Paying "Under the Table"


#1

Any thoughts on these types of arrangements? I know they are common for babysitting and other odd jobs, especially for young people. Legally speaking, I know these types of income are supposed to be reported, but it’s also not regularly enforced (I know I never got a tax form at the end of the year from the families I babysat for as a teen!)

So where would you/do you draw the line? Every last cent needs to be reported? Is it different if it’s a kid, teen or adult? Type of work? Under a certain amount is “no big deal”?

Also, if it is sinful, is it considered grave matter? After all, not reporting income is considered by some to be stealing from the government. Curious to know your thoughts on this widespread practice.


#2

The IRS rule is if you pay a specific worker more than $600 for the year you should report it. That rules out many babysitters and parents from reporting requirements.

If the babysitter is irregular, I wouldn’t even worry about it. If they are regularly babysitting for you, then you should report it. And there is no requirement that you can’t pay by cash for everything. Paying by check is just helpful if you wish to deduct the expenses on your own taxes, as it helps to track the amounts.


#3

So cash makes it harder to track, but that doesn’t address my concern about morality. Is it if the government doesn’t care, then the parties involved don’t need to, either?

I also wonder about this because often the worker is working for under stated minimum wage requirements, or may not have the legal qualifications.

So, for example: I’m thinking about babysitters in my state. If it’s regular care (more than a date night/week), they are supposed to have a degree in childcare with 2 years paid experience in a facility before they can work as a provider independently. So is it morally wrong for Mrs. Smith down the street to watch your kids part-time in her home, if she doesn’t report the income? Is it morally wrong for you to hire her under those conditions?


#4

They are illegal.

Not necessarily. Your obligation in hiring a baby sitter, grass mower, etc, who works for many individuals providing this service is to pay them. Only if you exceed $600 in payments do you need to complete a 1099. It is the baby sitter/grass mower’s responsibility to report the income to the IRS, not yours.

So, there isn’t anything “under the table” about it.

Paying “under the table” means you have an **employee **for whom you are not paying employment, social security, medicare, or worker’s compensation as required by law.

The families you sat for are not obligated to give you a tax form, unless you earned over a specific amount of money, and possibly not at all depending upon the tax code in force at that time. Nor were you required to file a tax return if you earned under a specific amount of money.

You simply follow the law. It stipulates who needs to report, file, and for how much.

Stealing is grave matter. Fraud is grave matter.


#5

Anyone can gift anyone else up to $11K without a tax liability, per year. A parent can gift allowance money, chore money, etc. It is not income.


#6

I am unsure what you mean by “the government doesn’t care”. The regulations govern what must be reported or not reported.

Minimum wage applies to employee/employer relationships.

You are not describing a babysitter. You are describing a day care service. Which is completely different, and likely is under specific state requirements. Do not do business with unlicensed individuals.

If she has a daycare business, then you simply pay the invoice. You have no obligation to do anything else. She is obligated to report her business income.

However, be warned that those who are willing to cheat the government will also be willing to cheat you. For example, there are numerous examples of people who desired to be hired “under the table” who then kept timesheet records, and sued their “employer” for overtime, social security and employment tax, and otherwise filed grievances with the EEOC.

Beware of those who want some sort of illegal arrangement, it can backfire on you.


#7

Any thoughts on these types of arrangements? I know they are common for babysitting and other odd jobs, especially for young people. Legally speaking, I know these types of income are supposed to be reported, but it’s also not regularly enforced (I know I never got a tax form at the end of the year from the families I babysat for as a teen!)

Most teenage babysitters don’t earn enough from one family for the family to have to issue them a 1099 form.

So where would you/do you draw the line? Every last cent needs to be reported? Is it different if it’s a kid, teen or adult? Type of work? Under a certain amount is “no big deal”?

If you are the one employing the help, then just follow the income rules. If the income you give the person in a year is under $600, a 1099 is not necessary. The IRS doesn’t make a distinction between age groups. If you are employing someone for more than $1900 per year, you also are obligated to pay social security taxes for the person and deduct the appropriate amount of social security taxes for their part of the tax.
Now, if the person has his/her own business (meaning the person has registered their business with the state), then you don’t have to issue any paperwork for them. It’s up to them to do any reporting. If the person is doing babysitting “on the side” and hasn’t established a formal business, then yes, you should follow the rules above, even if the person is babysitting in their own house and not in yours.
Now if you ask a relative or friend to do something for you and no payment discussion has taken place ahead of time and you just give them some money, I would consider that a gift.

Also, if it is sinful, is it considered grave matter? After all, not reporting income is considered by some to be stealing from the government. Curious to know your thoughts on this widespread practice.

It would be considered sinful to cheat the government or not pay social security for them when required. Ask a priest if it’s grave matter or not. I don’t think any of us can tell you that for sure.

Now, if you an adult being paid “under the table” as you call it, then you are obligated to report all of your income, unless you haven’t earned enough total income to file a tax return at all. A dependent child who has no unearned income (like interest) does not have to file a tax return to report earned income if it is less than $6,100.
Of course, sometimes these things aren’t really earnings but “gifts” also. Let’s say a friend wants me to watch her dog and house while she is gone. I do it out of friendship but then when she comes back she insists on giving me a little cash. This would be a gift, not income.


#8

Most teenage babysitters don’t earn enough from one family for the family to have to issue them a 1099 form.

So where would you/do you draw the line? Every last cent needs to be reported? Is it different if it’s a kid, teen or adult? Type of work? Under a certain amount is “no big deal”?
If you are the one employing the help, then just follow the income rules. If the income you give the person in a year is under $600, a 1099 is not necessary. The IRS doesn’t make a distinction between age groups. If you are employing someone for more than $1900 per year, you also are obligated to pay social security taxes for the person and deduct the appropriate amount of social security taxes for their part of the tax.
Now, if the person has his/her own business (meaning the person has registered their business with the state), then you don’t have to issue any paperwork for them. It’s up to them to do any reporting. If the person is doing babysitting “on the side” and hasn’t established a formal business, then yes, you should follow the rules above, even if the person is babysitting in their own house and not in yours.
Now if you ask a relative or friend to do something for you and no payment discussion has taken place ahead of time and you just give them some money, I would consider that a gift.

Also, if it is sinful, is it considered grave matter? After all, not reporting income is considered by some to be stealing from the government. Curious to know your thoughts on this widespread practice.

It would be considered sinful to cheat the government or not pay social security for them when required. Ask a priest if it’s grave matter or not. I don’t think any of us can tell you that for sure.

Now, if you an adult being paid “under the table” as you call it, then you are obligated to report all of your income, unless you haven’t earned enough total income to file a tax return at all. A dependent child who has no unearned income (like interest) does not have to file a tax return to report earned income if it is less than $6,100.
Of course, sometimes these things aren’t really earnings but “gifts” also. Let’s say a friend wants me to watch her dog and house while she is gone. I do it out of friendship but then when she comes back she insists on giving me a little cash. This would be a gift, not income.


#9

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