Thread: More New Jersey businesses flouting tax laws

By ERIK ORTIZ Staff Writer, 609-272-7253

Published: Monday, April 06, 2009


New Jersey's shadow economy is under a spotlight by state officials.
State Labor Commissioner David J. Socolow said the state is seeing more instances of employers paying workers in unreported cash wages, even as the state "puts a dent" in the number of other types of cases in which employers cheat the system.

"If the employer's going to cheat, they're going to cheat all the way," Socolow said in an interview with The Press of Atlantic City last week.

Maybe even more so now, economists say. As a slumping economy has forced employers to cut costs and made workers more desperate to secure whatever jobs - legitimate or otherwise - are available, the idea that people would flout labor and tax laws is not such a stretch.

Socolow, however, declined to speculate on whether the problem would worsen if the economy continues to struggle.



He said by paying under the table, employers are not reporting workers' wages to the state or the Internal Revenue Service, nor are the employers paying into various insurance benefits for workers, such as disability and unemployment.
In cases known as "misclassification," the employer might provide a Form 1099 that accounts for the worker's income but then fails to pay insurance benefits and payroll and other taxes for the worker because the employer does not consider the worker an official employee. Instead, the employer might purposely misclassify the worker as an "independent contractor."

"Workers who are not covered are at greater risk of their employer not following (Occupational Safety and Health Administration) rules, not having the benefits that they need when they need them, and they're at greater risk of being cheated out of their wages altogether," Socolow said.

A 2006 study by the Government Accountability Office, the investigative arm of Congress, found that 15 percent of employers misclassify workers, with a disproportionate amount being immigrants. While concrete numbers are difficult to find, various studies estimate about 40 percent to 50 percent of illegal immigrants are paid under the table, while the rest might still pay into Social Security using false numbers.

In 2007, the state Labor Department identified more than 31,000 misclassified or nonreported workers in New Jersey, accounting for more than $482 million in underreported wages and more than $17 million in unpaid payroll taxes.

Figures from 2008 were not readily available last week.

Socolow said many of those workers have a "lack of a voice with their employer," are not in a union or do not speak English. The companies they work for include landscaping, construction, nail salons, dental offices and information technology businesses.

Union leaders in southern New Jersey say their organizations discourage under-the-table jobs and employers paying unreported wages.

"We don't see that too much. It's against every union's bylaws," said William Pauls, president of the South Jersey Building and Construction Trades Council in Atlantic City.

Payroll taxes are important because they help pay for the state's unemployment insurance fund. With the economic downturn causing unemployment claims to jump, the ability for the government to collect the rightful amount in payroll taxes is crucial, state officials say.

Gov. Jon S. Corzine has called for an increase in the payroll tax - of about $90 per employee - that businesses would have to pay to make up for the dwindling unemployment fund. Business groups have spoken out against the tax hike.

Meanwhile, Socolow said the Labor Department and the Department of Banking and Insurance have worked to establish a cross-match program to verify whether the more than 250,000 employers in the state's unemployment tax and disability insurance database are covering their workers. He said the Labor Department also partners with the IRS on any leads.

Employers caught misclassifying workers must pay back taxes and usually penalties related to findings of negligence or fraud.

Patrick Fleenor, chief economist at the Tax Foundation, a nonpartisan research group in Washington, D.C., said that while employers are acting illegally, "they're also acting rationally."

"It's not surprising you get these cases," Fleenor said. "People know they can get away with it, and indeed they do get away with it. Having an already high marginal tax rate creates an incentive for people to pay under the table or do all sorts of shenanigans."


E-mail Erik Ortiz:

EOrtiz@pressofac.com

Employee vs. contractor

According to state officials, when workers are misclassified as independent contractors or paid under the table, they are deprived of their proper coverage for social insurance benefits such as Social Security, unemployment, workers compensation and disability.

New Jersey uses the "ABC test" to determine whether employers are hiring an independent contractor or an employee:

A) While the employer sets the scope of the work and deadlines, the contractor still determines his or her hours and how to do the job.

B) The contractor is hired to do work outside of what the employer usually does or physically works outside the employer's place of business.

C) The contractor is established as independent from the employer and is engaged in other jobs.

http://www.pressofatlanticcity.com/184/ ... 50224.html

And no one is E-Verifying the immigrant workers.

The Gov't can't hold Americans accountable for paying taxes when the Gov't does pay them either.

And if NJ and other states continue to heavily tax employers , the employers are either going to go to the states in this country with fewer taxes and/or they are going to leave the country.

Further, none of the states have the right to cry about loss of money if they aren't putting into effect E-verify and enforcing immigration laws.

Gov. Jon S. Corzine has called for an increase in the payroll tax - of about $90 per employee - that businesses would have to pay to make up for the dwindling unemployment fund. Business groups have spoken out against the tax hike.

Wait. A politician wants businesses to cover some tax? Wow!!! I think this guy has potantial!

But the businesses will just in-turn take this off on their federal tax form. We the people, middle-class will pay.

That useless corrupt piece of sh!t called a governor could solve most of his state's fiscal woes if he stopped running a sanctuary state allowing businesses to hire illegal aliens who aren't paying taxes instead of Americans who do and halted in-state tuition, non-emergency health care, education, welfare, food stamps and other benefits to those illegally in this country. However that will never happen because Corzine is owned by the mob and it's labor unions, who hire illegal aliens for their casinos and other businesses. New Jerseyians need to wise up and kick this waste of space, oxygen and taxpayer dollars out of office in 2010.

Originally Posted by retiredairforce

That useless corrupt piece of sh!t called a governor could solve most of his state's fiscal woes if he stopped running a sanctuary state allowing businesses to hire illegal aliens who aren't paying taxes instead of Americans who do and halted in-state tuition, non-emergency health care, education, welfare, food stamps and other benefits to those illegally in this country. However that will never happen because Corzine is owned by the mob and it's labor unions, who hire illegal aliens for their casinos and other businesses. New Jerseyians need to wise up and kick this waste of space, oxygen and taxpayer dollars out of office in 2010.

Ditto RAF!