What you need to know when accepting envelope wages
It is generally employers’ obligation to calculate, declare and pay tax on wages. You can check whether your employer has registered you as an employee and has declared your wages properly in the e-MTA, choosing there "Registers and inqueries" > "My inqueries" > "My employments" and "My income".
If you have been paid wages by the employer but the employer has failed to declare it, you have to declare the wages yourself and pay income tax on the wages.
Knowingly accepting envelope wages exempts neither the employer nor the employee from their tax liability or the envelope wage receiver from the payment of income tax.
When submitting an income tax return please check and correct, if necessary, the data on wages received using part II of table 5.1 of the income tax return for a natural person. If you receive envelope wages, you are obliged to declare the amount received in your bank account or the amount paid to you in cash in part II of table 5.1 of the income tax return for a natural person.
Submission of false information in the tax return may lead to a fine up to 1,200 euros.
Receivers of envelope wages risk not being entitled to sickness benefits, redundancy payments or unemployment benefits; and due to unpaid taxes the amount of their pension will be lower in the future and they will always be in a weaker position in the event of a possible labour dispute with the employer.
Most of us pay taxes because it is normal and dignified. By paying taxes we keep life going on in Estonia.