Here’s How To File Taxes If You Weren’t Paid A Standard Paycheck

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Are you currently freelancing or side-gigging? Maybe you babysat for your sister after work or on the weekends. You probably already figured this out, but when it comes to filing taxes, you have to follow different protocol when you’re paid in cash. Filing can also get weird if you’re paid in cash but in an unconventional way, like through Venmo or PayPal. Before you freak out from confusion, we’ll break down exactly what you need to know about filing and how to do it successfully.

You’ll file taxes depending on whether you’re technically considered an employee who is paid in non-taxed payments or a contractor (or fully independent freelancer). There are a number of differences between the two. For example, an employee pay period must be regular while a contractor could take payment upfront or payments could be irregular.

If you fall under the employee category, you’ll report every dollar you made under your employer on a W-2 form. Your employer must provide you with a W-2 by the beginning of February each year. If you’re a contractor, each client you work for each year is supposed to send you a W-2 if you made over $600 under each one, but they’re not required by law. Even if they don’t, you must fill out a 1099 form, in which you can include the amounts made under each client instead of filing separate forms like you would W-2s. Basically, as a contractor, you must be diligent in keeping records of how much money you made throughout the year.

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Of course, we’re not finished. What about Social Security and Medicare? If you’re an employee, your check should automatically have those payments deducted, but if it doesn’t, or if you’re a contractor, you can estimate how much you should allocate on your tax forms by using an estimator. Once you know how much to withhold, you can indicate it on the 1099 form.

Oh, and what about if you receive tips as a waiter, bartender, etc.? The IRS has a trusty form for that, too! Just fill out a 4070 form, which should be used on a daily basis to record tips, since we bet you can’t remember every single amount you’ve received over the course of the year.

Finally, what if you were paid via Venmo, PayPal or any other payment app or website? Yep, it’s all considered cash in the IRS’s eyes. If you were paid for a service you provided, that payment, no matter in what form, should be taxed. Keep records of all your online payments, just as you would tips or any other cash payment.

We know, there’s so much to learn when it comes to tax forms and what’s considered “cash” and what isn’t. But hopefully, you walk away from this article feeling like you can totally dominate tax season without fear.