Typically the Department of Labor attempts to recoup the money by holding a hearing. If the person loses the hearing they could potentially become liable for all the benefits they collected. Usually the DOL finds out becomes someone tells them in some manner either through someone reporting, a tax filing or some other manner. The people paying the person off the books may be violating various tax laws themselves since they are paying off the books.
You could be facing civil penalties and potential criminal charges at the state and federal level. Your question indicates a need to speak with a tax attorney in your community. It is prudent to choose an attorney versus a CPA because privilege attaches.
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