You've found yourself in a tricky situation, and it's understandable that you're seeking guidance on how to navigate reporting an employer who is paying under the table to the IRS. This is a serious matter, and the IRS takes tax fraud very seriously. While the process can seem daunting, this guide will walk you through each step.
Ready to take action? Let's dive in and understand how you can report your employer to the IRS for paying under the table.
Understanding "Under the Table" Payments and Why They're Wrong
Before we get into the "how-to," let's clarify what "paying under the table" actually means in the eyes of the IRS and why it's a problem.
Paying "under the table" typically refers to an employer paying an employee in cash or by other informal means without reporting those wages to the IRS or other government agencies. This usually means:
- No taxes are withheld: No federal income tax, Social Security, or Medicare taxes are deducted from your pay.
- No W-2 forms are issued: You won't receive a W-2 at the end of the year, which is crucial for filing your own taxes.
- No unemployment or workers' compensation contributions: The employer isn't paying into these systems, which can leave you without a safety net if you lose your job or get injured at work.
Why is this wrong? For the employer, it's a form of tax evasion, allowing them to avoid payroll taxes and other obligations. For you, the employee, it means you're not contributing to Social Security and Medicare benefits, and you may not be eligible for unemployment benefits if needed. It also makes it difficult to prove your income for loans, housing, or other financial needs.
 |
| How To Report An Employer For Paying Under The Table Irs |
Step 1: Gather Your Information and Evidence
This is arguably the most crucial step. The more specific and credible information you can provide to the IRS, the better their chances of investigating and taking action.
QuickTip: Focus more on the ‘how’ than the ‘what’.
What kind of information should you gather?
-
Employer's Details:
- Full legal name of the business: Even if you know it as "Joe's Diner," try to find the official registered business name.
- Business address: The physical location of the business.
- Employer Identification Number (EIN): This is like a Social Security number for businesses. While you might not have this, it's very helpful if you do. You might find it on past pay stubs (if any were ever given), business checks, or other official documents.
- Owner's or principal's name: The name of the person(s) in charge.
- Contact information for the employer: Phone number, email, etc.
-
Your Employment Details:
- Your full name and contact information: The IRS may need to contact you for more details.
- Dates of employment: When did you start working there, and if applicable, when did your employment end?
- Your job title and duties: What did you do?
- How you were paid: Was it always cash? Checks that weren't reported? A combination?
- Frequency of payment: Weekly, bi-weekly, monthly?
- Amount of wages received: Be as accurate as possible about how much you were paid "under the table."
- Any other benefits received: Were you given meals, housing, or other non-cash compensation that wasn't reported?
-
Evidence and Documentation: This is where you really build your case.
- Pay stubs or informal records: Even if they're not official, any notes or records you kept of your pay.
- Bank statements: If you deposited the cash payments into your bank account, these can show a pattern of irregular deposits.
- Timesheets or work schedules: Proof that you were indeed working for the employer during the periods you claim.
- Emails or text messages: Any communication with your employer about your pay, work hours, or employment terms.
- Witness statements: If other employees are also being paid under the table, their willingness to corroborate your claims can be powerful (though this can be tricky, as they might fear retaliation).
- Photographs or videos: If they show you working at the business during specific times, this can be useful.
- Any other relevant documents: Receipts, invoices, contracts (even informal ones), or anything else that connects you to the employer and shows your work and payment.
Pro-Tip: Organize all your information. Create a timeline of your employment and payments. The clearer and more concise you can make your report, the easier it will be for the IRS to process.
Step 2: Choose Your Reporting Method
The IRS offers a few ways to report tax violations. Your choice depends on whether you want to remain anonymous and if you're seeking a potential reward.
Option A: Form 3949-A, Information Referral (Most Common)
This is the standard form for reporting alleged tax law violations. You can file it anonymously if you wish.
-
Online Submission:
- The IRS now offers an online experience for Form 3949-A. This is often the quickest and easiest way to submit your information.
- Go to the official IRS website and search for "Form 3949-A."
- Follow the prompts to fill out the online form. You'll be asked for the employer's information, the nature of the violation (paying under the table), and details about the payments.
- Be as thorough as possible when describing the alleged tax law violation. Include all the details you gathered in Step 1.
-
Mail Submission:
- If you prefer not to submit online, you can download and print Form 3949-A (Information Referral) from the IRS website.
