How to Report Cash Wages

Dealing with the IRS requires detailed records of your earnings.

Tax time brings fear to many people. Tax services tell you in their advertisements that the tax code is so complex you could not possibly fill out a form without their help. The truth about taxes is that anyone who can read, perform basic math and follow simple instructions can file their own taxes. Cash wages paid to you during the year must be included every time you file. These wages are usually paid without paperwork. So, you must keep accurate records of cash wages so you can report them to the IRS as required by law.

Things You'll Need

• Tax forms

Instructions

1. Record every bit of pay you receive throughout the year with pencil and paper. Be sure to include the name and address of who paid you the money along with the date it was paid. Keep these records organized and in a safe place.

2. Wait to receive your W-2s, 1099s and any other tax information you are due such as banking and stock summaries. Keep these forms with your records.

3. Get a copy of the tax form you will fill out. Choose either the 1040, 1040A or 1040EZ depending on your particular situation. The IRS website can guide you to the appropriate form. Be sure to get a copy of the instruction manual for the form you choose.

4. Add the total of all wages from your W-2 and 1099 forms. Add the cash you were paid to this amount. Record the total amount of your wages on line 7 of the tax form you have chosen. Make copies of your handwritten records to turn in with your tax return.

5. Follow the steps outlined in the instruction manual to complete your tax form. Send the form along with any money due to the IRS by April 15 of the year following the time you made those wages.

Tips & Warnings

• Keep your notes for at least 10 years in case any questions arise from the IRS. An auditor will need to see each of the notes you have made if they are called upon to review a case against you or one of your employers.

• Report all cash wages to the Social Security Administration and Medicare so that your records will be up to date with those entities.

• Failure to report cash wages to the IRS is a federal crime that is punishable by jail time and/or fines. Be sure to keep accurate records and report all wages every year.

References

• IRS Form 1040 Filing Instructions
• Social Security Administration: Houusehold Workers
• IRS: Employment Taxes