Filing cash income
If I am being paid cash to work for someone (who says they will not be claiming that on their taxes) how do I file mine? Am I considered self employed and should expect to pay self employment taxes on a 1040? Something else? Do I have to say who paid me, and if so, will that get them in trouble? I'm trying to prepare but also figure out if I've gotten myself in a bad situation or not. Thank you for your help!
Answer:
Without knowing anything about the type of work involved, it’s a little more difficult to give an answer.
First, presumably, you’re working and being paid as an individual and not working through a company. Second, I assume you’re not going to receive a Form W-2 at year-end from the individual who is paying you. If both of those assumptions are correct, then, you would be considered self-employed. I am not getting into the issue of whether you should be properly classified as an employee or as an independent contractor, as that issue has its own intricacies. By nature of the fact that the person paying you says he/she will not claim any write-off on his/her taxes, it sounds like you’re not being treated as an employee (as treating you as an employee would involve its own paperwork). In that case, you would report any money you received (and any corresponding expenses you pay in order to generate that income) on Schedule C on your individual income tax return, subject to income tax. Also, you should expect any money you receive to be subject to self-employment tax, unless your net earnings from self-employment for the year were less than $400. You do not have to say who paid you. I wish you the best in your endeavors!
Adam Dickreiter
