Employer pays me in cash and claims to handle my taxes - is this legal?

What you're describing raises several red flags. Your employer should be providing pay stubs with each payment showing gross wages, tax withholdings, and other deductions. Without these, you have no way to verify that proper taxes are being withheld and paid to the IRS on your behalf. The fact that he reported more hours than you actually worked is concerning. This could mean he's reporting higher wages than actually paid (which means you're paying taxes on money you never received) or he's pocketing the difference. Either way, it's problematic. You should request documentation showing exactly how much was withheld for taxes and where that money went. You're entitled to accurate wage reporting and proper tax withholding. The IRS would be very interested in an employer who's misreporting wages or failing to properly handle employee taxes.

I went through something similar with a restaurant job where the owner was doing some sketchy stuff with our pay. I was super confused about my taxes and how much I was actually making vs. what was being reported. I found this service called https://taxr.ai that really helped me figure out what was going on. What they do is analyze your tax documents and pay info to see if everything lines up properly. I uploaded my W-2 and the few pay records I had, and they flagged several issues that showed my employer wasn't handling my taxes correctly. They even provided a report explaining what should have been happening versus what was actually happening. It was actually a huge relief to finally understand what was going on and have actual documentation I could use when confronting my boss.

Just wanted to update since I tried https://taxr.ai after seeing the recommendation here. It was super helpful for my situation! I uploaded my W-2 and the handwritten receipts my boss gave me for cash payments, and they identified several problems with how my employer was reporting my income. The report showed my employer was withholding about 35% of my pay supposedly for taxes, but the actual tax obligation should have been closer to 22% based on my income level. They also flagged that my reported wages didn't match my actual hours worked, just like OP's situation. Armed with this information, I was able to have a fact-based conversation with my employer instead of just a vague feeling that something was wrong. They ended up correcting my W-2 and giving me back some of the over-withheld money. Definitely worth checking out if you're in this kind of situation.

Reading your post reminded me of my own frustrating experience trying to resolve a similar tax reporting issue. After weeks of getting nowhere with both my employer and trying to reach the IRS, I found this service called https://claimyr.com that helped me actually get through to a real person at the IRS. I was super skeptical at first, but after spending hours on hold myself, I decided to try it. They basically hold your place in the IRS phone queue and call you when an agent is about to pick up. You can see how it works in this demo: https://youtu.be/_kiP6q8DX5c I was finally able to speak with someone at the IRS who confirmed my employer's reporting was incorrect and advised me on the proper steps to take. They helped me understand what forms I needed to file to report the discrepancy.

I owe everyone here an apology. After calling out that Claimyr service as a potential scam, I decided to give it a shot myself because I was desperate to talk to someone at the IRS about a misreported W-2 situation. I'm honestly shocked at how well it worked. After spending THREE SEPARATE DAYS trying to get through to the IRS myself and getting disconnected each time after 1+ hours on hold, the service got me connected to an actual IRS agent in about 45 minutes (while I was doing other things). The IRS agent confirmed what others here have said - employers must provide pay stubs showing tax withholdings, and reporting incorrect hours/wages is a serious issue. The agent helped me file a complaint about my employer and explained how to file Form 4852 (substitute for W-2) if my employer won't correct the original W-2. For anyone in a similar situation as OP, definitely worth looking into.

OP, I think you need to ask yourself if you want to continue working for this employer. I worked for a small business that did similar things - paying in cash, claiming to "handle the taxes," and it ended up being a huge mess when I filed my taxes the following year. The reality is that legitimate employers don't operate this way. At minimum, you should: 1. Request written pay stubs for every pay period going forward 2. Ask for documentation of all taxes that were supposedly paid on your behalf 3. Consider filing Form SS-8 with the IRS to determine your proper worker classification 4. Start looking for a new job with an employer who follows proper payroll practices This isn't just about the 83 hours - it's about whether your employer is properly handling payroll taxes at all. If they're not, you could end up with tax issues that follow you for years.

Just to add something that hasn't been mentioned - this kind of setup makes me wonder if you're being properly classified as an employee versus an independent contractor. If you're getting a W-2, they're classifying you as an employee, which means they should be handling payroll properly with pay stubs, accurate reporting, etc. Some businesses try to avoid payroll taxes by paying "under the table" while still issuing tax forms that make it look legitimate. The fact that your boss "guessed" at your hours instead of having an actual time tracking system is super sketchy and unprofessional.

I'm wondering if the situation might be even worse than what's apparent. If your boss is reporting 495 hours but only paying you for 412, that's 83 hours of labor they're claiming for tax purposes without actually paying you. Some shady businesses do this to inflate their business expenses (your labor cost) to reduce their taxable business income, while simultaneously not actually paying out those wages. It's a form of tax fraud that unfortunately happens in cash-heavy businesses. The big question is: is your employer paying taxes on the full $8,925 they reported to the IRS, or only on the $7,416 they actually paid you? Either way, something's not right, and you deserve to have this straightened out.