All income received, unless specifically excluded, must be reported.
So in the end, there is really no "under the table work".
Your friend can simply report this on a Schedule C with her form 1040. Whether an individual receives a 1099 or not, the income should be reported.
Keep in mind, that since the "employer" is not really handling this correctly, your friend will be subject to SE Tax on these earnings along with paying regular income tax.
*A reminder that posts in a forum such as this do not constitute tax advice.
Also keep in mind the date of replies, as tax law changes.
