My son and two of his college roommates have been doing some side work. They use this to help pay tuition and living expenses.
Landscaping, wedding photography, drone videos, website design etc.
They have been mostly working for cash/Venmo. He told me this weekend they have been taking credit cards from businesses using Square. They do not have a business license or pay taxes.
Should they worry about it?
Find out where they stand on the “business license” side of things. This is the more pressing issue. The IRS is very forgiving to those who are trying to correct a mistake. Once their “business” is set up, figure out how to run the income through the business and figure out the taxes that are due.
But step one is making sure they are running an above board business. That is where they could really get hurt. The tax stuff…oh well, they will have to pay their taxes and if they pay that or set up a payment plan, it’s not a big deal (the IRS isn’t the bad guy some want to portray it as). But operating a business without a license? That is where you can get into real trouble.
Business licenses? Taxes? I guess it depends on whether they choose to be honest or not?
I don’t think they have a choice to be honest or not. Those CC receipts have incriminated them.
Thanks. I will use my fatherly powers to guide these lost souls…haaaaaaaaaaaaaa
There is a limit on how much a business can pay an individual before the business needs to specify who it went to. That limit’s pretty low. My wife and I remember it as being something like $300. We’ve used that in our rental properties as a guideline. If we were audited we’d have the record of what a payment went to and for what, so like the $530 we just paid to a handyman would show up, and conceivably that could lead the IRS to him to make sure he paid taxes on it.
In a way I see this as what risk are they willing to take. Is it income? Then they probably ought to expect to pay taxes on it. Having a business license isn’t really the issue for this multiple odd-job sort of thing. However, if they’ve been collecting the funds under a business’s name without having a license, that could be trouble.
Great info, thanks. These kids are super driven and they aren’t doing half bad. They work really well together and it wouldn’t surprise me if they do something together long term.
They might as well do it right. I mean nobody gets by paying $750 a year in taxes these days.
Go Utes!!!
I think it depends on how much they make. Filing taxes is not mandatory under a certain income threshold.
I’m not sure. Knowing them they will bring in enough to file.
Would you only claim the credit card payments and pocket the cash?
Sorry for the dumb questions. This is new to me.
I tutored all through college and was paid in cash. I just kept track and paid taxes on my earnings.
FYI, the minimum for single filing status if under age 65 is $12,200. Not going to answer the cash question. 
So, here’s the reality. You are supposed to pay on cash and card. Tracking the card is easy, tracking the cash is hard. You can only pay on the card and odds are, nothing happens. If you only pay on the card and not the cash and get audited and they discover the cash, there are some big time problems.
Odds are they audit and catch? Very, very, very low.
You have two options:
1- pay on both, nothing to worry about, other than less money.
2- pay on card only, probably don’t get caught, but still…
Geez, just be honest and pay the taxes.
That is what I told them. They already got their business license and tax ID.
I gave them my 2 cents. So far they seem to be listening.
Ya…mow a lawn and get $30-50 in cash. They must be crazy dishonest not to pay the taxes on that.
The other stuff I totally get. They are making thousands on that.
You are telling me that you have always paid all of the taxes on everything you have made, sold, bought? If so you are a better man than me.
Like I said before, I am helping them make the right call. I think they are going in the right direction now.