Any employee that get paid in cash is actually doing a disservice for himself. Not only it is illegal, he is losing a lot of benefits.
- He loses social security benefit credit because he has 0 income reported that year
- If there is a work comp claim, he won't be covered since there is no record
- If he gets fired, how does he file unemployment benefit? His employer doesn't contribute any
- If you want to take a home loan, well you have no records... no one will give you a mortgage loan
- Tax evasion: The employee and employer gets to skimp paying payroll taxes: 6.2% for social security up to $128,400 in gross income, 1.45% for Medicare. Employee pays no fed and state taxes. Possible felony + jail time for both...
For example: a 35 years old male that has worked for 10 years under the table getting cash entirely. He is planning to retire at 65; He only has 30 years of social security credit left instead of 35 years max (this lowers his retirement benefit).
No offense, I agree with each of your points, but I'd like to play Devil's Advocate and the argument is somewhat tongue-in-cheek:
1. How often is it that a pharmacist makes less than the SS maximum ($128,400)? I completely understand your point if that is their only source of income.
2. Short of a gunshot wound, what wouldn't be covered by standard health insurance, it's just cost shifting onto the employer? That said, how many independents offer even bad health insurance plans? Also, good luck claiming workers comp from even your company. There's a reason why they had to outsource it to a company that is out and out user hateful for claims to work.
3. How many times have you heard stories about positive termination in ways that avoid unemployment insurance? Is that really a benefit if you can never claim it?
4. True, if you want prime rates. For subprime rates, proof of income is not required. During a recent IG review, I was shocked having to see the VA Loan Guarantee Program (LGY) have so little oversight over what documentation was actually submitted in support of the ability to pay down the loan, and what we require is more than apparently the mortgage broker normally requires.
5. Absolutely, but who is likely to audit you? Possibly not the Feds. (I definitely can tell you that MN Revenue and Treasury routinely report their audit results to the IRS for further action, making cash payments really difficult.)
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6. (Really out there) Do you really expect, you, yourself to actually collect Social Security at a meaningful level? No, if that happens, it'll be casino money, but this is a situation where I can't see how this works out like the Greenspan Commission.
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I see your point, but 20-25% (averaging over the marginals and the state tax) is considerable enough to risk for even us. Even though I think the best way to be patriotic is to not commit crimes and pay your taxes, I completely understand someone gaming the system not just because of greed, but because screw DC and what it stands for. Remember, that in this system, you're only a criminal if you're convicted. And the likelihood of that for white-collar crimes is much lower than your banal assault and robbery beat.
It's not the way you think, your opinion is sound, but the other way is quite viable with different inputs. In other words, to make a buck on the market, is it better to invest in fundamentals or against human stupidity? Turns out that against human stupidity is a viable strategy.
