<p>DD, instead of taking a WS job, is working for an elderly couple doing some elder sitting, yard work, and home maintenance. It looks like she made about $400-$500 last semester and she is paid in cash, not even checks. She will be filing taxes due to scholarship/grant money for non-qualified expenses plus a summer job. How have others handled such "under the table" cash?</p>
<p>Can it be reported as “tips”?</p>
<p>Can she report it as self employed income?</p>
<p>Would be like babysitting money? I don’t think
Most kids file for that and these days it can easily be $40 for a weekend night.</p>
<p>I think it would be more like babysitting money and I suspect most don’t file for that like you say Thumper. I probably would encourage her not to file the cash if it wasn’t for the fact that she does that job instead of work study.</p>
<p>seriously? just ignore it on taxes. Unless your D got like 10K extra scholarship money which would be taxable, she isn’t going to be paying any taxes anyway.</p>
<p>Wall Street wizzards find ways of not reporting millions in income and people here are worried about how to report a measly $400?</p>
<p>Just curious why one would encourage a kid not to report income on a tax return? If it’s not going to make an impact on the tax she owes, then it won’t make an impact. It is reportable. She earned the money. I never have any income to report other than what is on my W2, but I have to imagine there’s a spot on the tax return form that says something along the lines of “other income.” I don’t think the Wall Street wizards hiding millions are germane to the discussion. If she made the money in cash, it’s not traceable, of course, so filing or not filing is a matter of honor.</p>
<p>If cash was banned and all transactions were traceable by the IRS the budget could be balanced. It really is other income, but I would guess most people don’t tell the IRS about it. As self employed income it probably wouldn’t create a income tax burden, but it might cause you to pay self employed social security taxes. D has 1099-misc forms from some of her jobs, and with nothing withheld the social security tax takes a bite.</p>
<p>FooMonChew - But she does have to file and will owe taxes due to scholarship for non-qualified expenses and over 3K made over the summer. It comes out to about $6300. She will owe seveal hundred and Federal and State taxes. I imagine the received cash, if declared would be taxed. But, I also don’t want to have the elderly couple having to file paperwork for a few hundred dollars.</p>
<p>GTAlum, </p>
<p>I wouldn’t think the elderly couple would have to file paperwork (i.e., a 1099-misc form showing your D as an “independent contractor”). I’m not a tax expert, so don’t quote me. My recommendation is, if your D received money for services rendered, she should report it under other income. It is unlikely the IRS is going to come searching for an associated 1099 (this would fall under the “small potatoes” exemption, I believe ;)). Babysitting income, btw, does need to be reported (at least the IRS says it should be!).</p>
<p>I dont think the 1099-misc is required if the money is not paid in connection with a trade or business (which it does not appear to be)</p>
<p>Of course, another issue is that her cash job is in another state and therefore 2 sets of state taxes may need to be filled out.</p>
<p>GTalum,</p>
<p>I might be wrong, please verify with a tax professional, but you only have report self-employed income if it is over $400. (It might only apply to Social Security Taxes though.) You need to verify exactly how much she made, perhaps it is not an issue?</p>
<p>Also, 1099 is not required if your daughter chooses to report the income.</p>
<p>Remember that there was some expense involved in earning the $400. For example if she had to drive to the couples house, she had to run errands like taking them to the grocery store, the mileage is deductible. If she had to buy some tools etc. those are all deductible. </p>
<p>If she can recreate some of the expenses, let us say $50, it reduces the income by that amount. Deduction for mileage is about 55 -c- per mile, if she drove a total of 100 miles that is $55.</p>
<p>So even if she earned $450, but she has over $50 in expenses, it comes below the $400 limit.</p>
<p>Lerkin: You have to report all income. If the self employment income is less than $400, you do not have to pay self employment taxes, you still have to pay income tax</p>
<p>[Filing</a> Requirements for Self-Employed Individuals](<a href=“http://www.irs.gov/businesses/small/article/0,,id=115043,00.html]Filing”>http://www.irs.gov/businesses/small/article/0,,id=115043,00.html)</p>
<p>So if she can reduce her income to less than $400 by showing expenses, she avoids the SE tax impact.</p>
<p>This is actually a very good question, and I hope students are paying attention to the answers. If income from self employment is > $400, you must file taxes. Here is the problem from a financial aid standpoint: Students and parents indicate that they earned $1000 from miscellaneous work, but they didn’t file a return. This is called confliction information, and the student will not get aid until the situation is resolved. If a return was not filed but should have been, the student/parent will have to file that return in order to get aid. They don’t “have” to file it … they just have to IF they want to get aid. And if it’s late, there could be a penalty involved. </p>
<p>I had a student whose aid I had to hold up last year for this reason - he earned more than $4000, though. In the end, he ended up with write offs and tax credits that actually gave him a refund … so it’s not all bad! :)</p>
<p>Thanks kelsmom. She will be filing taxes due to the information I stated above. Are you telling me that from a financial aid standpoint, she should declare the cash income that she was doing as opposed to a WS job? She does have an on-campus job this semester as well.</p>
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<p>I’ll answer for myself…not Kelsmom. If this is regular income of any kind, she should report it on her taxes. </p>
<p>A work study job does not count on next year’s FAFSA as income…but a work study job IS taxable income for students…if they have more than a certain amount of income regardless of the source, they must file.</p>
<p>One year, our DD’s work study income added to her summer job exceeded the income threshold and she was required to file…including both her WS income AND her summer income. </p>
<p>So…for tax purposes…I do NOT believe there is a difference in the source of the income…WS or “other”. It’s income.</p>
<p>For FAFSA purposes, WS income doesn’t count.</p>
<p>^^^^^ What she said!</p>