Employer Tip of the Month ~ IS IT ILLEGAL TO PAY YOUR EMPLOYEES IN CASH?

IS IT ILLEGAL TO PAY YOUR EMPLOYEES IN CASH?
BY STEPHEN FIEGEL, ESQ.

AS A RULE, IT IS NOT ILLEGAL FOR CALIFORNIA EMPLOYERS TO PAY EMPLOYEES IN CASH. IT MAY, HOWEVER, COMPLICATE THE PROCESS OF PAYING ACCURATE PAYROLL TAXES. CALIFORNIA LAW REQUIRES THE FOLLOWING INFORMATION ON ALL EMPLOYEE ITEMIZED PAY STATEMENTS:
 
GROSS WAGES EARNED;
TOTAL HOURS WORKED (NOT FOR SALARIED EMPLOYEES);
PIECE RATE EARNED (IF APPLICABLE);
ALL DEDUCTIONS;
NET WAGES EARNED;
PAY PERIOD;
NAME OF EMPLOYEE AND LAST FOUR DIGITS OF SOCIAL SECURITY NUMBER;
NAME AND ADDRESS OF EMPLOYER; AND
APPLICABLE HOURLY RATES.
 
MOREOVER, FAILURE TO REPORT WAGES TO ANY GOVERNMENT AGENCY IS ILLEGAL. THEREFORE, BY PAYING EMPLOYEES “UNDER THE TABLE,” EMPLOYERS EFFECTIVELY AVOIDING PAYING REQUIRED TAXES. EMPLOYERS ARE REQUIRED TO WITHHOLD FROM EMPLOYEE'S CASH PAYMENTS AND PAY THEIR SHARE FOR THE FOLLOWING:
 
SOCIAL SECURITY AND MEDICARE (FICA);
STATE AND FEDERAL INCOME TAXES;
UNEMPLOYMENT INSURANCE (FUTA);
STATE DISABILITY INSURANCE (SDI);
STATE UNEMPLOYMENT INSURANCE (SUI);
WORKERS COMPENSATION;
OVERTIME COMPENSATION; AND
SOME OTHER EMPLOYMENT BENEFITS.
 
EMPLOYERS THAT FAIL TO PAY THE REQUIRED WITHHOLDINGS MAY RESULT IN SEVERAL PENALTIES. FEDERAL TAX PENALTIES INCLUDE REQUIRING EMPLOYERS TO PAY ALL AN EMPLOYEE’S UNPAID LIABILITIES.
 
ADDITIONALLY, CRIMINAL PROSECUTION MAY OCCUR. EMPLOYERS RISK INVESTIGATION BY THE IRS. TAX EVASION DEFENDANTS ARE KNOWN TO SERVE TIME FOR THEIR OFFENSES.
 
IN SUMMARY, IF AN EMPLOYER DECIDES TO TAKE ON THE RISK OF PAYING EMPLOYEES IN CASH, THEY MUST COMPLY WITH ALL EMPLOYERS’ REQUIREMENTS IN CALIFORNIA. EMPLOYERS MUST MAINTAIN ACCURATE RECORDS, AS PAYING EMPLOYEES WITH CASH ELIMINATES A PAPER TRAIL. 
 
IF YOU HAVE ANY QUESTIONS REGARDING THIS ISSUE OR ANY OTHER EMPLOYMENT-RELATED MATTER, PLEASE CHECK OUT MY WEBSITE AT WWW.EMPLOYMENT-LAW.NET OR CALL ME FOR A FREE CONSULTATION AT (916) 333-4653. ​