Reporting income from side work on a family member's house

[Dibeneejoey]

Hello. I perform misc. odd jobs at my mother's house as side work throughout the year, 3 to 4 times a month, whenever I have free time. She pays me cash for this work and there are no 1099-Misc documents involved.  Can anyone indicate if this considered business income requiring a schedule C, or "other income", for tax reporting purposes.

Thanks

[LenaH]

You would report this income on a Schedule C. For tax purposes, self-employment income includes any part-time businesses or "side work" performed in which you are in business for yourself, rather than another person. 

You are able to file a Schedule C without a 1099. When you are inputting information for your Schedule C, click on the option Other self-employed income under Common Income. This includes cash and checks received and income not reported on any particular 1099 form. 

If you file a Schedule C, you are also able to deduct your expenses incurred for your side work. You are not able to do so if you enter your side work income under Other Income. 

To create your Schedule C, please complete the following steps:

1. Open your return in TurboTax.
2. Search for Schedule C with the magnifying glass tool on the top of the page.
3. Select the Jump to Schedule C link in the search results.
4. Select Yes to the question Did you have any self-employment income or expenses? 
5. Follow the on-screen instructions to complete your Schedule C.

[Dibeneejoey]

Thank you LenaH for the information.  I also forgot to mention that this work is part of an employee agreement that I have with my mother, although I have the majority of control on how things are to be completed.  1.) Would that change anything? 2.) Can you confirm that my mother also does not have to file a 1099-Misc?

Thank you!

[ColeenD3]

You have to pay tax on the income one way or another. If you are a household worker with an employee agreement, she would have to issue you a Form W-2.

Generally, for 2020 an employer needs to pay Social Security and Medicare taxes for “cash wages” of $2200 or more paid to any one employee. Cash wages refer to checks, money orders and the like. They don’t include “the value of food, lodging, clothing, transit passes and other noncash items you give your household employee.” But cash given to an employee in place of those items counts as cash wage.

If you can control how things are done, you are a contractor who receives a 1099-NEC. Even of you do not receive one, you are liable for SE taxes on any cash payment over $400.

[Dibeneejoey]

Great!  Thanks for information ColeenD3

[Opus 17]

Why do you and your mom want to treat this as a business relationship at all?  As a practical matter, kids fixing stuff around their parents' house and parents giving kids money is just something families do for each other, and I would not bother to report it at all.

The other issue is whether this is an "ongoing trade or business" that you operate in a businesslike manner with a clear profit motive.  Do you do contractor/handyman work for other people, or only your mother?  If only your mother, and you insist on reporting the income, it would be other or hobby income and not self-employment.  You would not owe self-employment tax, but you can't deduct expenses like tools and so on.  (If you are reporting this as a business, so you can deduct tools as a business expense that are really for personal use, since you don't do handyman work for anyone else, the IRS may view that as improper if you are unlucky enough to be audited.) 

[Dibeneejoey]

There are title 19 implications involved in my situation.