Unemployment payroll tax fraud is when an employer deals in cash-only or uses other schemes to conceal their activities and their true tax liability. This is also referred to as the underground economy, tax evasion, tax fraud, cash pay, tax gap, payments under-the-table, and off the books.
Misclassifying employers have artificially low costs because they have not covered the cost of unemployment insurance contributions and workers' compensation for their employees. Law abiding businesses that properly classify their employees are subsidizing businesses that misclassify and could end up paying higher unemployment insurance contributions, higher workers' compensation premiums, and higher taxes than would be required if all employers followed Tennessee law.
Worker misclassification occurs when any employer treats workers as "independent contractors" when they are employees. Some employers use this tactic to avoid compliance with:
If an individual commits UI fraud, you could face a variety of serious penalties. These include:
You may report an employer who hires a worker and improperly classifies the person as an “independent contractor” rather than as an “employee" or the employer pays the worker in cash with no tax deductions by contacting the worker misclassification Fraud Tip Line at 1.888.243.7283 or you can complete the Employee Misclassification Fraud Tip Form.