I earn a decent living as a salaried employee for the state of Oklahoma. But, to make ends meet, I do various odd jobs for my neighbors, who pay me in cash. Am I required to report this income to the IRS?

This is a tricky question to ask an Oklahoma tax lawyer! Technically, yes, you are legally and ethically bound to report all of your income over a certain amount to the IRS, and any reputable tax attorney will tell you so. However, the IRS won't be too concerned if your cash jobs only bring in a few hundred dollars a year—and, even if you report this income, it won't have a significant effect on your year-end tax bill.

However, the ethical edges get a bit fuzzier if your yearly cash income amounts to few thousand dollars, and you'll be in the red zone if it amounts to tens of thousands of dollars or more. At a certain point, the government will notice your lifestyle does not match your stated income level, and an IRS revenue officer may well initiate an investigation.

If the government can establish a paper trail proving that you are running a significant cash business in addition to your salaried job, you will be on the hook for at least any unpaid taxes, plus penalties and interest. If they can prove that you intentionally set out to deceive the government, you could potentially face criminal prosecution and jail time.

But, let's not get carried away. If you earn a hundred bucks in cash every month for helping your elderly neighbors install their storm windows, or shoveling the snow from their front walks, the IRS has better things to do than go after you for omitting this from your tax return. The real juice comes from tax evaders who fail to declare hundreds of thousands, or even millions of dollars', worth of income.

For more information or other questions, contact the Oklahoma tax professionals at Travis W. Watkins, PC (800-721-7054) today! We will offer you a free consultation as our way of introducing the firm.