"Underground Economy" is a term that refers to those individuals and
businesses that deal in cash and/or use other schemes to conceal their activities and
their true tax liability from government licensing, regulatory, and taxing agencies.
Underground Economy is also referred to as Tax Evasion, Tax Fraud, Cash Pay, Tax Gap,
Payments Under-the-Table, and Off-the-Books.
The Employment Development Department is concerned about workers who lose benefits and
other protections provided by state law when the businesses that they work for operate in
the underground economy. When businesses operate in the underground economy, they gain an
unfair competitive advantage over businesses that comply with the law. This causes unfair
competition in the marketplace and forces law-abiding businesses and every citizen in
California to pay higher taxes.
State Increases
Efforts to Identify Tax Evaders
Paying wages "under the table" ... is it worth the risk?
Paying wages "under the table" is paying wages to employees by cash, check,
etc., and disguising the payment with the intent of avoiding payroll taxes.
Some employers pay full or partial wages "under the table" because they
cannot afford the taxes and insurance costs associated with the wages. However, paying
wages this way can actually be very costly.
Many employers do not realize that when they get caught doing this, their CA state
payroll tax liability will be 20 times more than if they would
have voluntarily reported the employee's wages and paid the payroll taxes.
In addition, these types of payments violate labor laws, which in turn can cost the
business thousands of dollars in penalties.
For a copy of the state's brochure Paying Cash Wages "Under the
Table"...Is It Worth the Risk? (form DE 573CA) call 1-888-745-3886. You can also
download this brochure from the state's web site at: http://www.edd.ca.gov/taxform.htm
To report a business paying wages "under the table":
- Call the States' toll-free hotline: 1-800-528-1783
- Fax: 916-464-1020
- E-mail: ueo@edd.ca.gov
