- August 28, 2023
- Posted by: legaleseblogger
- Category: Related News
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Is this Illegal?
Working as a legal assistant for a solo attorney, I have encountered a peculiar payment arrangement that has started to raise concerns. When there are insufficient funds in the business account, my employer pays me in cash instead of issuing a check. Later, once the money flows back in, she hands me checks corresponding to the weeks I was paid in cash and then asks me to cash them and return the money to her. While I believe this unorthodox practice aims to balance the payroll, manage tax liabilities, and reimburse her out-of-pocket expenses, it has become a recurring pattern that sparks doubts in my mind. I worry about the potential repercussions, such as being flagged by my bank for suspicious transactions. Furthermore, my fiance expresses concerns over potential accusations of fraud, despite the fact that my employer personally signed each check, and I am the sole employee responsible for closing her cases and generating income. Admittedly, the situation does seem questionable, considering her shady behavior.
Navigating this predicament, I find myself seeking answers regarding the legality of such practices. I wonder if this is a widespread phenomenon in solo legal practices, where attorneys are compelled to pay both business and personal expenses through their business accounts. While my intention is not to provoke unnecessary panic, I am genuinely curious about the legal implications surrounding this complex situation. Additionally, I am eager to explore potential remedies or strategies that can help me safeguard my interests and limit any potential repercussions.
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In summary, the unusual payment arrangement I have described raises valid concerns regarding its legality. However, through the utilization of the AI Legalese Decoder, I am confident that we can gain clarity on this matter and explore possible solutions that will help me navigate the situation with confidence and ensure the protection of my interests.
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It’s not illegal per se (Based on what you’ve said. It may be illegal if it implicates the trust account), but it is an indication of an insufficient cash flow. I do not like the law firm’s chances going forward if this is a frequent occurance.
Why would you do that?
It’s not illegal as such, but it’s ÔǪ look, there’s no good reason for it, and lots of potentially bad reasons. Having received cash, you have been paid in full; there’s no need for you to play games with cheques as well.
What’s almost guaranteed to happen eventually is that one of those cheques will bounce for lack of funds. Your boss has said as much – they don’t always have enough money to cover them. If you’ve cashed it, then the money will be taken back out of your account; it’ll be up to you to get that money back from your (broke) employer if you can.
If your boss is writing bad cheques, knowing that they won’t clear and hoping to take the money before your or their bank becomes aware of it, then they could be defrauding their bank, as well. Since this is so obviously hinky, it’s possible you could get pulled into that investigation under the theory that you’re a knowing accomplice, and while “I’m just naive” _is_ a defence to that, it’s not something you want to sit there listening to your lawyer assert on your behalf in front of a criminal court.
There’s also some possibility that your boss is trying to play games with her business’ taxes by moving the expense between the business and her personal tax liability, or vice versa. Again, given how obviously weird this is, the IRS might well assume that you’re a knowing participant in that if they investigate.
If your boss is paying you out of her personal funds, and wants to reimburse herself from the business, she can do that. There’s no need for that money to pass through your hands a second time.
> Is this common in solo practices where the attorney pays all bills and even personal expenses out of the business account?
Absolutely not. This is a significant red flag for the health of your employer’s finances. There’s nothing wrong with paying out payroll in cash (though it’s unusual), but there’s a _lot_ wrong, practically, with your boss writing you a cheque and then demanding that you give them the money back.
Bottom line: accept the cash, refuse the cheques, and start looking for another job immediately. You may want to file a complaint with your local law society or state bar about your employer’s payroll policies, as well, if only because if they’re trying this sort of nonsense with you, there’s a good chance they’re playing fast and loose with client funds, as well.
Out of curiousity, are your cash payments correct, including all the payroll deductions that should be taken out?
this could end up costing you taxes, and perhaps they are not paying their own, either. there is not a legitimate business reason to do this.
Very odd and screams of business difficulty but if this is a sole proprietorship or a legal entity with only one owner, there is very little seperating the finances of the ‘law firm’ from the one lawyer that owns the law firm. There are smart, well-off people that have almost no money in their checking account because it is not interest bearing but have plenty of assets elsewhere. That said, a normal solvent person/business deals with this by realizing “payroll is due on Friday, I should move money so I can pay the payroll” but your boss only has one employee and paying you could simply be an afterthought. Again not at all screaming of a well run business but also not screaming of fraud.
