The Internal Revenue Service and State Department of Taxation and Finance have their own penalties for failure to withhold and report wages.
Advocates for low-income people say this underground economy provides jobs that wouldn’t otherwise be there. They point to the food and beverage industry, where people usually work for low wages, as a common area where people are paid off the books. If taxes were withdrawn from their meager pay, advocates argue, they wouldn’t earn a livable income.
But the employees are also losing out on something they might not be thinking about right now: Social Security benefits down the line. The amount you take home in Social Security is based on your earned income over the years. If income isn’t being reported, it isn’t adding to your work history.
It’s hard for young people to be future smart like that, but it’s just another way that working under the table is harmful.
Everyone who participates in this cheating of the government — because that is truly what is happening — forces fellow Americans to contribute more to the tax system that provides our services.