"I'll pay you in cash, but let's not talk about taxes." This is what a friend heard from his boss when he started working in a restaurant kitchen. At that moment, he smiled and thought it was a good deal.

After all, cash in hand means more money right away. Anyone who has seen taxes deducted from a paycheck knows how tempting that can be.

However, about two years later, he got a call. The apartment lease was up for renewal, and they asked for income proof. At that moment, he realized, "Oh, I haven't officially worked at all on paper!"

Today, I want to talk about cash payments under the table and how they can come back to haunt you later. I've also checked the relevant figures for Arkansas.

First, let's clear up a common misconception. Paying someone in cash is not illegal in itself.

The issue lies not with the cash but with the record-keeping. When an employer does not report wages, withhold taxes, or keep work records, that's when it becomes under the table.

The first cost is social security credits. As of 2026, you earn one credit for every $1,890 of reported income, with a maximum of four credits per year.

To earn all four credits, you only need to report $7,560 in a year. That's a surprisingly low threshold, but if you're only getting paid in cash, it's zero.

To qualify for retirement benefits, you typically need 40 credits. It may seem far off now, but if a year of work is missing from your record, it will create gaps in your future benefit calculations.

The really scary part is not retirement but disability. SSDI eligibility is also based on work credits, so if you suddenly get injured and have no work history recorded, you'll have nowhere to turn.

The second cost is unemployment benefits. Unemployment claims are based on wage records maintained by the state, and if a job isn't reported, there's no record at all.

This means if a restaurant closes and you're laid off suddenly, you have no grounds to file a claim. The unemployment insurance tax that Arkansas employers pay is based on wages up to $7,000 per employee, so employees not on the books are completely excluded from that calculation.

The third cost is workers' compensation. In Arkansas, employers with three or more employees are generally required to carry workers' comp insurance.

But what happens if an unrecorded employee gets burned in the kitchen or cuts themselves? The insurance company will first question whether that person was actually an employee, and the employee has to fight that battle alone.

The fourth cost is the wages themselves. The minimum wage in Arkansas is $11 per hour for businesses with four or more employees, and it has remained the same since 2021.

Under federal law, if you work over 40 hours a week, you must be paid 1.5 times the overtime rate. But without a record of your hours, it's really hard to prove how much you worked.

My friend experienced this. He worked 55 hours a week, but when he calculated it by the hour, he found he was earning less than minimum wage. He had no documents to argue with, so he just let it go.

The fifth cost is taxes. Many people think that cash means no taxes, but cash income is still reportable.

If you try to sort it out later, it can get complicated with the social security and Medicare contributions that your employer should have matched. If you worked as an employee but had no withholding, you can use IRS Form 8919 to sort out your share, and if your employment status is unclear, you can request a determination with Form SS-8.

The sixth cost is credit and living. Proof of income is required for rental applications, auto loans, mortgages, and even for green card or citizenship paperwork.

If you don't have a pay stub or W-2, banks have no reason to believe you earn money. Ultimately, my friend struggled to find a cosigner.

I generally believe in letting the market decide. I know that too much regulation can make it hard for small businesses to survive.

However, this is a different conversation. Under-the-table payments mean that the taxes the boss saves ultimately come at the expense of the employee's future. It's not fair competition, and only businesses that report honestly end up losing out.

So if you're currently getting paid in cash, what should you do? Start by keeping a record of your hours and the amounts you receive, dated. Notes on your phone are fine.

Deposit the cash you receive into a bank account to leave a paper trail. Then politely ask your boss to process a W-2 for you. Surprisingly, some places are willing to make that change.

Log into my Social Security account and check how your income record is being tracked. If you see any empty years, that reflects your current situation.

If your tax situation is complicated, don't hesitate to seek help from a tax professional or a free tax counseling program. The longer you wait, the more complicated it will become.

If it were me, I would choose a job that pays a little less but provides a W-2. Being able to prove my work five years down the line is a much more valuable asset than a few hundred dollars more now.