This is tough! Ideally your employer would have paid you on the books and issued you a 1099 or a W-2. However, since you are in this position you have to present your own evidence that this money came from paid work (as opposed to something like gifts). If you are paid in cash and claiming the Earned Income Tax Credit, then you will be at a higher risk of being audited by the IRS. So, you want to be sure you have appropriate “back-up” materials to prove that your cash income was from work.

You can do this with a letter from your employer stating what you were paid, proof of work, a log of assignments and amount paid, or regular bank deposits of the money to show the trail for depositing what you were paid. Unfortunately these don’t mitigate your risk of being audited, but they will help you prove that you were paid for work.

If you are in this situation, it is often best to work with a free tax prep partner who is based at a nonprofit; that way you can talk this through with them. You can find in-person tax prep sites here or work virtually with an IRS-certified tax preparer through GetYourRefund.

Did this answer your question?