain experience, you could grow to charge far more than $15-20/hour as well.
If you have the artistic touch, you may have thought about selling your work or doing commissions in the past. You’ll have to work through the business side of things to establish effective marketing and set your prices. If you can work through that, you could make a nice chunk of change doing what you love - and who knows where it’ll end up, the sky's the limit!
Garage Sale / Online Selling
Looking to get rid of some clutter? If you have a lot of old things that you don’t need anymore, you could consider listing them for sale. Who knows, you might find out you’re good at it and enjoy it enough to consider dabbling in flipping things you buy to make money. Thrift shops and couponing can be good ways to cut costs if you’re looking to sell for a profit.
Renting a Room or Car
There is a certain degree of trust that comes with this one - but it’s becoming increasingly popular to rent out your things while you’re not using them for some side cash. Renting out your car on sites like Turo, or your house on sites like Airbnb won’t exactly pay you cash, but it’s a great way to make some passive income if your situation allows it. If you’re comfortable with your customers and would prefer the cash route, you could always create a more informal deal following the same concept.
Pet Sitting or Walking
A pet lover’s dream - getting paid to hang out with new animals. Well, it’s not all sunshine and rainbows, but it can be a pretty great way to make some money if you’re good with pets. When pet owners go out of town, they’ll often look for someone to look after their pets. If you’re open to it, you could go beyond walking or watching them for a few hours and charge more for overnight or long-term pet sitting.
Returnables & Scrap Metal
If you’re into collecting and have a truck or large vehicle, you could look into turning in scrap metal. It’s also a lot easier if you live in a state that offers a deposit on certain recyclable materials like soda cans or bottles. This can be difficult if you don’t have the means to collect or store it. But if you do, you can watch scrap prices and maximize your money.
Teen Finance Tips references research from industry experts and reputable industry publishers to support claims or data in our content when applicable. Learn more about our publishing standards and practices in our editorial guidelines.
- Investopedia - How Big Is America's Underground Economy?
Accessed: December 31, 2020