Was 2010 a good year for you? For some it was a financially difficult time – hours were cut while monthly bills still came in. Fortunately some people saw this as an opportunity to earn some extra cash on the side doing jobs like dog walking or getting tips as a restaurant server on the weekends. The extra money was helpful and you were allowed to stay on top of your finances.
Now it’s tax season and you’re wondering how this will impact your tax return. Do you include your cash income or do you have to have a minimum before you have to include it on your 1040? If you do need to file it, how do you do it?
With the IRS the only see two types of income taxable and non-taxable. According to the IRS, here’s how they view income, including cash:
Taxpayers must report all income from any source and any country unless it is explicitly exempt under the U.S. tax code. There may be taxable income from certain transactions even if no money changes hands.
Generally, the IRS considers all income received in the form of money, property or services to be taxable income unless the law specifically provides an exemption.
Check out the definitive source: Publication 525, Taxable and Nontaxable Income.
As you see, tips and cash income are not included. While some people believe that there is a $600 minimum to include income when filing taxes, there is no minimum in the IRS’ eyes.
If you received tips at your job, it should have been reported to your employer and included in your W-2. The amount would be included on line 7 of your 1040. If your employer made a mistake, they have to give you a W-2c (corrected W-2) for you to file your taxes properly.
If you received cash for dog walking or babysitting for example as part of self employment, then you should include the amount on your Schedule C.
Don’t be worried when it comes to filing taxes. Getting more income, including cash is a great thing. Keep it that way by being honest when filing your taxes.
Elle helps families at Couple Money achieve financial freedom by sharing tips for reducing debt, increase income, and building net worth. Learn how to live on one income and have fun with the second. More from Elle Martinez
I am babysitting and being paid by cash for my granddaughter do I need to obtain any forms to fill out or anything from my daughter stating how much I am being paid when I file my taxes for the year?
Juanito says:my boss pay me in cash and he dont provide me a w-2, How can I report my income in form 1040 or should I report my cash wages.?
corey w says:I worked a real job for 2 months then i started climbing trees for tree services.. And noone gave me a 1099 can i still file what i made if i dont really have proof… Im pretty sure i made about 18000 last year (2014)
Richard says:Technically you are required to report that. Realistically, unless one of your clients reports you, no one would know and even then it wouldn’t be enough to spend IRS time investigating. If you’re pretty sure you made 18k last year you must have something you based that on and I would suggest practice working on a schedule C(C EZ IF you will not claim expenses exceeding 5k) and see how it feels to you on completion. I’m thinking your real problem might be the expenses as IRS won’t complain about income to tax. Maybe you might even be able to ask someone to issue you a 1099 if you worked mostly for that person? IRS might complain about expenses offsetting the income however without evidence. The problem that a lot of people don’t realize is that IRS simply is overextended and rarely calls a little guy on the carpet-very rarely-below 1%. Granted some tax preparer would have more expertise answering this. Even if you get stuck with taxes this could serve you with regard to Social Security. This report would show up on your record allowing you extra earnings and, ultimately, a higher benefit IF it could be in your 35 highest years of earnings OR if you become disabled.
Janice says:So if I worked for cash and and filed a schedule C it would go on my Social Security even though no taxes were paid to Social Security, federal or state?
Would I have to pay back taxes on this?
