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Arthur Rubin
Arthur Rubin, Tax Preparer
Category: Tax
Satisfied Customers: 1496
Experience:  22 years of tax preparation experience, including individual, trust, and estate returns.
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For a person that works in labor but gets payed cash how can

Customer Question

hi
JA: Hello. What seems to be the problem?
Customer: for a person that works in labor but gets payed cash how can i pay taxes in all the proper channels example like paying Se Tax (self employment)
JA: The Accountant will know how to help. Please tell me more, so we can help you best.
Customer: for example A person that gets payed cash not in the formal way like getting a paycheck and the tax gets collected from the pay check.
JA: Is there anything else important you think the Accountant should know?
Customer: for example like a person who gets payed under the table but whants to do things legally regarding taxes
Submitted: 13 days ago.
Category: Tax
Expert:  Arthur Rubin replied 13 days ago.

Thank you for using Just Answer, and for wanting to do the right thing.

If you should be considered an independent contractor, just report the income on Schedule C. You may also report the person paying you, but he/she is only obligated to report to the IRS if he pays you $600 or more as part of his business. (There may be additional state labor law requirements.) To avoid IRS penalties, you should make quarterly estimated tax payments, but the penalty is only simple interest at a statutory rate.

If you should be considered an employee, there is no way to report the income without getting your "employer" in trouble. I'd report the income on 1040 line 7 (wages), but the FICA (social security and medicare) payments will not be made correctly. You might also file form SS-8 to request a determination from the IRS that you should be considered a (soon-to-be-fired) employee.

The general rule is that you should be considered an employee if the employer has the right to determine how you do your work, rather than just the outcome. There are more complicated indicators, but that is the general rule.

If you don't have a Social Security number, and are a US citizen, permanent resident, or foreigner authorized to work, you'll need to apply for either an SSN or an ITIN, depending on your precise circumstances. If you are a foreigner not authorized to work, I don't have a good answer as to what you can do to construct a tax identity.

I hope this is helpful. If you need more information, please don't hesitate to ask, but, remember, I'm not on 24/7.