It can be hard to keep track of your taxable income when you don’t have a regular job and your income comes from many sources. It’s even harder if you get paid in cash. With no W-2 form coming from an employer at the end of the year showing your income and deductions, and perhaps not even a 1099 listing your miscellaneous income, it can be tough to figure out how to report the income on your taxes, but you report these earnings as you would other business income.
Keeping Track of Income
Before you can report your earnings, you need to know just how much money you made during the year. It’s virtually impossible to remember the totals when you get different amounts at different times from multiple sources. The best plan is to keep track by writing each amount down when you get it. Giving customers a two-part receipt that shows their name, the job, the date and the amount paid will leave you with a copy for your own records. If you don’t use receipts, list each job and the amount you were paid in a log book or calendar.
Getting it All Together
Use your receipts or logs to determine the total amount you made for the year from doing odd jobs. You’ll need this information for filing. Fill out a Schedule C or C-EZ. The EZ is simpler to fill out, but not everybody can use it. In general, if you earned more than $5,000 you can’t use the EZ. You won’t need to file your income receipts with your tax papers, but keep them safe in case the Internal Revenue Service has any questions about your income.
Determine Your Earnings
Enter the type of business you have, such as “handyman” or “child care.” If you got money from more than one type of business, you’ll need to use a separate Schedule C for each one. Fill out all the other required information on the form, such as business address and what your business does. Enter your gross income amount in Section 1, along with any other relevant information. Use Part II of the form to enter your expenses. The basic formula to determine your net profit is to subtract your expenses from your earnings.
Things to Consider
Only the net profit you’ve earned by working, as determined when you fill out Schedule C, gets listed on your 1040 tax form. This is the amount the IRS uses as the basis for determining how much tax is due, along with any other income you list on your 1040 form, such as money from other jobs. Since your cash earnings won’t have had anything withheld from them, you’ll end up paying self-employment tax on them if they’re more than $400. This tax includes income tax, Social Security tax and Medicare tax, so it’s higher than straight income tax on the same amount would be.
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