Wondering how to pay taxes on under the table work? Receiving wages without any withholdings requires the receiver to pay any state, federal, Social Security and Medicare taxes on the money. In order to pay taxes on under the table work, you will need to enter the income on your federal and state tax forms and use any necessary forms required by each government agency.
To pay taxes on under the table work, you will need:
- 1040 tax forms (including Schedule C and Schedule SE)
- State tax forms
- Your W-2 forms
- Any 1099 forms
- All other tax documents
- Fill out a Schedule C Profit and Loss form. This form is used to list any income that you received for work completed that you were paid cash for doing. You will enter the total amount of pay received and any expenses that you had while doing the job that paid cash. In order to pay taxes on under the table work, you must follow each step on the form and find your profit or loss.
- Enter the profit or loss on Schedule SE, the Self-Employment Tax form, on line 2 and on line 12 of the 1040 form. If you have a loss, enter that amount in parentheses on each form to represent a negative.
- Complete the Schedule SE to determine your Social Security and Medicare tax liability. Multiply line 3 by 0.9235 and enter the result on line 4. If the amount is under $400, you will not need to file the Schedule SE or pay Social Security or Medicare taxes. If the amount is $400 or more, multiply line 4 by 0.153 if your income is less than $106,800, or by 0.029 if the income is more.
- Enter the result on line 5 on line 56 of the 1040 form to pay taxes on under the table work. Divide the amount on line 5 in half and enter the result on line 27 of the 1040 form.
- Complete the 1040 form. If you had other wages with federal tax withheld, it may offset the self-employment tax owed. Follow each step on the 1040 to determine how much you owe or if you will have a refund. Send the 1040 form, Schedule SE, Schedule C and all supporting documents to the IRS address listed in the back of the 1040 Instruction Booklet.
- Complete the state return using the adjusted gross income from the federal 1040 form. You may need to pay state income tax, but Social Security and Medicare are only paid through the 1040 tax return.
Tip: always report the income and don’t put it under “Other Income,” because it is not other income, but a wage that you were paid. You must pay taxes on under the table income.