I don't have stories for you, but also consider that going legit will help your employee be able to qualify for apartments and loans and receive social security later in life.

The IRS audit isn't the highest risk actually. Unemployment claims in the biggest one, followed by workers comp, and then wage board claims. Then after that it's when the employee realizes they can get more tax credits, disability, social security by properly reporting the income. They file and report the income, which involves a form turning in the employer. There is no statute of limitations on this.

If you're paying a nanny or something similar, all it takes is them filing an SS-8 with the IRS if you somehow slight or wrong them. Then comes the pain train

People get caught all the time.

When employees discover they can't rent an apartment or get a car loan because they have no documented income, they'll come to Reddit and ask what to do. People can be very helpful here...lol.

In addition to not having documented income, your employee won't be earning any social security credits (unless they are legit self-employed and pay the required taxes) and won't be able to contribute to an IRA (unless they have other earned income they pay tax on).

P.S. The employer share of social security and medicare tax is 7.65%, not 15.3%.

Isn't it more on the worker as an independent contractor? They are responsible for paying their own income tax.

She's probably right about the risk of an audit. But all it takes is one disgruntled employee to ask here and get full instructions on how to report their employer.

If you're compensating your employees enough that they're all happy as Scandinavians, then you can afford the payroll taxes. If you're not compensating your employees enough then you can't afford not to pay the payroll taxes.

Do it right. I just worked for this dude and he claimed he was “holding my overtime” time rolled around and the season slowed down and asked for it back and got every excuse in the world other than the truth. I thought I was helping him by him not needing to pay me the OT and figured he would get it back around tax time with the way his “business” runs. Thankfully I got my dad on also and he witnessed this dude feed me this utter line of BS.

Morality of it avoid ANY complications with ANYONE and just do it by the book.

The repercussions will cost far more than that 15%.

Ask Joseph, he’s doing prison time soon. ❤️

Payroll taxes are who to worry about, that involves not just the IRS but the state DOR as well. The state DOR is what you want to really worry about, they're a lot more hungry than the IRS and have more time on their hands.

What kind of work are you having done? Why aren't these just contractors? Is this like a babysitter or housekeeper?

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And, depending on one’s ambition, a background check or reporter finding out that you employed someone under the table is not a good look. (Doing it the right way is the right thing to do, whether you get caught or not.)

>Isn't it more on the worker as an independent contractor?

Only if they meet the IRS criteria for self-employment. OP has implied they don't (such as a regular nanny).

If you're talking about a contractor (e.g plumber, carpenter, etc.), it largely falls on them to report income.

If you're talking about a caregiver, cook, cleaning staff, etc, then you need to start withholding Medicare and social security if they make more than $2,100/year.

This is a housekeeper that comes to the house 3 times a week

My spouse's grandmother was quite wealthy and employed a full-time housekeeper/cook for decades. Then in came time to retire and the worker had no social security or Medicare because she was paid under the table all that time. The grandmother was wondering if she should give the woman some money to live on. I don't know what she eventually decided to do.

The key is to make sure they are classified correctly. You can't just throw a 1099 at anyone, even though a lot of people sure would like to *and they do it, even though it's not advisable!

https://www.irs.gov/businesses/small-businesses-self-employed/hiring-household-employees

It's not about income taxes, it's about the other things like social security, medicare, unemployment and workers comp, etc.

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It’s a felony. People do get caught. What’s even more likely, though, is that years down the road the person needs to legitimize their income so they file a form saying you fails to give them a W2. Then you’re on the hook for all of the taxes (and penalties) even if criminal charges aren’t bright. It’s also a felony…

Honestly, just use a service instead of treading into that water right there. It'll save you the headache and the idea that something may show up in the mail one day.

As others have stated, disgruntled people can easily send the DOR after you. What happens if they get hurt in your house? How are you going to take care of them? Homeowners insurance is going to sniff around about why they were changing your light bulbs or something like that if it's not just "stepped off the porch wrong" kind of thing.

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So I hired a painter, told him I would pay him in cash. Right after the job was done and he was walking out the door they swarmed me. Told me they had been watching us for a while and knew exactly what we were up to. Took a ride downtown.... intense questioning, lie detectors, interrogated to the max. They tried to tell me they knew I did this all the time and to come clean. I denied everything and told them I wanted a lawyer. After years of legal battles and tons of money spent I was definitely scared straight! Never again will I even think about doing something so wrong. I mean just think about the kids. What if my 11 yr old walked in the room and saw that?? He would be scarred for life.

This right here exactly as above

OP says it’s a housekeeper. Based on your link, it sounds like a housekeeper who brings their own cleaning supplies and just gets down to business would be an independent contractor.

My grandmother used to do housekeeping jobs "under the table" and at some point she thankfully realized that she wouldn't be getting any social security that way. So that got her to take a legitimate job!

My dad keeps telling me one of his brothers is suffering the consequences because he too wasn't always doing reported labor either. They're all in their 70s now and a couple of them are disabled from years of hard work. One has their comfortable retirement checks and the other one does not due to their work not being recorded and social security not being paid.

This is such a real issue that nobody thinks about until they're 70+ and still working their asses off because they seriously cannot retire,t here's no funds there to do so!

At least your spouses grandmother realized that she was to blame for that and thought about maybe fixing it. It would have been so much easier and less of a stress on everyone if they had just been able to do it all right from the start :( Lots of those employers have no sympathy for the person in the end, since it's a "I paid you for all the work you did, should have saved better, I guess!" D: D: D:

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Exactly, housekeeping is one of those things that can go either direction.

We hire through a janitorial company. The janitorial service happens to be ran by a single person, who does all the work themselves. They come within a window (standing appointment weekly) and bring all their own gear. The only thing we offer is the consumables because I'm not paying them to buy me trash bags and toilet paper but they offer that service if one wants it!

But if you have A Person come in, say every Monday 9am-12pm. And you have a set routine for them and they use your equipment in your closet to do it. Then that's an employee.

I don't believe this.

Or the employee slips and falls and is now in a really tough spot. Needs benefits or unemployment etc

Nannygate

https://en.m.wikipedia.org/wiki/Nannygate

Then looking to retire and looking for social security payments.

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"The only people who can legally collect benefits without paying into Social Security are family members of workers who have done so. "

They're not your employee, they're someone you're hiring to clean your house. It's on them to decide how they report that money.

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Now I'm imagining your cleaner stealthily arriving every week through a window, and leaving you with a clean house.

I slipped and fell in this person's house. Points at you. Now my back hurts and I can never work again. I want $1Million dollars. Also they never paid me my wages and just gave me some cash one time, I think they are exploiting immigrants.

If you let people in your property who are not under a contract and are not bonded and insured, you are a fool.

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Yes, and the scariest part is they won't qualify for Medicare if they don't get those 40 quarters of work in.

Elderly and no healthcare is pretty scary.