Being Paid

[borntohula]

i have a question regarding getting paid under the table.

 

my employer was paying me under the table because (in her words) she wanted to help me be a bit more financially sound after being unemployed for 6 months. i thought she was helping me out, but after only having worked there for two months, i was fired, and i realized that she was doing it to save herself. as it turns out, i was hired as a band-aid of sorts (it's a small, independent bookstore), and that she had no interest in keeping me on staff longer than the two months i was there. had i been there for three, i would've been entitled to two paid weeks of notice of my termination (rather than the day-of termination i got) and i also would have been able to sue her for wrongful dismissal.

 

now that i've been fired, i'm tempted to claim the money i was paid on my next tax return with the hopes that she'll be audited for it. i'm assuming that by doing that i'll only have to pay the tax that i owe for what i was paid, and not have to pay any extra $$$ for penalties. am i right to assume that? is claiming the money a stupid move? is anyone here familiar with these kinds of laws and procedures? i've checked out employment ontario's website but it's vague and mostly unhelpful to my situation.

[ToadMan]

I can't give you any concrete information... or anything that I am confident is correct. I hope somebody else can.

 

I think there are a lot of factors here. I'm not sure about the fact you knew you where off the books. You could claim that you weren't aware. If you where off the books, then you won't have the right documentation to claim the income (no T4 or ROE). If you where going to go the route of claiming that you didn't know, you could probably just contact the department of labour and tell them you haven't received an ROE. That would put the owner in a bit of a trouble spot to supply you with one (considering you weren't on payroll). Other than that you could just report the owner for paying you under the table.

[jnak00]

You should be claiming the income in any case. Now, I know many many people don't, but by law you are supposed to. You will only be liable for the tax on the income, there will be no penalties or anything like (assuming you pay your taxes on time)

 

The chance of your employer getting caught from it is slim to none.

[borntohula]

i'll ignore the ghastly spelling mistakes to say thank you. i figured those were my options. i'm just not sure if i'll have to pay a penalty for knowing that i was being paid under the table or something.

 

i guess i should also mention that at the beginning of my tenure there, i filled out a tax form of some sort (i'm really not sure if it had a name, i'm a dumbass for not photocopying it)... the kind you'd have to fill out before being put on payroll somewhere. now i'm wondering if that will somehow factor into whether or not i receive a T4 or ROE. again, i know very little about all of this, and all of my other employers were rather large companies or institutions, so i'm also not used to being taken advantage of in this way.

 

You should be claiming the income in any case. Now, I know many many people don't, but by law you are supposed to. You will only be liable for the tax on the income, there will be no penalties or anything like (assuming you pay your taxes on time)

 

The chance of your employer getting caught from it is slim to none.

 

nuts. so should i report them if i'm feeling rather bitter? or are you saying that even still, the chances of them being caught for it are slim?

 

i guess the seriousness with which revenue canada would pursue the issue is relative to the amount of money i was paid, and the amount that they were owed by neither party paying taxes on it.

Edited April 23, 2009 by borntohula

[ToadMan]

Hmmm....

 

Sorry if my spelling and grammar was sub-par.

 

One of my points wasn't that you shouldn't claim the income, but that if you don't get a T4 then the tax form doesn't have a way for you to claim the income. I mean you can write it as income in step 2 (line 28) of federal. The form doesn't ask you who paid you, and without a T4 you are gunning to get at least a call from, if not an audit from CRA. You most likely should just contact a tax expert and they will tell you how you claim income you don't have proof of.

 

If you filled in a T1 (which is the form you usually fill in), then it is possible that you where on payroll and your employer filled is that you where electing to not have taxes withheld. That is completely legal if your income will not exceed your allowable non-refundable credits.

 

More concerning would be if you had CPP end EI deducted. You might want to contact someone about that, because I think there can be some problems. Especially if you are planning on claiming the income.

 

As I said, I hope there is someone who is more of an expert on it than me. I know quite a bit as I am doing cross boarder taxes this year (but I have expert help also).

[prototypepariah]

This might seem like a really stupid question so forgive me, but you were paid with checks correct? You'd have proof she/they/the store paid you for something certainly not because they enjoyed your company.

