Housekeeping for cash

[Anakasmom12]

I clean 2 houses all year long. They pay me in cash. I make $7600 annually. I am a single mother with 2 kids, I use child support to pay my rent, my son's disability pays utilities, and my cleaning money pays everything else. I live alone with the kids. I cannot work full time because my son is medically dependent on my care. My question is how would I file this coming year, would I get the child tax credit, what would be the smartest and best way to file? 

[xmasbaby0 · Accepted solution]

The refundable portion of the child tax credit---which is called "additional child tax credit" is based on the amount of income you earn by working.   The amount you get is 15% of the amount above $2500 of earned income.   That is added to your refund.  So, since you do have some income from self-employment, you would get some of the additional child tax credit, and you could also get earned income credit based on the income earned and on having two children.

You have self-employment income, so you will be paying self-employment tax for Social Security and Medicare.

You could use the free software available through the IRS site to prepare your tax return.

Use this IRS site for other ways to file for free.  There are 8  free software versions available from the IRS Free File site

https://apps.irs.gov/app/freeFile/

https://ttlc.intuit.com/community/self-employed/help/what-is-the-self-employment-tax/00/25922

https://ttlc.intuit.com/questions/2902389-why-am-i-paying-self-employment-tax

https://ttlc.intuit.com/questions/3398950-what-self-employed-expenses-can-i-deduct

  The maximum amount of the child tax credit is now $2000 per child; the refundable “additional child tax credit” amount is $1500.   In order to get that credit, you have to have income from working.  The credit is calculated based on the amount you earned above $2500 multiplied by 15%, up to the full $1500 per child. If the amount you earned was too low, you will not get the full $1500.

 If your child is older than 16 at the end of 2022, you do not get the CTC.  But you may still get the non-refundable $500 credit for other dependents instead.

https://ttlc.intuit.com/questions/1900923-what-is-the-child-tax-credit

https://www.irs.gov/help/ita/does-my-childdependent-qualify-for-the-child-tax-credit-or-the-credit-f...

https://ttlc.intuit.com/questions/1900643-what-is-the-child-and-dependent-care-credit

https://ttlc.intuit.com/questions/1899157-what-are-the-qualifications-for-the-earned-income-credit-e...

https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/use-the-eitc-assistant

https://ttlc.intuit.com/questions/4499708-what-is-the-500-credit-for-other-dependents-family-tax-cre...

[Opus 17]

Although you will not owe income tax, you are self-employed, and because your net profit from self-employment is more than $400, you are required to file a tax return. That includes a schedule C to report your self-employment. You must report your gross income from house cleaning. You can deduct ordinary and necessary business expenses, provided that you have records. Your expenses might include cleaning supplies (if you purchase your own) and local transportation to and from the houses that you clean (car mileage, mass transit fare, etc.).  You will pay 15% self-employment tax on your net profit after deducting expenses.  Because your taxable income is less than the standard deduction, you won’t owe income tax.

Child support is not taxable income and is not reported on your tax return.  

You may list medical expenses as deductions if you pay them directly that are not reimbursed by insurance or Medicaid, but because of your low income, you won’t actually receive any tax benefits for including them as deductions.  

Because you have some income earned from working, you will qualify for some part of the additional child tax credit, although you will probably not receive the full $2000 per child dependent.  You will also qualify for the earned income credit (EIC).  The additional child tax credit and the earned income credit will probably add up to be more than the self-employment tax you owe, so you should expect a refund.

turboTax will want to charge you around $120-$150 to file a federal and state tax return that includes self-employment income. There are other software companies that will allow you to file for free because of your low income status. Check the IRS website for “FreeFile” providers and pick one that you like. 

You should be keeping accurate business records of your income and expenses. If you are paid by check or by cash app, keep photo copies of the checks or take pictures of them, or print out your cash app transaction records. If you are paid by cash, keep an accurate diary. Also, record your expenses, and keep a diary of your cleaning appointments — the date, the address, and so on.  These records will help you in case the IRS questions your income.

[Krayon2]

If rental income is paid in cash and no 1099 where is it reported?