Our experts answer readers’ tax questions and write unbiased product reviews (here’s how we assess tax products). In some cases, we receive a commission from our partners; however, our opinions are our own.
- Workers who get paid in cash, especially sex workers, face extra challenges during tax season.
- Sex worker and enrolled agent Daisy Douglas has 3 simple tips, including filing as self-employed so you can write off expenses.
- When putting money in the bank, consider depositing small amounts at a regular cadence.
Filing income tax returns is complicated enough. But people who work in cash economies — like sex workers, bartenders, servers, and side-hustlers who get paid in cash — face additional challenges during tax season.
To start, getting paid in cash can create a different kind of relationship with money.
“I just remember feeling so paralyzed any time I thought about finance,” sex worker and tax preparer Daisy Douglas tells Insider. “When I first started dancing, I just kept all of my money in a shoebox because I was too terrified to do it.”
Additionally, workers who get paid in cash experience financial disadvantages. At the beginning of the pandemic, Douglas watched her coworkers at the club struggle financially. As in-person work dried up, some of her colleagues were unable to receive unemployment benefits because they hadn’t filed their taxes in years.
Insider’s Featured Tax Software
Douglas says her fellow sex workers had a hard time finding professionals to help them file taxes properly.
“There are even a few cases where someone did find an accountant who was willing to take them on, but they were overcharged or treated unprofessionally because of the work they did,” she says.
Douglas always wanted to provide tax services for her community and the pandemic gave her the final push that she needed. In 2020, she became a certified tax preparer and opened her own business called Daisy Does Taxes, while still working part-time as a sex worker.
“I’m semi-retired” she says.
See Insider’s picks for the best tax software »
For people who primarily get paid in cash, here are three simple tips Douglas has that will make filing your taxes a lot easier:
1. Make small regular cash deposits instead of one lump sum deposit
Instead of making one large cash deposit into your bank account, Douglas recommends breaking it into smaller ones and spreading them out over time.
If you deposit $10,000 or more in cash in one lump sum, or in two or more related payments within 24 hours, you will need to fill out Form 8300 to report where that cash came from.
“Cash deposits are often flagged by banks as being suspicious,” Douglas explains. “It can lead to having your accounts shut down. This is something that anyone in the cash industry should be aware of, but it disproportionately affects sex workers.”
Instead, Douglas recommends making regular cash deposits, similar to the cadence of a weekly or biweekly paycheck. This can be especially useful if you want to take out a loan or buy a home in the future.
“The IRS is going to want to see a clear pattern of consistent income that shows you can afford that loan,” Douglas says.
2. Double-check that your employer correctly reported your tip income
If you work at a restaurant or other establishment with cash tips, you are required to report your tip income to your employer, who will then put that amount on your W-2. When you do receive your W-2, make sure your employer reported your tip income correctly.
“Sometimes, your employer might be resistant to reporting your tip wages,” Douglas explains. “Assert your rights and let them know that this is the way tip income is supposed to be reported.”
Douglas says that some employers underreport cash tips because “they would then have to pay Social Security, Medicare tax, and payroll taxes on your earnings, and some of them don’t want to do that.” Underreporting your wages can affect your ability to apply for a loan or a mortgage down the line, so it’s important that your tip income is reported properly.
3. Consider filing as self-employed so you can write off expenses
If you offer a service like pet-sitting, babysitting, or sex work, that pays in cash, consider filing taxes as self-employed so you can write off your expenses.
“Unless the person that you’re walking dogs for hired you, set an hourly rate, or issued you a paycheck, you would be considered self-employed in that activity,” Douglas says. “You can also take some write-offs, like your mileage driving to that person’s house, or if you buy any dog treats.”
Finally, Douglas says, “If you’re making $400 or more from one activity, then it does need to go on your tax return.”
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Read our editorial standards.
Please note: While the offers mentioned above are accurate at the time of publication, they’re subject to change at any time and may have changed, or may no longer be available.