 

That said from my limited very limited knowledge of the US's laws this is gonna not amount to anything more than headache for you trying get back at someone for "misleading" you. While I doubt the store can get in very much trouble at all. Besides didn't you get an extra 10-15% by not paying taxes? Over 2 months that might just be about the amount of severance pay you mentioned you would be entitled too.

[borntohula]

If you filled in a T1 (which is the form you usually fill in), then it is possible that you where on payroll and your employer filled is that you where electing to not have taxes withheld. That is completely legal if your income will not exceed your allowable non-refundable credits.

 

More concerning would be if you had CPP end EI deducted. You might want to contact someone about that, because I think there can be some problems. Especially if you are planning on claiming the income.

 

yes, the T1 is what i filled in. i did not scratch the box to opt out of taxes the legal way, as i was under the impression that i'd be there for a year. but my boss might've. who knows.

 

i just got a statement from my boss, as i asked her to detail what i made and what was actually deducted. i'm surprised i got it, but in any case, she did deduct CPP and EI (same as UIC, right?), just not the tax. i will be contacting someone soon about all of this. what about having those things deducted but no tax spells t-r-o-u-b-l-e for you?

[ToadMan]

That seems like you should be OK. I'm not sure about the rules for CPP and EI which was my concern over them. You should be able to get a T4 from the employer, and then they actually weren't paying you under the table (just not deducting taxes). If she won't provide a T4, the CRA website indicates that you should contact them if you where included in the businesses return, then the CRA can give you a copy of your T4. If you weren't, then they will investigate the business. Note that T4's don't get issued until closer to tax time (sometime in February is the cutoff for employers to send out T4's. ROE's on the other hand have a much more strict time limit to the day you where terminated). I would suspect if you where actually paying CPP and EI then she had just modified your T1 to indicate to not deduct taxes... which seems unscrupulous and maybe something you should report, but maybe not the same sort of crime. If the CPP and EI was deducted but not actually paid, then your employer is in some trouble and I'm sure the CRA would be interested in your story.

 

In terms of penalties if you claim the income, and pay any tax owing by the deadline (April 30th), then you will have no penalties.

 

prototypepariah: You are correct that he would have earned more... however, it is entirely possible that his deductions would make him owing no tax... so he would have got any withheld tax back anyway. In which case the severance would still be in addition.

 

I think the real loop whole here is that you where actually let go in the probation period, which means the employer can let you go without cause. So all you have really experience is being lied to, and the employer possibly modifying documents you submitted.

[prototypepariah]

Is it generally a rule in Canada that you aren't an at will employee? In the state in the US where I live you are at will unless otherwise explicitly stated. Meaning you can be fired without cause or notice, and you have no recourse, heck I don't think you can collect unemployment at that point.

[RicardoObviouso]

i have a question regarding getting paid under the table.

 

my employer was paying me under the table because (in her words) she wanted to help me be a bit more financially sound after being unemployed for 6 months. i thought she was helping me out, but after only having worked there for two months, i was fired, and i realized that she was doing it to save herself. as it turns out, i was hired as a band-aid of sorts (it's a small, independent bookstore), and that she had no interest in keeping me on staff longer than the two months i was there. had i been there for three, i would've been entitled to two paid weeks of notice of my termination (rather than the day-of termination i got) and i also would have been able to sue her for wrongful dismissal.

 

now that i've been fired, i'm tempted to claim the money i was paid on my next tax return with the hopes that she'll be audited for it. i'm assuming that by doing that i'll only have to pay the tax that i owe for what i was paid, and not have to pay any extra $$$ for penalties. am i right to assume that? is claiming the money a stupid move? is anyone here familiar with these kinds of laws and procedures? i've checked out employment ontario's website but it's vague and mostly unhelpful to my situation.

dude, its too bad you're in this position. i've been a business owner and employer for a good portion of my adult life, and hopefully i can provide you some insight.

