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Patrick, Esq.
Patrick, Esq., Lawyer
Category: Employment Law
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If I know of an employer who paid cash to their contractor

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If I know of an employer who paid cash to their contractor can I report them to the IRS and how?
Good evening and thank you for entrusting me to answer your question.

It's actually not illegal to pay an employee or contractor in cash. Of course, all applicable taxes still apply and must be paid, but payment in cash does not violate any law.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, please be so kind as to provide a positive rating of my service so that I may receive credit for assisting you. Very best wishes to you and thank you so much for coming to Just Answer.
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Customer: replied 4 years ago.

If they were paid on hourly and 40 hours a week are they consider employee or contractor?

Thank you for the reply.

"If they were paid on hourly and 40 hours a week are they consider employee or contractor?"

That is a question without a simple or black and white answer.

Generally speaking, a worker will be properly classified as an employee if the person to whom service is rendered retains significant control over the manner and means by which the work is performed. This, ultimately, is the relevant inquiry. And while a fixed and regular hourly schedule is one factor to consider when determining the extent of control, additional factors frequently taken into consideration include the following:

1. Whether the person performing services is engaged in an occupation or business distinct from that of the principal;
2. Whether or not the work is a part of the regular business of the principal or alleged employer;
3. Whether the principal or the worker supplies the instrumentalities, tools, and the place for the person doing the work;
4. The alleged employee’s investment in the equipment or materials required by his or her task or his or her employment of helpers;
5. Whether the service rendered requires a special skill;
6. The kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision;
7. The alleged employee’s opportunity for profit or loss depending on his or her managerial skill;
8. The length of time for which the services are to be performed;
9. The degree of permanence of the working relationship;
10. Whether or not the parties believe they are creating an employer-employee relationship may have some bearing on the question, but is not determinative since this is a question of law based on objective tests.

See here for some very helpful additional information and comparison between contractors and employees. http://www.twc.state.tx.us/news/efte/appx_e_twc_ic_test.html

In short, there is no black and white answer and more information would be required to make an assessment of a particular worker's classification. Either way, though, cash payment is legal.

Patrick, Esq. and other Employment Law Specialists are ready to help you