QUESTION

 

 

 

ANSWER

 

Q1)

Tina Song, president of Motown Construction Service is trying to pull out a rabbit out of the hat by conducting her business in cash instead of check or credit cards. It is a common knowledge that the cash transactions can easily be masked from the IRS and she wants to evade tax by doing her business through cash. In the conversation snippet it is mentioned that she gets her payments in cash, to use that money and also to avoid the gaze of the taxman she has to pay her employees in cash, which she is doing with Marvin.

Also, she wants to cut corners by not including Marvin into her payroll system which in the short run would be beneficial to both the parties, but will have long lasting implications for Marvin and the company. If these misdeeds are found out, the company would be staring at a large penalty and a loss of face which would be detrimental as it would also affect client relations and other business dealings.

While paying in cash it is important to declare cash payments on Form W-2 each year, it has a separate cash component section. It is clear from the given snippet that Tina has no intention of doing that. According to IRS, paying the salary under the table i.e. in cash without record is one of the top types of employment tax non-compliance.

Another reason that Tina is avoiding formal routes is that she doesn’t want to sign up for workers’ compensation insurance. This conversation doesn’t shed light on whether Marvin is a legal worker in US, if not then also Tina would want to wash her hands of the responsibility, but I think as he is joining the firm only for the summer this reasoning can well be negated.

The corporate tax in US stands at 21%, which means that on every dollar profit earned, Motown would have to pay 21% to the government, taking home only 79 cents. But if the transactions are not shown on legal documents, this 21% can easily be hidden from the authorities, resulting in full dollar in the pockets. I think this is a major motivational factor for Tina to do her business this way. One disappointing thing is that her clients are also indulging in these malpractices which really shows the need of ethics in the business world. We continually have seen many business failures, like that of Enron but still businesses continue to uphold these values and support such miscreants.

Companies need to look at the big picture while making such decisions. These tricks and manoeuvres might bring in short term wealth, but in the long term hiding them is not only difficult but very costly also. If the taxman has you under his gaze, then getting out of this muddle is next to impossible. A company is then staring at a huge penalty along with the jail time for all the culprits, I am sure Tina would not want such fate to befall upon her.

Q2

Marvin is looking for a summer opportunity and Tina Song, the president of Motown Construction is offering him a position with competitive remuneration but has also put him in a dilemma. She is offering him a summer opportunity that will leave him in good stead in his future endeavours. But also, she is doing so on a condition which should be a complete no-no for someone who is just stepping his foot onto the corporate ladder. The choice in front of Marvin is very intriguing and one which will determine his future career paths and decisions.

Marvin can uphold the ethical consciousness and can decline the offer made by Tina. But if he chooses this, he will be kicking a good summer opportunity away. It is important for him to start his career on an ethical note otherwise choices made by him, will cloud his judgement all through his professional life. If he agrees to the offer made by Tine, there would be a lot of implications for him, ethically as well as legally.

Marvin would have no earnings to show withholding social security earnings and resulting in a lack of social security benefits. Also, worker’s whose name is not on the payroll are not entitled for workers’ compensation or unemployment benefits. These benefits along with insurance make up a huge part of any employment. I feel that Marvin should demand these benefits and should not be overly ecstatic by the opportunity and the salary provided to him.

Ideally Marvin should inform Tina that he is fine with cash payments as long as she makes that mention to the IRS. This is a summer opportunity; which Marvin would not be doing for money. He would be looking for some corporate exposure along with network, so he should not get involved in mindless hassles of tax evasions. He should be a good citizens and declare his earnings.

If Tina is not ready to oblige to Marvin’s demands, he should look for other opportunity which would not only give him corporate exposure but also helps mould his ethical side. Motown is a firm that is doing its business in an unethical way and to associate himself that early in his career with such a firm, could prove detrimental for his future prospects.

Also, Marvin should ask Tine to enrol him into the formal payroll system, as he is an employee, no matter how short the duration might be. This would help him clear his hands from the tax evasion exercise prevalent at Motown. As an extreme step, if Tina is not budging, Marvin can complaint and help the public at large discover the misdeeds that are going on at the firm. But this step will draw undue flak on Marvin and he would be well advised to stay away from such acts.

In the end sound advice for Marvin would be to not stain his hands with illegal tax free money. As he is just looking for a summer opportunity where he would be searching for corporate exposure, money should come secondary and he should decline if the payments are made in case without record.

References

Blakely-Gray, Rachel (2018). Paying under the table. Retrieved from https://www.patriotsoftware.com/payroll/training/blog/paying-employees-cash-under-table-illegal/

Bibey, Chris (2019) Pay employees cash. Retrieved from https://www.surepayroll.com/resources/blog/is-it-illegal-to-pay-employees-cash

Murray, Jean (2019) Using Cash to Pay Employees and Independent Contractors. Retrieved from https://www.thebalancesmb.com/using-cash-to-pay-employees-and-independent-contractors-397357

Blakely-Gray, Rachel (2016). Employees cash. Retrieved from https://www.patriotsoftware.com/payroll/training/blog/paying-employees-cash-under-table-illegal/

Brian, D. (2017) Paying employees under the table. Retrieved from http://www.vision-hr.com/news/3138-paying-employees-under-the-table/

Coble, Christopher (2015) How much trouble are under the table employees? Retrieved from https://blogs.findlaw.com/free_enterprise/2015/06/how-much-trouble-are-under-the-table-employees.html