How to Report Cash Income With and Without a 1099

Do some clients pay you in cash? You might assume the Internal Revenue Service (IRS) won’t find out, but that’s not always the case.  

If a client sends you a 1099-NEC to report cash payments, the IRS gets a copy, too. But here’s the kicker: Even if you don’t receive a 1099-NEC, your cash income is still taxable. The IRS requires you to report all earnings—even if it’s not documented on a tax form. 

Don’t worry, though. We’ll walk you through how to report cash income without a 1099 (and with one). That way, you will always be compliant and you’ll remain in good standing with the IRS.

Do you need to report cash income to the IRS?

Yes, you must report your cash income to the IRS. Cash income is taxable, just like wages or investment gains. 

Examples of cash income include: 

• Cash payments for freelance, contract, or gig work 
• Side hustle earnings from roles like babysitting, tutoring, or reselling 
• Tips from service jobs, like bartending or taxi driving 
• Any cash wages you’re paid for work  

Typically, you must file a tax return if your total income (including cash earnings) exceeds the standard deduction. 

However, there is an important exception: You must still file a tax return if your net self-employment earnings equal or exceed $400. When you report self-employment income, you may also owe self-employment taxes. Self-employment taxes total 15.3% of your earnings and cover the employer and employee portions of the Social Security and Medicare tax obligations. 

How to report cash income without a 1099

It’s OK if you don’t have a 1099 form. We’ll explain how to report cash income on your taxes without one. And if you did receive a 1099-NEC or 1099-K, great—just enter the info from your forms when you file.

Keep detailed records of cash payments

It’s important to record  cash payments as you receive them. That way, you know how much you earned—whether or not clients send you a 1099. Here are some ways to keep proper records: 

• Save bank statements and transaction details from third-party platforms like Venmo or Cash App—especially if you don’t expect a 1099-K from them. 
• Get receipts from customers no matter how they pay you. 
• Use a spreadsheet or accounting software like Intuit QuickBooks to record cash payments. 

If you’re missing records, review old invoices, bank deposits, or past emails with clients for clues.

Use Schedule C for self-employed cash income

If you’re a freelancer, gig worker, or otherwise self-employed, you must report all your earnings on Line 1 (gross receipts) of Schedule C—even if you didn’t receive 1099-NEC forms from your customers. Schedule C will be attached to your Form 1040 tax return. 

How to reduce your tax liability after reporting cash income

You can reduce your taxable income (and keep more of your money) by: 

• Claiming business deductions (if you’re self-employed) for company costs such as advertising, internet and phone bills, mileage, and home office expenses. 
• Contributing to tax-advantaged accounts for retirement or health savings, like a solo 401(k), traditional individual retirement account (IRA), or health savings account (HSA) (if you’re enrolled in a high-deductible health plan). 
• Claiming tax credits like the Earned Income Tax Credit (EITC) if your income is on the lower side or the Saver’s Credit if you contribute to a retirement plan and have income below a certain amount. 

You may wonder: How much in cash expenses are allowed in income tax liability calculations? The good news is that the IRS doesn’t limit the amount of allowable business deductions. And if your business expenses exceed your income, you may have a net operating loss (NOL), which could lower your tax bill in future years. 

Keep records of your expenses—including receipts, invoices, and bank statements—in case of an IRS audit.

Paying estimated taxes on cash income

If you’re self-employed and don’t have taxes withheld from a paycheck, you may need to make quarterly estimated tax payments, especially if you expect to owe more than $1,000 in taxes for the year. This includes tax liability for cash income. These quarterly payments cover self-employment taxes (Social Security and Medicare) and income taxes. 

To get a solid estimate of your income and deductions for the year, you have a couple of options: 

• Use TurboTax to do the calculations for you. 
• Work through the IRS worksheet in Form 1040-ES to manually estimate your tax liability. 

Either way, gather these key items to plan your estimated tax payments: 

• Last year’s tax return: This helps ensure you’re accounting for all income and deductions. You can also reference your total tax paid if you plan to base your estimated payments on 100% or 110% of last year’s tax liability, depending on your income (a method that can help avoid underpayment penalties). 
• Your record of estimated tax payments and withholding so far: If you’ve already made quarterly payments or had taxes withheld from a paycheck, factor those amounts in to determine what’s still owed. Your bank records, check register, or latest pay stub can help track those payments. 

You can make estimated tax payments using Form 1040-ES (by mail) or online via the Electronic Federal Tax Payment System (EFTPS), IRS Direct Pay, or a third-party payment processor. If you pay late or don’t pay enough tax, the IRS may charge an underpayment penalty. 

What are the risks of underreporting?

If you don’t pay your income tax (including cash earnings) on time and in the correct amount, you may face: 

• Penalties and interest charges on unpaid tax 
• Criminal tax fraud charges in the most extreme cases 

The IRS can audit your tax returns for up to three years after you file your return. 

Don’t assume the IRS won’t notice missing income. Even if your clients don’t send 1099s, the IRS has ways to uncover unreported earnings. It can compare bank deposits to reported income, analyze whether your expenses align with your stated earnings, and track third-party payment platform transactions.

How TurboTax makes reporting cash income easy

If you’re concerned about how to report cash income on TurboTax, don’t be. The platform makes it easy by: 

• Walking you through the entire process—even if you don’t have 1099s. 
• Integrating with QuickBooks to import relevant transactions from your bank and third-party apps, like PayPal or Venmo. 
• Calculating self-employment tax and quarterly estimated payments automatically. 
• Maximizing self-employment expense deductions to save you money.