Just discovered my boss has been paying me under the table for months - what do I do?

If OP reports this as self-employment income, aren't they basically letting the employer off the hook for their share of taxes? Wouldn't that also potentially cause problems down the road with employment verification or Social Security credits?

Is there any safe way for them to report this without getting the employer in trouble? I mean, the boss is clearly doing something wrong, but OP still needs the job.

You raise a good point - reporting as self-employment income does shift the tax burden entirely to the employee, which isn't fair or legally correct. However, it's a common short-term solution when people need to become tax compliant quickly. The ideal approach would be to address this directly with the employer and request proper classification as an employee with appropriate tax withholding. If that fails, you can file Form SS-8 with the IRS to request a determination of worker status, and Form 8919 to report uncollected Social Security and Medicare taxes. This protects your Social Security credits and properly allocates tax responsibility.

Does it actually help with situations like this? I'm in a similar boat with side gig income that wasn't properly documented and I'm worried about filing correctly.

How does this work with income that wasn't reported on any official forms? Like, does the system help you create documentation for cash payments or would I need to have some kind of proof?

It absolutely helps with these situations. The system analyzes whatever documentation you do have (even if it's just your own records of payment) and helps determine the proper tax treatment. It creates a clear audit trail showing you made a good faith effort to comply with tax laws even when your employer didn't. For cash payments or undocumented income, you can input your own records (dates, amounts, etc.) and the system helps create the appropriate documentation to properly report it. It essentially helps create a paper trail and recommends the right forms to use based on your specific situation.

How does this actually work? Feels sketchy to have some random service connecting calls with the IRS. Do they listen in on your call or something?

Yeah right, the IRS doesn't actually help people over the phone. Even if you do get through, they'll just tell you to hire a tax professional or figure it out yourself. This seems like a waste of money.

It's actually pretty straightforward - they use an automated system to wait in the IRS phone queue. When an agent answers, their system connects to your phone. They don't stay on the line or have access to your conversation at all - they're just bridging the initial connection to save you the wait time. The IRS agents are actually quite helpful if you can get through to them. When I called about my unreported income situation, the agent walked me through all my options, explained the different forms I could use, and even helped me understand the potential consequences. They won't do your taxes for you, but they absolutely will explain the correct procedures and requirements for unusual situations.

Thanks for this advice. I've definitely started keeping much better records now. Did you end up having to pay the employer portion of taxes too, or were you able to avoid that somehow?

I initially got stuck with the whole tax bill including the employer portion, which was painful. But after filing Form SS-8 (to determine I was actually an employee) and Form 8919 (Uncollected Social Security and Medicare Tax on Wages), the IRS adjusted things and ultimately my former employer got hit with their share plus penalties. The process took about 8 months though, so be prepared for a wait. Definitely keep every bit of evidence you can - text messages about schedules, bank deposits, anything that proves you were an employee rather than an independent contractor.

This is terrible advice. The IRS has sophisticated methods to detect unreported income, and the penalties for intentional tax evasion are severe - potentially including criminal charges. Bank deposits that don't match reported income are a massive red flag. Even if you don't get caught immediately, there's no statute of limitations on fraudulent returns, meaning the IRS could come after you years later when the amounts owed (with penalties and interest) are much larger.

Ok fine, but then how do you explain all these cash businesses that go years without getting caught? My uncle's been running his handyman business cash-only for like 15 years and never had an issue.

Your uncle might think he's never had issues, but the IRS often takes years to catch up with unreported income cases. They use data matching from bank records, third-party payments, and lifestyle analysis. Just because someone hasn't been audited yet doesn't mean they won't be - and when they are, the penalties and interest compound over time making it much worse. The difference here is that OP is an employee, not truly self-employed. Employee wage theft (which is essentially what this is) gets flagged much faster than independent contractor situations because there are more data points for the IRS to cross-reference.

This is really solid advice, especially about documenting everything right away. I'm curious though - when you say "file the appropriate forms (SS-8 and 8919)" - does that automatically trigger an investigation into the employer? I'm worried about burning bridges while I'm still working there and looking for other options. Also, how long does the SS-8 process typically take? I've heard it can be months before you get a determination, and I'm not sure if I should wait for that before filing my taxes or just go ahead and report the income some other way for this year.

Filing Form SS-8 does initiate a formal review process with the IRS, but it doesn't automatically trigger an "investigation" in the criminal sense. It's more of an administrative determination process. The IRS will contact your employer to get their side of the story, but it's presented as resolving a classification question rather than an enforcement action. That said, if you're concerned about workplace relationships, you might want to start job hunting first. The SS-8 process typically takes 6-12 months for a determination, which is way too long to wait for tax filing purposes. For this year's taxes, I'd recommend reporting the income using Form 8919 (without waiting for SS-8) if you're confident you're an employee rather than an independent contractor. This protects you from self-employment tax while still being compliant. You can always file SS-8 later if needed for future reference or if the situation escalates. The documentation you're creating now will be crucial regardless of which path you choose, so definitely keep detailed records of everything moving forward.

This is such great advice about checking with the state Department of Labor too! I hadn't even thought about the potential for other employment law violations. You're absolutely right that if they're not handling taxes properly, they might be cutting corners on other worker protections as well. I'm curious - when you contacted your state's labor department, did they require any specific documentation? I'm wondering if the records I'm keeping for the IRS situation would also be useful for a potential labor complaint. Also, did reaching out to them create any complications with your employer, or were they able to handle things discreetly while you were still working there? The point about not feeling guilty really hits home. It's hard not to feel like you're causing problems when you're just trying to protect yourself from someone else's mistakes.