You are obligated to pay income taxes even if you are paid under the table.

It sounds like your former boss may be contemplating tax fraud. He'd pay you in cash so there'd be no record of the payment and he'd pocket the withholdings instead of paying them to the IRS. (There are some circumstances in which your income could be reported on a 1099 instead of a W-4, but this doesn't sound like one of them.)

It is not a good idea to agree to this. First, since he will not be paying the withholdings, you will not be able to get an income tax refund. Second, when he gets caught engaging in tax fraud, the IRS will also come after you if you haven't paid taxes on the earnings.

If you believe that your boss is engaged in tax fraud with other employees as well, you could always report him to the IRS. The IRS sometimes pays a percentage of the recoveries from tax fraud to whistleblowers.