Taxpayer asks:

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.

Taxgirl says:

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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Kelly Erb is a tax attorney and tax writer.


  1. The person paying you “under the table” should give you a 1099 and if not, should they should be reported to the IRS and the Department of Labor. Does that person deduct this money from their business? And if one is filing Schedule C, one also has to pay self-employment taxes (Sch SE) on the net income which are 15.3% for social security and 2.9% for medicare! Something is fishy here and it may be illegal unless you are working as a consultant or professional (which sounds doubtful). It can’t be legal income if called under the table. It has to be above board and reported both by the person paying and the person getting paid.

  2. I feel like quite a few people think it’s no big deal to get paid under the table. I bet that this post will help clarify things for the misinformed.

  3. Hey TaxGirl.

    I have a sister in the US who is currently in a bit of a problem with her employer. Number 1, she is a Licensed PT in the Philippines but then moved to the US with an immigrant visa. She also has just received her working permit and SSS.

    Now the problem is, her employer hired her in the guise as a Volunteer. It’s been a little more than 2 years since she’s worked for her employer and yet she gets paid way below the minimum wage. Could she do anything about this? Do you know of any Government agencies where she can report these people?

    Besides paying their PT Aides under the table they also charge everything they buy and spend money on – on their physical therapy rehab center. Even their personal/family affairs are charged under their PT Rehab Center’s name.

    Where can she report this?

  4. I have started work with this fashion designer and she said to start my pay would be under the table. Come to find out she has no money I need to pay bills and she’s been stringing me along and not paying me. What course of action can I take
    Please help me
    thank you

  5. We have a teenager who just worked her first job over the weekend. At the end of the weekend, the place paid her in cash, no receipt or paystub of any kind. They didn’t have her fill out a W4 or even an application. I called the state labor board. They just kind of gave a nod and a wink, like, why are making a big deal about this. No wonder lots of people look the other way when the people that work for our government don’t even care when the law is being broken. Not sure what to do other than have her find another job.

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