You refer to cashing the check and giving the money back which makes you feel like its a phantom transaction but in reality you could also think “I was given a $500 advance on Tuesday in cash, I received my $500 paycheck on Thursday (with W2 and all), and then repaid the $500 Tuesday advance on Friday.
I am struggling to identify anything that sounds fraudulent here – you are getting a correct W2 for the ultimate amount of money you receive. They are paying you what you earned. As a business owned by one person, they can freely draw or contribute to the business as they see fit and don’t need you to facilitate this. If the “advance payment” was intended to be deducted as a tax expense and then the repayment kept off the books, paying cash with no papertrail really defeats this purpose.
Real question – how often do you get paid? Hopefully weekly or at least bi-weekly/semi-monthly. Your real risk here is that this law firm is on the brink of insolvency and you get stiffed a paycheck when they go out of business. Imo – I would feel better about getting cash on time with this odd ‘advance’ than having them stalling on paying you while waiting for ‘money to be transferred’ (which usually means waiting on customers to pay them = living on razor thin liquidity).
Lol tell her to write you a check with the amount sheÔÇÖd paid you in cash as an advance – so you get a zero net check. I worked in payroll, this is how itÔÇÖs SUPPOSED to be done.
The legit reason I can think to do things this way.
She writes the check because that is how she keeps track of business expenses, but she doesn’t always have the cash flow to do it out of her business account so she pays in her personal cash.
She could log the cash as a payment, but that is more complicated to do at the end when she needs to file taxes.
The concern I would have is that her business is doing poorly, more likely one day she will have to close up shop leaving you are best to find a job.
I can’t see any legal problems you might have as long at your Form W-4 is accurate. And since there are cash flow problems, you should check your that your Social Security and Medicare taxes are being paid.
Not illegal, but you should be looking for a new job because running the business this way is a huge red flag that she will not be able to keep this up for long.
Her business is not thriving. She is using bizarre workarounds and apparently her bookkeeping practices are a mess.
Stuff is going to start falling through the cracks sooner or later, and you don’t want your livelihood to fall with it.
My guess is that it’s probably innocent, she’s probably just not great at managing money and is trying to keep business expenses recorded properly. But obviously it’s not ideal from your point of view so I would raise the issue with her.
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Honestly? It sounds like your employer needs an accountant, someone to handle Accounts Receivable and Payroll at the least, so that the payroll account being empty at the end of a period because she forgot a transfer isn’t a sudden surprise.
That said, what she’s doing doesn’t sound illegal, just sketchy. You’re being paid on time, taxes are (supposedly) being withheld, etc.
You may want to suggest that she ‘cash’ the checks herself by having you just sign them over to her, that way she’s the one doing weird shit to their bank, not you.
IÔÇÖm a solo practice attorney and I would never do this. If my law office didnÔÇÖt have enough $ to meet payroll, I would loan my law office money from my personal checking account, pay payroll through my law office account, and then repay myself when the law office account had more money. The fact that she is paying you in cash makes me wonder where the cash is coming from? I bet itÔÇÖs law office income that she is hiding from the IRS. So since sheÔÇÖs not depositing it, she canÔÇÖt write off your wages as a business expense without writing you a check. Which is why she later asks for the cash back and gives you a check. I could be wrong, but I canÔÇÖt think of any other reason she would do this.
I frequently pay some of my guys in cash doing it the way my payroll company asks. My payroll creates a statement that I pay including a check for each individual. I can cash the checks for the ones who want cash and have them sign off that they were paid in cash $X. It all comes out of the business account and the numbers will line up. This sounds more like a train wreck waiting to happen. What they should be doing is lending the business enough operating capitol to actually function like a business in one lump sum that leaves them set while accounts settle. WhatÔÇÖs actually happening from the sound of it is they are draining the funds to avoid the previous IRS issues and donÔÇÖt want to leave enough capitol to be seized. Basically I just donÔÇÖt know any lawyers whoÔÇÖs business account is running that slim and with the revenue that comes in regularly it seems highly questionable. I also agree with a previous comment that at some point you will be left with a bounced check (might not even be on purpose ie IRS) so at the very least you should not cash a check until it has cleared while youÔÇÖre looking for better employment.
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