I have been offered a full time job at $15.00/hour.  The prospective
employer wants to pay me "under the table", no taxes withheld or
reported.  What would be the SPECIFIC Federal & state penalties
(Pennsylvania) for this tax evasion for me AND for the employer?

Summary:

You-

Federal, most likely charged with tax evasion. Fine not to exceed
$100,000 imprisonment not to exceed 5 years. State, same charge, Fine
not to exceed $25,000 imprisonment not to exceed 2 years.

Your Employer-

Could be charged, not likely.

Some extraneous information omitted ...

Federal:

Section 7201. Attempt to evade or defeat tax 

      Any person who willfully attempts in any manner to evade or
    defeat any tax imposed by this title or the payment thereof shall,
    in addition to other penalties provided by law, be guilty of a
    felony and, upon conviction thereof, shall be fined not more than
    $100,000 ($500,000 in the case of a corporation), or imprisoned not
    more than 5 years, or both, together with the costs of prosecution

Section 7203. Willful failure to file return, supply information, or pay tax 

      Any person required under this title to pay any estimated tax or
    tax, or required by this title or by regulations made under
    authority thereof to make a return, keep any records, or supply any
    information, who willfully fails to pay such estimated tax or tax,
    make such return, keep such records, or supply such information, at
    the time or times required by law or regulations, shall, in
    addition to other penalties provided by law, be guilty of a
    misdemeanor and, upon conviction thereof, shall be fined not more
    than $25,000 ($100,000 in the case of a corporation), or imprisoned
    not more than 1 year, or both, together with the costs of
    prosecution.  In the case of any person with respect to whom there
    is a failure to pay any estimated tax, this section shall not apply
    to such person with respect to such failure if there is no addition
    to tax under section 6654 or 6655 with respect to such failure.  In
    the case of a willful violation of any provision of section 6050I,
    the first sentence of this section shall be applied by substituting
    ''felony'' for ''misdemeanor'' and ''5 years'' for ''1 year''.

Section 7206. Fraud and false statements 

      Any person who -
      (1) Declaration under penalties of perjury
        Willfully makes and subscribes any return, statement, or other
      document, which contains or is verified by a written declaration
      that it is made under the penalties of perjury, and which he does
      not believe to be true and correct as to every material matter;
      or
      (2) Aid or assistance
        Willfully aids or assists in, or procures, counsels, or advises
      the preparation or presentation under, or in connection with any
      matter arising under, the internal revenue laws, of a return,
      affidavit, claim, or other document, which is fraudulent or is
      false as to any material matter, whether or not such falsity or
      fraud is with the knowledge or consent of the person authorized
      or required to present such return, affidavit, claim, or
      document; ...
    shall be guilty of a felony and, upon conviction thereof, shall be
    fined not more than $100,000 ($500,000 in the case of a
    corporation), or imprisoned not more than 3 years, or both,
    together with the costs of prosecution.



State:

Part X. Procedure and Administration.
§ 7353. Crimes.
(a) Any person who wilfully attempts in any manner to evade or defeat
any tax imposed by this article or the payment thereof shall, in
addition to other penalties provided by law, be guilty of a
misdemeanor and shall, upon conviction, be sentenced to pay a fine not
exceeding twenty-five thousand dollars ($25,000), or to undergo
imprisonment not exceeding two years, or both.

(c) Any person required under this article to pay any tax or to make a
return, keep any records or supply any information, who wilfully fails
to pay such tax or make such return, keep such records or supply such
information at the time or times required by law or regulations,
shall, in addition to other penalties provided by law, be guilty of a
misdemeanor and shall, upon conviction, be sentenced to pay a fine not
exceeding five thousand dollars ($5,000), or to undergo imprisonment
not exceeding two years, or both.

(d) Any person who wilfully makes and subscribes any return, statement
or other document which contains or is verified by a written
declaration that it is made under the penalties of perjury and which
he does not believe to be true and correct as to every material
matter, or wilfully aids or assists in, or procures, counsels or
advises the preparation or presentation, in connection with any matter
arising under this article, of a return, affidavit, claim or other
document which is fraudulent or is false as to any material matter,
whether or not such falsity or fraud is with the knowledge or consent
of the person authorized or required to present such return,
affidavit, claim or document, shall be guilty of a misdemeanor and
shall, upon conviction, be sentenced to pay a fine not exceeding five
thousand dollars ($5,000) or to undergo imprisonment not exceeding two
years, or both.

(e) Any person who wilfully delivers or discloses to the Department
any list, return, account, statement or other document known by him to
be fraudulent or to be false as to any material matter shall be guilty
of a misdemeanor and shall, upon conviction, be sentenced to pay a
fine not exceeding five thousand dollars ($5,000) or to undergo
imprisonment not exceeding two years, or both.

My guess is you can file a schedule c in early January 2005 covering
the wages paid you. Same for Pennsylvania if they have a state income
tax. Study the instructions and report according to your best guess of
what the instructions mean. IRS has some recording you can listen to
by telephone on how to file schedule c. You can perhaps be vague about
who is paying you. Odds are about even you will hear from IRS and you
need to be completely truthful even if it makes big trouble for your
new employer. Typically penilties are small for innocent mistakes, so
don't use a tax professional. In the meantime get schedule c
instuctions and the 2 page form from from someone who filed last year.
White out their numbers and estimate what your numbers will be on Dec
31, 2004. This will show your proper intent if you get questioned
before early January. Unlikely. It will also allow you to complete the
correct form the first few days of January, as few changes are likely
in the form or instructions. You may find you can make honest
deductions sufficient to cover the double FCIA you will be required to
pay as self employed. Think of your self as a sub contractor of your
new boss, who you should not tell you intend to file a schedule c.
 If you have some investments that will deduct income tax for you (or
another job, or a spouse with a job) you may be able to avoid filing a
quarterly estimated tax return. You get larger deductions by claiming
-2 or even -5 deductions. Generally if you owe IRS less than $400,
they won't hastle you about quarterly estimated tax.  Neil