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querying the hive mind
Legality of work for teenager
What are the legality issues of a teenager working for a friend's small business and getting paid in cash (i.e. under the table)? I understand no one will really care, but is it actually illegal? They would not earn enough to have to file taxes.
I understand it may vary by state, but a general answer would be great. Thanks.
posted by roaring beast on May 06, 2024 at 10:07 AM
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I can't comment on the legality, per se, but my concern would be with worker's compensation. If the teen is injured and is not an employee, there may be difficulties with receiving care for any injuries that occur on the job.
posted by sacrifix at 10:14 AM
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The formal term for working "under the table" is Unreported Employment.
Payroll taxes are imposed by the federal and all state governments. These include Social Security and Medicare taxes imposed on both employers and employees, at a combined rate of 15.3% (13.3% for 2011 and 2012)., from Taxation in the United States on Wikipedia, emphasis mine.
It would seem that the employer (and the employee) are committing tax evasion, and skipping out on their duty to fund things like Social Security and Medicare, but also worker's comp and unemployment. Tax evasion is one of those things that is illegal, and is often seen not a big deal, except when it's a really big deal. Lots of famous rich people get busted for evading taxes, but small businesses do too.
posted by SaltySalticid at 10:29 AM
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SaltySalticid is right. I have some sympathy for people breaking the law if it's an informal situation, for example a self-employed individual who pays a friend $50 to help out for an afternoon a couple of times. But if the friend has an actual business, then there is - or should be - already a system in place for issuing W-2s, paying payroll taxes, etc. In that case, by paying under the table, they are actively and consciously avoiding taxes.
posted by Mr.Know-it-some at 10:40 AM
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It may well depend on the age of the teenager. In the place I grew up, you weren't allowed to work until 16 unless you got permission from the government and there was a process for getting that permission that I had to go through in order to be allowed to get a summer job as a waitress in the local diner at 15.
posted by jacquilynne at 10:50 AM
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Aside from the age/work permit issue, is there any exception or special case for a teenager working just a few hours? For example, could they be legally employed as a temp/seasonal worker or independent contractor/self employed without the business owner having to report them as an employee? (I'm guessing not, but just seeing if there are any special cases)
posted by roaring beast at 10:54 AM
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For example, I just saw that employer doesn't have to file a 1099 for someone earning less than $600.
posted by roaring beast at 10:57 AM
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Hm, ordinarily I would advise against the 1099 thing bc that lets the employer legally avoid taxes and puts all the burden (or liability for evasion) on the worker. But the IRS does seem to indicate you don't have to file a 1099-NEC for less than $600 total.
I can't advise any further but I will say if I were the business owner I'd want to run it by my lawyer, and make sure I know the difference between an employee and a contractor. I don't know if anyone gets caught for it, but I am still mad about a former employer who systematically misclassified people in my position as independent contractors when we should have been employees, by the IRS's criteria above.
posted by SaltySalticid at 11:07 AM
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could they be legally employed as a temp/seasonal worker or independent contractor/self employed without the business owner having to report them as an employee?
I believe this would depend on the kind of work they're doing - working as a cashier is definitely an employee type activity, doing graphic design might reasonably be characterized as contractor activity.
posted by mskyle at 11:08 AM
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Agree with the others, regarding workers comp questions. You hope an injury never happens, but what if it does? And it's not just that, it's all the other (if somewhat thin, in the US) protections given to workers. What if they get harassed at work, or are otherwise victimized? A shady employer could just go "Who? I don't have anyone by that name on my payroll. Don't know what you mean..."
Also, this is an extreme case, but an acquaintance worked for years and years "under the table", but is now finding out the hard way that because she'd only ever worked for a couple years with everything official, her eligibility for Social Security is basically nil. Also, when the pandemic hit and she was out of work, she was ineligible for the Pandemic Emergency Unemployment Compensation or whatever, because as far as the government was concerned, she hadn't been working.
posted by xedrik at 12:11 PM
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I've Seen Things in small businesses that hire teens regularly. Some examples are:
- the worker's comp thing is hugely real, especially anywhere without socialized medicine but also what if the teen has a concussion from slipping on the floor and can't go to school or work elsewhere for a year, etc.
