Author Topic: Cash Payment and Taxes  (Read 799 times)

whitethunder

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Cash Payment and Taxes
« on: May 03, 2018, 03:57:55 AM »
TLDR: I want to start cash-only side-hustle and want to know the tax implications if I am able to save 100% of my full-time job's income.

I'd like to start a babysitting service and foresee making about $250 per week. This is realistically enough to cover most of my living expenses and I would then invest the majority of my income from my full-time job. Will this get me into trouble with taxes in the future? I imagine if I were audited, the Revenue Agency would ask, "how did you live if you were able to invest almost 100% of your income?"

sokoloff

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Re: Cash Payment and Taxes
« Reply #1 on: May 03, 2018, 04:36:50 AM »
To be perfectly clear, you are required to declare that cash income on your tax return.

If youíre asking whether if you donít do that, will the IRS is going to somehow find out that you lived off $10K of unreported cash income, I think the answer is that that is extremely unlikely. (People have all sorts of arrangements with friends, family, etc.)

Missy B

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Re: Cash Payment and Taxes
« Reply #2 on: May 07, 2018, 09:19:32 PM »
It does seem unlikely, unless you are depositing the cash in a bank account. You would have to provoke enough interest to go look at your investment accounts. Typically the govt gets interested in people who declare almost no income at all. Since you're already declaring enough income to live on, and since $1000 a month isn't enough to be living large on (which does get noticed) you could very well get away with it.

HipGnosis

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Re: Cash Payment and Taxes
« Reply #3 on: May 11, 2018, 12:03:05 PM »
To be perfectly clear, you are required to declare that cash income on your tax return.

If youíre asking whether if you donít do that, will the IRS is going to somehow find out that you lived off $10K of unreported cash income, I think the answer is that that is extremely unlikely. (People have all sorts of arrangements with friends, family, etc.)
Technically, the IRS requires you to estimate your taxes quarterly and pay (quarterly) when you owe $1,000 (or more).   Roughly 15.5%.

The IRS doesn't know when or how much you save or invest.  They would need a pretty good/unusual  reason to look into that.

One point of concern - if the people you are sitting for claim the child care tax credit, that will tell the IRS you are getting 'income'.   The parents will need your SSN to claim the credit.    It would be 'awkward' for you to not pay taxes for about a year and then get asked for your SSN.