When and How to File Cash Income
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?
Do I Include Cash Income When Filing Taxes?
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.
What is nontaxable income? Generally they include:
- Public Assistance
- Child Support
- Federal Tax Refund
- Workers’ Compensation
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.
Where Do I Include Cash Income in My 1040?
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.
Thoughts on Cash Income
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.