Babysitting: paid in cash and check, figuring out tax?

Question

Hi, I am in the process of preparing my income tax return, and I was hoping someone could advise me on the following:
1) A friend of mine warned me that being paid by cash or check may be illegal, since it hints at activity that is being done under the table. Now this of course has alarmed me, and I do want to pay my taxes. Is he correct?
2) I babysat for a couple of families on a part-time basis. I considered myself a contractor, so I am using Schedule C. But I did not receive a 1099 from the families. I can still file Schedule C without being penalized for not having a 1099, right?
3) I was unfortunately bad with accounting. I don't have an exact idea of how much I made, but I do have a pretty good idea of how much I earned, since I can estimate the hours per week I worked. Any advice on this matter.

Thank you so much.

Answer 1

You can estimate your income.

You report your nonemployee compensation on Form 1040, Schedule C.

You also need to complete Form 1040, Schedule SE, Self-Employment Tax, and pay self-employment tax on your net earnings from self-employment, if you had net earnings from self-employment of $400 or more.

More info:
http://www.irs.gov/faqs/faq-kw5.html

Answer 2

1. What are they going to pay you with if it isn't cash or check? Jelly beans? Cracker-Jacks? Being paid in cash or by check is the way our economy operates at that level. I suppose you could take credit cards if you wanted to. (Basically your friend doesn't know what he's talking about.)

2. You probably won't get 1099s. You won't be penalized for that. A LOT of commerce is completed without 1099s. Just make sure that you list all of your income!

3. Get better with your accounting! THAT is what can burn you if you are audited! There is simply NO excuse for that! While you CAN estimate your income, you should aim high on that. But nothing will protect you better than well-kept financial records.

Two last items:

a. Don't forget Schedule SE and the Self-Employment tax if your net earnings are more than $400.00!

b. Taxes are due when the income is earned, NOT when you file your return. If you are self-employed, you may need to make quarterly estimated tax payments using Form 1040ES. Failure to do that can trigger penalties and interest for underpayment of taxes.

Answer 3

you will might desire to report a time table C, it incredibly is self-employment income. you have the flexibility to deduct stuff like food expenses, ingredients, toys you purchase, etc. you additionally can deduct the area of your place which you utilize for the corporation yet that gets frustrating. word that despite you have left over as your income would be problem to fifteen.3% self-employment tax besides as Federal and all different proper income taxes. you ought to additionally start up making quarterly deposits to the IRS in the different case you would be penalized at tax time.