- Fill out the form completely and legibly.
- Attach any supporting documents you have gathered. Do not send original documents; send copies.
- Mail the completed form and copies of your evidence to the address provided in the form's instructions.
Important Considerations for Form 3949-A:
- Anonymity: You can choose to remain anonymous. If you do, the IRS will not contact you for further information or provide updates on the case. If you provide your contact information, the IRS may contact you, but they generally keep your identity confidential from the employer being investigated.
- No Reward: This form is purely for reporting violations and does not offer a monetary reward.
Option B: Form 211, Application for Award for Original Information (Whistleblower Program)
If the amount of unpaid taxes is significant and you have substantial, original information, you might qualify for an award through the IRS Whistleblower Program.
QuickTip: Read in order — context builds meaning.
-
Understanding the Criteria:
- To be eligible for an award, the IRS must recover more than $2 million in taxes, penalties, and interest from the employer.
- If the employer is an individual, their gross income must exceed $200,000 for at least one of the tax years in question.
- You must provide original information that leads to the collection of these proceeds.
-
Submitting Form 211:
- Download Form 211 (Application for Award for Original Information) from the IRS website.
- This form is much more detailed than Form 3949-A. You'll need to provide a comprehensive narrative explaining the alleged tax non-compliance, along with detailed supporting information and evidence.
- It's highly recommended to consult with an attorney specializing in whistleblower cases if you choose this route. They can help you prepare a strong claim and navigate the complex process.
- Mail the completed form and supporting documents to the IRS Whistleblower Office at the address specified in the form's instructions.
Important Considerations for Form 211:
- No Anonymity (effectively): While you can request confidentiality, submitting a claim for an award often means you won't be truly anonymous, as the IRS may need to contact you extensively.
- Timeframe: Whistleblower cases can take years to resolve, as the IRS needs to conduct a full investigation, and the employer has rights to appeals.
- Award Amount: If successful, you could receive an award of 15% to 30% of the collected proceeds.
Step 3: What to Expect After Reporting
Once you've submitted your report, the ball is in the IRS's court.
IRS Review Process:
- Initial Assessment: The IRS will review your submission to determine its credibility and whether it warrants further investigation. They prioritize cases with specific, credible information.
- Investigation: If your report is deemed credible, the IRS may initiate an investigation or audit of the employer. This could involve examining the employer's financial records, interviewing the employer and potentially other employees, and cross-referencing information with other databases.
- Confidentiality: The IRS generally keeps the identity of the informant confidential. However, in some rare legal circumstances, your identity could be revealed, particularly if the case goes to court. This is why it's a personal decision whether to include your contact information.
- No Direct Updates (unless you're a whistleblower): If you filed Form 3949-A without providing your contact information or if the case doesn't meet the whistleblower criteria, you will likely not receive updates on the status of the investigation. The IRS does not provide information on specific investigations to informants. If you filed a Form 211, the Whistleblower Office will communicate with you throughout the process, though updates can be infrequent.
Potential Outcomes:
- Employer Penalties: If the IRS finds that the employer was indeed paying under the table, they can face significant penalties, including:
- Back taxes, interest, and penalties: For all unpaid federal income tax, Social Security, and Medicare taxes.
- Fines: Substantial monetary penalties.
- Criminal charges: In severe cases of willful tax evasion, the employer could face criminal prosecution, which may include imprisonment.
- Loss of business license: In some cases, prolonged non-compliance could lead to the revocation of their business license.
- Impact on You:
- Your own tax obligations: If you received income under the table, technically you were supposed to report it. The IRS may expect you to pay taxes on that income. However, if you're the one reporting the employer, the IRS is usually more understanding of your situation.
- Potential for W-2 issuance: If the IRS intervenes, they might compel the employer to issue W-2s for past wages, which would allow you to properly report that income and receive credit for Social Security and Medicare contributions.
Remember: Reporting an employer is a serious decision. Ensure you have concrete evidence and are prepared for the potential outcomes. While the IRS aims to protect whistleblowers, it's always wise to understand the full scope.
Step 4: Maintaining Your Safety and Well-being
While the IRS endeavors to protect informants, it's essential to consider your own safety and well-being.
Protecting Yourself:
- Do not confront your employer: This could escalate the situation and potentially put you at risk of retaliation. Let the IRS handle the investigation.
