He's an Old World craftsman, a $14-an-hour master carpenter, a hard-working, God-fearing, law-abiding solid citizen -- until it comes to business licenses.

She's a world-class waitress at one of Washington's coolest water holes, pouring perquisites for Republican spear carriers and Democratic solicitors. They call her by name and tip generously -- a lot more generously than she admits to the Internal Revenue Service.

Cab drivers and consultants, street vendors and subcontractors, housecleaners, babysitters, shopkeepers, music teachers, farmers, flesh peddlers, bookmakers and hair cutters -- they all work in Washington in jobs that offer the most obvious opportunities for underground income.

If estimates that 5 percent of the labor force works "off the books" are accurate, ther are 80,000 people in the greater Washington area earning their living from subterranean enterprises, and thousands more whose moonlighting augments their income but not the government's.

They are ordinary people who by inclination or occupation are able to conceal their true income from the Internal Revenue Service.

When the IRS can't tax, government economic statisticians can't count. The result is a population the size of Bethesda whose jobs officially don't exist. They earn hundreds of millions of dollars that aren't added in when the wealth of Washington is totaled up.

No economist has ever taken a survey of the underground economy to see how its residents earn their livings. Some clues are offered by a 1976 IRS report, a result of a study that set out to knock down claims that a vast and growing underground economy exists.

Instead, the IRS's conservative analysis essentially confirmed the phenomenon. The agency found tax evasion was endemic in certain occupations.

Farmers fail to report 30 percent of their income, by IRS reckoning, and the Census Bureau suspects more than half of farm income is hidden.

The Labor Department estimates at least 25 percent of the country's more than 6 million illegal immigrants work off the books.

Self-employed persons -- from minimum-wage household workers to affluent professionals -- report only 60 percent of their earnings, the IRS estimates.

The tax collectors said that in 1976, the government failed to get is share of $39.5 billion worth of income earned by self-employed persons, $26.8 billion in other wages and salaries, $15 billion in dividends and interest and other legal and illegal income totaling $135 billion.

Economists consider workers at small retail stores, bars and restaurants and the construction industry major earners of underground income. Skimming of profits is as simple for bar owners as pocketing tips is for waiters. Shoplifting can account for unexplained inventory "shrinkage" in most stores, and an unscrupulous owner can easily exaggerate that loss and take home tax-free cash or merchandise.

But tax evasion is only one reason for going underground; others do it to avoid losing government benefits, to escape regulations or to circumvent costly union work rules.

A California Carpenter's Union affiliate studied several federally financed building projects and in May reported widespread evasion of requirements to pay union fringe benefits, which amount to 25 percent to 35 percent of labor costs.

On some jobs workers got a check for part of their earnings and cash for the rest.On the cash wages the contractors saved the cost of Social Security payments and health and welfare deductions. The workers didn't object because they collected their benefits anyway and received tax-free income to boot.

Other builders hired "independent contractors' who were nothing more than construction workers and listed payment to "suppliers" who supplied their own labor.

At the other end of the economic spectrum, a welfare mother who earns a few dollars a day babysitting a neighbor's children can face what amounts to a 150 percent or 200 percent tax on her earnings if she reports them honestly.

Not only will she lose $1 of welfare benefits for every $1 earned, but she could lose her eligibility for food stamps and perhaps even for subsidized public housing.

An unemployed carpenter in the ydistrict who works on a friend's house for a couple of days could lose his $197-a-week unemployment benefits. A retired worker between 65 and 71 can't collect a Social Security check if earnings exceed $5,000 a year.

Besides protecting benefits and evading taxes, workers go underground to avoid government regulations. Take the case of a self-employed Virginia capenter who has for years made a living with only his hands, his tools and his truck.

Satisfied customers pass him on to their friends the same way some people share new restaurants, and like the popular eateries, he requires reservations long in advance.

He holds a business license in the locality where he lives and is licensed as a home-improved contractor there. But if he wants to work in any other Virginia community, let alone cross the Potomac into the District or Maryland, he faces regulatory roadblocks.

"I pay for one license," he says, "but they all want my money. I don't pay them."

To ply his trade, he needs a Virginia Class B contractor's license that costs $35, a $20 Arlington County business license, and an Arlington home-improvement license for another $75. Arlington also requires him to pass an open-book test, post a $5,000 surety bond that costs $100 a year and prove that he has insurance.

Alexandria will recognize his state and Arlington licenses but collects a $30 fee for its own permit, requires a separate $10,000 surety bond and demands a copy of any contract form he uses.

Fairfax wants another $39.25 application fee for a license, administers two tests of its own, insists on a $10,000 bond, charges another $33.75 for its license and runs a check on his credit.

To take a job in Maryland requires another bond, another test with a $10 fee, a $75 state home-improvement license and state business licenses; the state preempts localities, saving the need for separate Maryland and Prince George's County permits.

The District not only demands business licenses and a $64 home-improvement license but also insists that any out-of-state contractor hire an agent in the District of handle any complaints. "I say to heck with them," says the carpenter. He has joined the underground economy.

His customers are in no position to quibble about the carpenter's lack of licenses. Few of them bother to take out the building permits required by law for much of the work he does. When they do get permits, the value of the project is routinely underestimated. And when the work is done, they rarely call the tax assessor to brag about the improvements that have increased the value of their property.