- without being formally employed, it's easy for an employer to skip other parts of the work relationship like if someone has to work through breaks or stay late or show up to do extra manual labour, a small business owner will sometimes lean on the under-the-table guy because they don't have to pay real overtime or maintain minimum standards.
- on the employer side, if the relationship extends past the summer (like the kid works there later after finishing school), this is a secret that can be pulled out of the box...I know a small business owner who ended up with a labour board complaint over unpaid hours (including breaks but also the initial under-the-table time) who ended up repaying the person for that time and way more, enough for a down payment on a house, because the relationship soured.
Basically, the chances of getting caught are low, but all the circumstances in which you would be are situations that are going to be super unfun.
Also...this is a bit lateral to your question but quite often teenagers accept really poor business practices because they are kids and don't know any better, and there are unscrupulous or unthinking people who take advantage of that by always hiring a few kids under the table or not planning vacations and getting kids in to cover hours, etc. Small business owners often kind of get by on cutting corners, but do you really want to the teen to be the corner being whittled at.
That doesn't compare to meat packing plants hiring underage kids, but it is a form of exploitation. If nothing else, an exploitative relationship can really sour a friendship. You think the business is doing your kid a favour to get them that first job, and that can be true -- sometimes it's a bit precious to try to make things function as if it were not a very casual exchange -- but a business that is willing to do it wrong may have some things backwards. I would say if this is a multi-week job, it's something to really think about.
posted by warriorqueen at 12:29 PM
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Aside from the age/work permit issue, is there any exception or special case for a teenager working just a few hours?
Depending on jurisdiction, there might be if the teenager is a child of the business owner.
posted by jgirl at 1:12 PM
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Can you tell us what the work is planning to be? Like, I wouldn't hesitate to have my kid do a few hours of work for cash and not worry about any reporting.
posted by amanda at 1:38 PM
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As a person who runs a small business and has had minor tax issues I can tell you that preventing problems is going to save you so much time, money, and frustration. And also that the IRS and your state do not care about your family friend's deal or that you owe money, what they do care about is that you to follow the law. What you are describing is illegal, the government does care.
Typically if the employer does not want to deal with the tax headache, they can employ someone in the US under a 1099. The whole tax burden is then transferred to the employee so while the employer does not do anything, then the family or the teen does have to report it. 1099 are for independent contractors so there are specific laws attached to that (The general rule is that an individual is an independent contractor if the employer has the right to control or direct only the result of the work and not what will be done and how it will be done.).
1099s are not required for people who make less than $600/year. If more than $600 is made, then the employer must send out a 1099 form to the federal and state governments for that tax year. It is cheap and easy to do at next year's tax time. It is always best to make a plan directly with the employer and get a form because the employer could always file the tax documents and if you don't report it YOU can be punished the next year.
The longer you don't follow the law the more penalty in interest you will owe. Interest is compounded quarterly. But you will not know what is going on because you are always 1 tax year behind. Tax problems happen the year after.
There are specific US Federal laws for teens. There are also state laws.
I hope that the teen has a great work experience and POST-work experience.
posted by mutt.cyberspace at 1:53 PM
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In addition to what's been said already, committing an illegal act can be used in some cases to bypass the protections of an LLC or corporation, such that the owner's personal assets could be targeted if a lawsuit happened.
posted by Candleman at 4:37 PM
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Response by poster: For example, I just saw that employer doesn't have to file a 1099 for someone earning less than $600.
The place you just looked this up is wrong, because the recent $25k to $600 threshold change they are writing about is for issuing 1099-K, not the type of 1099 you'd issue to a "contractor". Even then, this threshold applies to the issuer. The receiver still has to report incoming revenue starting with the first penny no matter if they are issued a 1099 or not.
posted by Back At It Again At Krispy Kreme at 8:22 PM
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($600 has been the regular 1099 reporting threshold for a long time now. Here's the IRS page.)
posted by nobody at 2:05 PM
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