I work at a small company that has been struggling for a long time now. A couple years ago the I was faced with a choice. Get paid under the table, accept a 25% pay cut, and lose health insurance or lose my job. I chose to become an “undocumented worker.” So I not have paid or filed for taxes since 2006. I would like to be legitimate and pay my taxes but I live paycheck to paycheck and I really can’t pay even this years taxes, much less taxes from previous years. Bankruptcy would offer one potential solution and is worth consideration. But my questions are not about bankruptcy but rather employment.
I have two questions:
1. I have to wonder how this will impact employment verification. When applying for a new job, will the potential employer know that I have not been paying taxes?
2. Assuming I am hired, and the new employer bringing me into their HR and tax systems, will they then learn that I was not paying taxes?
I presume you lost your health insurance anyway, as employees who don’t technically exist can’t really be added to your health insurance rolls. So, you’ve just chosen to be dishonest, working for someone who is dishonest and now you fear it might catch up to you.
Ahh, wickedness never was happiness. Sometimes it just takes a while for the unhappiness to catch up to you. Never mind, here are the answers to your questions.
1. For all intents and purposes you have not been employed. If your current company has been paying you under the table, you can’t really list it on your resume as your current company. The best you can say is that you were an independent contractor who did work for this company. It’s doubtful that they will ask to see your 1099s to verify. Your current employer can offer a reference, stating you are a contactor.
2. No, your new employer will not learn whether you have been paying taxes or not by simply hiring you and bringing you into their system. They will simply start reporting your income to the IRS.
Of course, when the IRS busts you (which they will), they can require your new employer to start garnishing your wages to make up for your lack of tax paying. Fun!
Now, as for the troubles you’ve created for yourself, I suggest you try to fix it as soon as possible. You say you have no extra money. Well, then, you have no extra money for IRS fines. I suggest you use what money you do have to hire a competent accountant (not a trained monkey at one of those fast food style tax offices) to help you figure out what you owe and what you need to do about it. It can only get worse. If you are a low income earner, it may not be as bad as you feared.
Now, I need the lawyers and accountants (of which I am neither) to weigh in and tell you how much trouble you are really in. It’s best to get honest as soon as possible and be honest going forward. And while you are at it, let’s get your finances in shape so you don’t end up like this again.