I only get paid in Cash. Do I have to file taxes?
What does the law say?
The law says that you must pay income taxes on the income you receive. You can reduce the income by the amounts you spent to make the money you received.
According to the IRS you must file a report if you receive as a non employee more than $400 in the year :
· Compensation for your services
· The sale of items. Or
· The bartering of goods or services
How do I report my Cash?
As an individual You report the cash you receive by filing a regular 1040 form and attaching a Schedule C to it. Because you did not have an employer you are considered to be self employed.
You can determine your self employment income and expenses by looking through your records to determine how much you earned and what amounts you spent to make the money you earned. For example, copies of checks you received, or a listing of the amounts you received. Expenses can be determined by a log of miles you drove, supplies, telephone, licenses, office expenses etc.
Do I have to pay taxes on the money I received?
Yes. You will have to pay two classes of taxes. One is called “Income Tax” and that is based on your tax rate. The other one is called Self Employment Tax or as is normally known “Social Security Taxes”. The Social Security Tax is about 15% of your net Self Employed income.
What happens if I don’t report my self employment income?
The IRS can easily determine the income you need to support your way of living. In an audit the IRS can say what a person like you earns and it is up to you to disprove it.
Why is it important that I pay my Self Employment Taxes?
By reporting your self employment income a portion of your taxes goes to your Social Security account and the Medicare insurance. Eventually that money will be used to support you when you can no longer work and to pay for your hospitals and doctors. The more you pay in the higher your retirement check.
When you report your self employment income you will pay more money towards your Social Security and Medicare.
Every year people come to my office to tell me that they can not get social security or Medicare because they never reported their cash income. Don’t be one of them