The IRS considers undocumented cash income (no W-2 or 1099-MISC), for work
performed, to be self employment income. Enter at "Business Income &
Expenses" and TurboTax (TT) will complete Schedule C or C-EZ for you and
allow you to deduct any expenses associated with this income. You'll also have
to pay self employment tax (social security) on any profits greater than $400. You report the income from your own records. If you get a
1099-Misc; it’s still reported the same way.
You should have been reporting all that
income for the last 4 years.
Are you an independent contractor? From what you describe, probably yes. It’s
a gray area and the topic has been around a long time. See. http://www.irs.gov/taxtopics/tc762.html
“I want to know what consequences the
company can face as well as myself and if i am actually a independent
contractor”. If you haven’t been reporting the income; you’re
in big trouble if the IRS finds out about it.. The company will be in trouble
for failure to issue a 1099-Misc, but only if they paid you more than $600 in a
year.
There is a way to contest the
“employer’s” classification of you as a contractor. That is to pay your share
of the Social security tax, each year, on form 8919, filed as part of your tax return. You also have to submit form SS-8 and the IRS will determine whether you or
the employer pays the employer portion of the SS tax. Even
if you shoulda been classified as an employee, you will still owe income tax
and half the social security tax
