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7 Reasons NOT to Get Paid in Cash

Why nannies, babysitters, senior care workers, housekeepers and other types of caregivers need to be paid legally.
When you accept a job as a nanny or other caregiver, one of the first questions you ask is "How much will I get paid?" If a potential employer wants to pay you in cash off the books, red flags should go up. An employer who wants to pay you an hourly rate, but not the taxes that legally go with it, doesn't have your best interests in mind. When someone pays you more than $1,800 a year, you and your employer are also required to pay taxes. (Note: If you earn less than $1,800 a year, doing occasional or part-time work for someone, you can get paid in cash.) While most employers realize the legal and tax ramifications of paying a caregiver under the table, some employees still find themselves in the awkward position of being offered cash payments instead of a proper employer/employee payroll. While the idea of pocketing that extra cash is appealing (who can't use a little extra money every month?), it does you no good in the long run and can really end up hurting your career, your health and even your retirement plans, says Lisa Weinberger, a lawyer and founder of Mom, Esq. "Employees who are paid legally and professionally have some very important benefits and protections," says Stephanie Breedlove, head of Care.com HomePay, provided by Breedlove. For example, the Domestic Worker Bill of Rights -- passed in New York, Hawaii and recently in California -- mandates protections like overtime wages for caregivers. You're in a much stronger position to ask your employer to abide by this bill if you're also following the law and paying taxes. Future employers might even question your honesty if they ever discover you didn't pay taxes. And when employees and their employers willingly break this law, they make the whole profession look bad. So start acting like the professional you are and learn about the reasons you need to be paid legally.
  1. You Won't Have an Employment History
    Having a legal employment history is necessary to everyday life. If you ever want to get car loan, a mortgage, a student loan, a credit card, health insurance, auto insurance, a future job, etc., you need to have documented proof that you worked.
  2. You're Not Covered in Case of Emergencies
    If you're getting paid off the books, you won't have access to many protective benefits if you ever need them. "You won't be paying into disability," says Lindsay Heller, who is also known as The Nanny Doctor. If anything happens, whether it's an accident or even pregnancy, you won't be able to receive disability coverage to take the place of lost wages, she says.
  3. You Lose Out on Retirement
    When you retire, you're entitled to money for living and medical expenses. But that amount depends on how much is paid into your Social Security account. In the long term, tax-free cash costs you these benefits. "When you retire and you haven't paid into the system, your benefits are much decreased, even if you are a hard-working member of society," says Weinberger. If you never paid into the system, you won't be able to get anything back. "It is important to pay into [Social Security], so that down the line you have access to it," says Heller.
  4. You Don't Get Unemployment
    If you ever get laid off or fired, you're entitled to unemployment -- typically half of your salary for up to six months.  Plus, this benefit is free for you, as your employer's taxes pays towards this program. But no taxes means no unemployment, says Heller. If your employer loses a job or decides to move, your job might get eliminated and you'll have nothing to fall back on.
  5. You're Potentially Inviting an Audit
    This IRS is cracking down on employment taxes. Any employer is responsible for paying the employee's share of taxes, says Weinberger. If your taxes aren't paid regularly, you'll have to pay them all at the end of the year. If you don't file properly, and you're audited by the IRS, you'll have to pay up. This could include all the back taxes, but any late fees and penalties as well.
  6. You're Lowering Your Professional Standards
    "If you are a nanny [or other caregiver], you are a professional," says Weinberger, "and that profession is very important." In no other profession is it acceptable to say you're interested in accepting a gross pay paycheck, not paying taxes. "That would never fly in any other profession," she says. Caregivers who accept this deal make every other caregiver look less professional.
  7. You're Doing Something Illegal
    "Paying taxes is not optional," says Weinberger. "If you are not doing it, you are breaking the law." And for employers who expect caregivers to follow every aspect of the law when caring for their children, seniors, homes, etc., why should they ask you to willingly break the law in this area? Skirting the law is not something an employer should ever ask a caregiver to do.
So stop thinking about the short-term benefits of a little extra cash and begin paying attention to your long-term career. "Yes, having tax obligations is a burden and it does decrease your net pay just a little bit, but don't think of it as a burden. Think of it as an investment in your future," suggests Breedlove. Julia Quinn-Szcesuil is an award-winning freelance writer and a mom to two girls. She lives in Massachusetts and has written for local and national publications.Your Next Steps:
* The information contained in this article should not be used for any actual nanny relationship without the advice and guidance of a professional advisor who is familiar with all the relevant facts. The information contained herein is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for your specific circumstances and may require consideration of other matters.  

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