Paying someone under the table means to pay a person without either reporting that one has made such a payment to the proper tax authorities, or allowing a person to collect payment without reporting that one has received a payment. This is a common form of illegal payment, which is used to reimburse people who are not licensed to work in a particular country. As a worker, receiving pay without reporting it is income tax evasion.

The expression under the table comes from the idea that the pay is secret. A way of maintaining this secrecy would be to hand the money to someone under the table, instead of above it, where all could see. Usually this form of payment is in cash because this allows the person to use the money without records of its use. If under the table payments are deposited into a bank account they are traceable.

Paying someone under the table also relates to the business of reimbursing those who are part of crime syndicates, such as the Mafia. Typically payments are made in cash, again to avoid any records of earnings. As well, people who sell stolen items, illegal knockoffs, or any illegal substances accept pay under the table.

It is not always illegal to pay someone under the table. This is especially the case when employing young people to perform odd jobs or to baby sit. Generally a child under 15 does not have to claim a small amount of revenue earned from babysitting or lawn mowing. State laws may vary however, and a child who earns a lot of money from babysitting might not be eligible as a dependent of the parents, or might have to file income tax. It is a smart idea to consult both state and federal tax laws to determine whether an income tax form must be filed.

Receiving pay under the table is quite different than working as a freelancer or an independent contractor. Though one initially receives money from the company/companies for which one works that is free of tax, one must report this income yearly. Failure to report income is again tax evasion, and is likely to be caught. Companies who hire freelance staff do note and report their payments to each employee using the employee’s social security number. Therefore, there is already a record of this payment to the freelancer.

Since a record exists, and even if it didn’t, anyone who works as a freelancer or independent contractor should be certain to keep back part of their pay for taxes. Consulting a good accountant or tax attorney can help you determine the percentage of payment that one should set aside for this purpose.