 

firstly, you should claim your cash as income. you won't be fined or penalized for doing it, it's what you're supposed to do if your employer doesn't (especially if she hired you as an "independent contractor"). employers are entitled to 90 days of service before they make a decision on an employee's fate within the company... it's brutal, but for a lot of employers, it's common practise to turn staff over within 90 days to protect themselves from being on-the-hook for situations like these.

in your case, you worked for less than 90 days, so no reason for termination is necessary, regardless of how you got paid. the only real revenge you can inflict on her is to submit an anonymous tip to the CRA regarding the way she pays her employees. if she's paying you under the table, chances are she's not claiming all of her income.

 

 

edit: i just read that she deducted ei and cpp from your paycheques but not income tax. she front loaded you. it's perfectly legal. you're on the books, she's just giving you the opportunity to generate more cash flow now, and then when you have a steady and consistent form of income, you can adjust the amount of income tax that's deducted (either from her or from your next employer). the crazy thing is that there's a HUGE amount of employers that do this, and its usually when they hire seasonal and/or short term staff. what will happen is that when you recieve your T4 for next tax season, it will show that no tax has been deducted and you'll have to pay it later. if you dont want to be out of pocket next april, request that your next employer deduct an additional $15-$20 off each paycheque and that should pay off what you already owe.

Edited April 26, 2009 by BootySweat

[ToadMan]

Is it generally a rule in Canada that you aren't an at will employee? In the state in the US where I live you are at will unless otherwise explicitly stated. Meaning you can be fired without cause or notice, and you have no recourse, heck I don't think you can collect unemployment at that point.

 

In general, the labour laws in Canada guaranty employees many rights once they have passed a probationary period. In Saskatchewan (where I am from) that is 3 months. Once you have been employed for 3 months then an employer can only fire you with cause. In most cases they have to show that they attempted to retrain you before their cause is considered valid. If you are dismissed (unfairly) you have the option to file a complaint with the department of labour. All employes once past 3 months are entitled to 2 weeks of notice (or pay in lieu of notice). Your also entitled to 3 weeks of vacation. It is actually near impossible for employers in Canada (Saskatchewan) to hire employees "at will". Not employment contract (other than a trade union agreement) can supersede the provisions of the Labour Standards Act. Canada has many socialist tendencies.

 

I now work in the US where my employment is "at will". My employer is really good, so I actually get 12 days of vacation. I understand however that not all employers are that nice.

[jnak00]

Most of what has been posted is correct. The employer should provide you with a T4, since they deducted EI and CPP.

 

The form you would have filled out at the onset of employment is the TD1. This tells the employer how much tax they should be deducting from your paycheque. It is entirely possible that you will owe no tax on the amounts they paid you (depending on how much it was), or that they were correct in not deducting any tax.

[saturnine]

under the table is cash money with no receipt. just how i likes it.

[borntohula]

dude, its too bad you're in this position. i've been a business owner and employer for a good portion of my adult life, and hopefully i can provide you some insight.

 

firstly, you should claim your cash as income. you won't be fined or penalized for doing it, it's what you're supposed to do if your employer doesn't (especially if she hired you as an "independent contractor"). employers are entitled to 90 days of service before they make a decision on an employee's fate within the company... it's brutal, but for a lot of employers, it's common practise to turn staff over within 90 days to protect themselves from being on-the-hook for situations like these.

in your case, you worked for less than 90 days, so no reason for termination is necessary, regardless of how you got paid. the only real revenge you can inflict on her is to submit an anonymous tip to the CRA regarding the way she pays her employees. if she's paying you under the table, chances are she's not claiming all of her income.

 

 

edit: i just read that she deducted ei and cpp from your paycheques but not income tax. she front loaded you. it's perfectly legal. you're on the books, she's just giving you the opportunity to generate more cash flow now, and then when you have a steady and consistent form of income, you can adjust the amount of income tax that's deducted (either from her or from your next employer). the crazy thing is that there's a HUGE amount of employers that do this, and its usually when they hire seasonal and/or short term staff. what will happen is that when you recieve your T4 for next tax season, it will show that no tax has been deducted and you'll have to pay it later. if you dont want to be out of pocket next april, request that your next employer deduct an additional $15-$20 off each paycheque and that should pay off what you already owe.

 

this is some great advice, thank you. i kept meaning to respond earlier, but i always got distracted.

 

all the advice i've received here has been great. who knew the bored could be useful for something?!?! thanks everyone.