One of the difficulties of receiving income in cash is that there is frequently no W-2 form that comes with it even though this income should still be filed on your tax return. Because this income is not reported on a W-2, it needs to be entered separately on tax forms.
How to file cash income on taxes
Keep careful records of your cash income. In the event that the IRS audits your cash income, it will look at bank account deposits, so make sure your calculated cash income is close to those deposits.
Total all of your cash income received for the year. Do not include any work which you have done in the fiscal year but for which you have not received payment.
Complete your Federal 1040 form. Line 21 on the 1040 tax form is for "other income." List the source of your income on the dotted line and the amount in the box.
Fill out your state income. Though the exact location of the entry will vary from state to state, you will need to also enter in your cash income information in a manner very similar to step 3.
File your taxes as you normally would.
Things You'll Need
Federal 1040 form
State tax form