- Keep your reporting confidential: Do not tell anyone, especially not your employer or current co-workers, that you have reported them.
- Secure your documents: Store your evidence and any related information in a safe place where your employer cannot access it. Consider digital backups.
- Seek legal counsel (optional but recommended for complex cases): If you have concerns about retaliation, or if the amount of under-the-table pay is substantial, consulting an employment lawyer or a tax attorney can provide you with personalized advice and protection. They can advise you on your rights and any potential legal ramifications for you.
Step 5: What if you were also paid under the table?
If you received payments under the table, you were technically obligated to report that income on your own tax return. While it might seem counterintuitive to report an employer while also having undeclared income, the IRS generally views employees who come forward as cooperative.
Tip: Reading in chunks improves focus.
How to address your own undeclared income:
- File an amended return (Form 1040-X): If you've already filed your taxes for the years you received under-the-table payments, you may need to file an amended return to accurately report that income. This shows the IRS your good faith effort to comply.
- Report the income on your current return: If you haven't filed yet for the relevant tax year, you should report the income on your regular Form 1040, even without a W-2. You can explain the source of income in your tax filing.
- Consult a tax professional: A tax advisor can help you navigate reporting previously undeclared income correctly and minimize any potential penalties for yourself.
It is always best to be truthful and cooperative with the IRS, especially when you are bringing a tax violation to their attention.
10 Related FAQ Questions
Here are 10 frequently asked questions, starting with "How to," along with quick answers related to reporting an employer for paying under the table to the IRS:
How to report an employer anonymously to the IRS?
You can report an employer anonymously using IRS Form 3949-A, Information Referral, by leaving the "Your Name" and "Your Contact Information" sections blank. However, if you choose this, the IRS cannot contact you for further details or provide updates on the investigation.
How to gather evidence when reporting an employer for under-the-table payments?
Gather all possible documentation such as pay stubs (even informal ones), bank statements showing cash deposits, timesheets, work schedules, emails, text messages, or any other communication related to your employment and pay. The more specific, the better.
How to fill out IRS Form 3949-A for an under-the-table employer?
Fill in the employer's full legal name, address, and EIN (if known). Clearly describe the alleged tax violation as "employer paying employees under the table," detailing the payment method, frequency, approximate amounts, and the period over which this occurred. Attach copies of any supporting evidence.
Tip: Break it down — section by section.
How to qualify for a whistleblower reward from the IRS for reporting an employer?
To qualify for an award, you must file IRS Form 211, Application for Award for Original Information. The IRS must collect over $2 million in taxes, penalties, and interest based on your original information. If the target is an individual, their gross income must exceed $200,000.
How to know if my employer is truly paying under the table, or just paying cash legitimately?
An employer can legally pay in cash, provided they still withhold and report all required federal income, Social Security, and Medicare taxes, and issue a W-2 at year-end. If they are not withholding taxes or issuing a W-2, then they are likely paying under the table illegally.
How to deal with potential retaliation after reporting an employer to the IRS?
The IRS aims to protect whistleblowers, but it's crucial to avoid confronting your employer, keep your report confidential, and secure all your documents. If you fear retaliation, consider consulting an employment attorney before or after reporting.
How to report my own undeclared income if I was paid under the table?
You should report all income, even if it was paid under the table. You can do this by filing an amended tax return (Form 1040-X) for past years or by including it as "other income" on your current year's Form 1040. Consulting a tax professional is highly recommended.
How to find an employer's Employer Identification Number (EIN) for an IRS report?
An EIN is often found on official business documents, invoices, or sometimes on pay stubs if they were ever issued. If you don't have it, you can still submit your report with the employer's full legal name and address, and the IRS may be able to find it.
How to track the progress of an IRS investigation after reporting an employer?
If you filed Form 3949-A without contact information, you will not receive updates. If you provided contact info on Form 3949-A, the IRS may contact you for more details but typically won't provide ongoing updates. For Form 211 (whistleblower claims), the IRS Whistleblower Office will communicate with you, but investigations can be lengthy.
How to get assistance if the IRS doesn't take action on my report?
If you believe there was a genuine tax violation and the IRS hasn't taken action, or if you have new information, you can always submit a new Form 3949-A with additional details. For complex or high-value cases, legal counsel specializing in tax law or whistleblower cases can provide guidance.
 |
