When and How to File Cash Income

Taxes 101

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.

Comments (13) Leave your comment

  1. 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)

    1. 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.

      1. 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?

    1. What was it they did not take out? If they did not take out FICA because they want to call you an independent contractor as so many do nowadays you should get an interview with a claims specialist at Social Security for assistance. There are a set of rules with regard to the appropriateness of calling an individual an employee or an independent contractor. But that’s a stab in the dark unless you define the taxes they didn’t deal with. This would be important to you and other prospective employees there.

  2. What if I’ve already filled @ got my tax return & didn’t know at the time I could have added my cash hours because my boss asked me not to?

  3. I too would like to know the answer to this question. I have already filed my taxes. I filed schedule C and just put in what I made. I hope that is good enough for a the IRS, I mean I was honest with my earnings but who knows what triggers an audit? Only the IRS Thats who… hopefully my return is accepted and a refund is issued.

  4. I worked as a cook in a small town BBQ restaurant, never filled out w2 or anything else, how do I claim this cash I was paid?

  5. I was recieving tanf in az. for part of the year2012. then worked odd jobs for cash no W2. I have two dependents and recieve no child support how do i file?

  6. I was late in filing my taxes for several years but finally I filed all years and each year I was do a refund. Irs is telling me that I can’t receive refunds because of late filing. What can I do about it?

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