I make $400 per week under the table. Virtually all of my income goes to paying bills. Is there any kind of tax exemption on the 1040 for people who don’t make that much money per year? I will only make about $16,000 this year and don’t want to get into any tax trouble. Many thanks.
The income threshold for filing for a single person (assuming there’s no other reason to file) for 2010 is $9,350. You’re well above that so yes, you need to file a federal income tax return. If this income is considered self-employment income, you need to file a tax return if you make at least $400.
Often, filing a return near the bottom of the income scale is a good thing, not a bad thing. If you don’t file a tax return, you won’t know if you’re eligible for certain credits like the Making Work Pay Credit (only applies to the 2009 and 2010 tax years) or the Earned Income Tax Credit (EITC). With those credits, you might be entitled to a refund even if you don’t owe any federal income taxes.
If you believe that you can’t afford to file your taxes, there are free filing options available. At your income level, you should qualify for at least one free filing option.
As a final note, the person who is paying you under the table isn’t doing you any favors. In addition to not offering you any of the benefits to which you might be entitled, you’re probably not covered for purposes of worker’s compensation or unemployment. You’re definitely not paying into Social Security (which may hurt you at retirment).
If you should be properly classified as an employee, the employer should be paying half of your payroll tax contributions (for your wages, that’s to the tune of about $1,224). Truthfully, if you’re more properly an independent contractor, the employer would have little incentive to pay you “under the table” unless there’s something else going on.
And trust me, as someone who has worked with businesses for a number of years now, if this finally catches up with your employer, he or she won’t hesitate to throw you under the bus. You may wish to talk with a tax professional or attorney about your options.
Like any good lawyer, I need to add a disclaimer:
It is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And while I love my readers, having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your situation.
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