My employer pays me cash but doesn’t tax the payment. What do I do?

[c97f7f64706f]

I get paid cash for working but none of my taxes are taking out. What do I need to do to be able to do it myself?

[VolvoGirl]

He is paying you as an independent contractor not as an employee. If he pays you more than $600 for the year he is suppose to give you a 1099NEC.

You need to fill out schedule C for self employment business income and pay self employment tax in addition to regular income tax on it.  The SE tax is to pay Social Security and Medicare tax that wasn't taken out like on a W2.

You use your own name and ssn or business name and EIN if you have one.   You should say you use the Cash Accounting Method and all  income is at risk.  After you put in your income and expenses  if your net profit is $400 or more you will pay 15.3% for 2013  Self Employment tax in addition to your regular income tax.  The Schedule SE will be automatically filled out for it.

You can enter Self Employment Income into Online Deluxe or Premier but if you have any expenses you will have to upgrade to the Self Employed version.

How to enter income from Self Employment

https://ttlc.intuit.com/community/self-employed/help/how-do-i-report-income-from-self-employment/00/...

Here is some IRS reading material……

IRS information on Self Employment

http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employed-Individuals-Tax-Center

Pulication 334, Tax Guide for Small Business

http://www.irs.gov/pub/irs-pdf/p334.pdf

Publication 535 Business Expenses

http://www.irs.gov/pub/irs-pdf/p535.pdf

You pay Self Employment tax on $400 or more of net profit from self-employment in addition to any regular income tax.  You pay 15.3% SE tax on 92.35% of your Net Profit greater than $400.  The 15.3% self employed SE Tax is to pay both the employer part and employee part of Social Security and Medicare.  So you get social security credit for it when you retire.  

[ee-ea]

If you don't feel that you are an employee, then you are in business for yourself and must file a Schedule C with your tax return. You will need to pay self-employment tax at 15.3 % in addition to income tax.

If you do feel that you were an employee, Form 8919 (it is in TT) is used to report wage income that was incorrectly reported on Form 1099 or not reported to you at all. It will require you to pay FICA and Medicare taxes on the payments (remember - you would have paid them anyway) but not the matching employer share. You will also have to prepare Form SS-8 (a request for determination on employee vs. contractor status). You will probably also upset your “employer”, because the IRS may contact him about whether or not he properly paid wages.
Form SS-8 is not in TT but is here http://www.irs.gov/pub/irs-pdf/fss8.pdf
See this IRS site http://www.irs.gov/taxtopics/tc762.html

[rjs]

Since you are working as an independent contractor, the person or business that is paying you is not your employer. They are your client.

Since no income tax is withheld from the payments that you get, you will have to make quarterly estimated tax payments. Be sure to read How Do I Make My Quarterly Payments? (on the IRS page that VolvoGirl referred you to), and also Estimated Taxes on the IRS web site. If you live or work in a state that has state income tax, you will also have to make quarterly estimated tax payments to the state.

[Opus 17]

Whether you are an employee or a contractor depends on the circumstances of your relationship.  Your employer can’t legally pay you as a contractor if the circumstances of your relationship make you an employee.  Read here for more.  

https://www.irs.gov/newsroom/worker-classification-101-employee-or-independent-contractor

https://www.irs.gov/taxtopics/tc762

If you believe that your relationship is that of an independent contractor, then you will file a schedule C as a self-employed person. You report your gross income and you can deduct your expenses and pay income tax and self employment tax on the net profit.  You will generally be required to pay quarterly estimated income taxes, and if you don’t make the quarterly payments, you may owe a penalty even if you pay in full when you file your tax return.

If you believe your relationship is that of an employee, then your employer is breaking the law. You will have to file a form SS8 as part of your tax return. This is a request to have the IRS investigate your situation, and determine if you are an employee or a contractor. If the IRS determines that you are an employee, they can assess substantial penalties to your employer. You may also want to contact your state labor board, because employers have certain responsibilities to pay taxes, unemployment insurance, and other things, and if your employer is paying you under the table, they are probably breaking several other state laws and not paying other state taxes that your state labor board will likely be interested in.