Author Topic: Cash strategy  (Read 958 times)

dizzy

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Cash strategy
« on: October 07, 2020, 08:12:24 AM »
So once upon a time I was a full time musician making $20k a year or less.  During that time (first 20 years in the workforce), I got some cash.  It never was an extreme portion of my pay for the year (at most 10-15%), so whatever, yeah?

Last 3 years I started making more (NOT a full time musician anymore).  Meanwhile I was getting some small cash: occasional tips from my job and once and a while on a gig (most stuff checks or apps these days). It was a tiny amount of money, until the last month when everything got nutso.  ďMaybeĒ now getting a couple hundred in cash a week of house calls.  My patients are insisting to pay me in cash, and much more than my standard fee.  I am so freaking lucky and yeah, passing it on for friends and donating. 

I am mostly self employed- will make about $5k from a W2 and then estimated 45-50k from self employment not including this.  So far I maxed HSA, trad IRA, and basically solo401k (rest of funds in a kickstarter and will put into 401k in December).  So everything else would go in the extra 20% portion for solo401k.  Any suggestions on how much to report.  Iím giving my boyfriend rent/utilities in cash, but itís only $335.  My COL in general is pretty low and couple things need to be with a card.

MDM

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Re: Cash strategy
« Reply #1 on: October 07, 2020, 11:51:39 AM »
Any suggestions on how much to report.
Perhaps the amount you receive?

SeattleCPA

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Re: Cash strategy
« Reply #2 on: October 07, 2020, 03:59:18 PM »
Any suggestions on how much to report.
Perhaps the amount you receive?

+1

seattlecyclone

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Re: Cash strategy
« Reply #3 on: October 07, 2020, 07:19:53 PM »
Yeah, your post basically boils down to "should I pay my taxes?" Yes. Yes you should. Could you get away with not paying them? Probably! Play that game at your own risk.

MustacheAndaHalf

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Re: Cash strategy
« Reply #4 on: October 08, 2020, 09:12:20 AM »
The IRS link I found shows $19.5k max solo 401(k) contribution, and then $6k for the Traditional IRA, and $3.5k for an HSA.  So that looks like $29k in pre-tax contributions, that subtract from your income.  Worth noting: the IRS is getting information about these contributions, so you aren't exactly under the radar when you contribute almost $30k to pre-tax accounts but then don't file taxes.  The IRS can figure out you made more than zero.

Let's say you make $55k total, and subtract the standard deduction: $42.8k
And then subtract pre-tax contributions (HSA, Trad IRA, solo 401(k)): $13.8k
As a layperson guess, isn't that about $1,500 in taxes?

dizzy

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Re: Cash strategy
« Reply #5 on: November 20, 2020, 07:03:23 PM »
Definitely I wasn't saying not to file taxes.  I meant on the cash portion of my earnings.  Having a better idea what that will be for the year at this point tho not 100% certain.

Anyway still figuring stuff out- it might make more sense for me to report the cash after all since right now (so annoying to calculate this, self-employed, my year end is still an estimate) I am qualifying for medicaid.  I think I still want to do this marketplace plan with HSA...I did love the medicaid plan when I had it, but probably going to avoid using the main thing I used on it (acupuncture) when I'm an acupuncturist myself.

seattlecyclone

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Re: Cash strategy
« Reply #6 on: November 21, 2020, 10:03:17 AM »
Your post still comes across as though you believe reporting your cash earnings on your taxes is optional. It isn't.

Let me be 100% clear: the law requires you to declare your entire cash income and pay tax on it just the same as if you got paid by check, direct deposit, etc. While it's true that people are more likely to get away with underpaying their taxes on cash income, it's still illegal. Now that you have this information, what you do with it is up to you.

phildonnia

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Re: Cash strategy
« Reply #7 on: November 23, 2020, 11:31:23 AM »
Definitely I wasn't saying not to file taxes.  I meant on the cash portion of my earnings.  Having a better idea what that will be for the year at this point tho not 100% certain.

Anyway still figuring stuff out- it might make more sense for me to report the cash after all...

As others are trying to make clear, you do not get to choose when or how much of your cash earnings to report on your tax return.  If you received it in 2020, then it is reported in 2020.

Maybe you can get away with something else.  You can also usually get away with shoplifting a quart of whiskey from a grocery store in your jacket pocket.  That doesn't make it a clever savings strategy.

caracarn

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Re: Cash strategy
« Reply #8 on: November 23, 2020, 11:43:11 AM »
You've been given the answer several times but seem to want to qualify with "it's hard to track" or some other administrative reason.

You owe taxes on all your income per the IRS rules, so you report it all.  It's just not worth the headaches (and possibly worse) that come with not doing that. 

As I tell pretty much anyone, "If you always tell the truth it's a lot less mental energy in your life because there are no stories to remember, you just tell people what actually happened".

dizzy

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Re: Cash strategy
« Reply #9 on: November 29, 2020, 06:24:02 AM »
Good news it turned out that I contributed too much to retirement.  And it seems like too much of a hassle to recharacterize my roth as trad IRA with the company I have it with.  In order to qualify for a marketplace plan and not medicaid (I love the medicaid provider near me, but let's be honest- I'm realistically still avoiding going into a doctor's if needed for probs another year- I want the HSA plan I can get with marketplace) I need to report more anyway.