Your cousin is in serious trouble and needs to act immediately. As someone who works in tax compliance, I can tell you that what he's doing is textbook tax evasion, and the IRS has multiple ways to catch this. First, every check he cashes creates a digital footprint - the bank scans his ID, records the transaction, and keeps copies of the checks. The IRS can access all of this through their investigative powers. Second, his customers who are paying him likely deduct these payments as business expenses on their own tax returns. The IRS routinely cross-references deductions against reported income of service providers. When they see thousands in payments to contractors who aren't reporting corresponding income, that's an immediate red flag. Third, the IRS uses sophisticated algorithms to identify businesses reporting unusually low income compared to industry standards. A flooring contractor in Oklahoma reporting only $105K when similar businesses average much higher will absolutely trigger scrutiny. The $70K in unreported income puts him in serious criminal territory - this isn't just about penalties anymore. He needs to consult with a tax attorney immediately (not just an accountant) to explore voluntary disclosure options before the IRS comes knocking. The difference between coming forward voluntarily versus getting caught could literally be the difference between paying penalties and going to prison. Don't let him wait any longer - every day he delays makes the situation worse.

This is an extremely serious situation that requires immediate action. Your cousin is committing tax evasion, which is a federal crime that can result in both civil penalties and criminal prosecution. The notion that cashing checks at the issuing bank makes income "invisible" is completely false. Here's why he WILL get caught: 1. **Paper trail exists**: Every check he cashes creates multiple records - the bank keeps copies of the checks, records of his ID, and transaction logs. The IRS has access to all of this. 2. **Customer deductions**: His clients likely deduct these payments as business expenses on their tax returns. The IRS routinely cross-matches these deductions against contractor income reports. 3. **Industry benchmarking**: The IRS uses sophisticated analytics to compare reported income against industry averages. A flooring contractor reporting only $105K when he's actually making $175K will trigger red flags. 4. **Suspicious activity reports**: Banks file SARs when they notice patterns like someone regularly cashing business checks instead of depositing them - this screams tax evasion. With $70K in unreported income showing clear intent to evade taxes, your cousin is looking at potential criminal charges, not just penalties. The IRS can pursue willful tax evasion as a felony punishable by up to 5 years in prison. He needs to contact a tax attorney (not just an accountant) IMMEDIATELY to explore voluntary disclosure. This could be the difference between paying penalties and facing criminal prosecution. Every day he waits makes his situation exponentially worse.

This is exactly why companies need better training on tax form requirements! I've dealt with this same issue multiple times as a tax preparer, and it's always frustrating when businesses incorrectly classify expense reimbursements as non-employee compensation. The Schedule C approach everyone mentioned is absolutely correct - report the 1099-NEC amount as income, then deduct the exact same amount as business expenses. Just make sure you categorize the expenses properly: airfare goes under "Travel," meals at 50% (unless it was a company-provided meal during travel), and hotels under "Travel" as well. One thing I'd add: if any of your reimbursed meals exceeded the federal per diem rates for those locations, you might not be able to deduct the full amount. The IRS has specific per diem rates for different cities, and meal reimbursements above those rates could be considered taxable income. Check the GSA website for the per diem rates that were in effect during your 2023 travel dates. Keep digital copies of all receipts and any communication with Company Z about these reimbursements. The paper trail is crucial if the IRS ever questions why you have a Schedule C with zero net profit.

Great advice from everyone here! I just wanted to add one more consideration - since you mentioned this was "occasional" consulting with Company Z, make sure you understand the implications for future years. If you continue to receive 1099-NECs from them (even if they're just for reimbursements), you'll need to file Schedule C each time. You might want to have a conversation with both companies about setting up a proper reimbursement arrangement going forward. Company X (your main employer) could potentially reimburse you directly for travel to Company Z if it's related to your W2 job duties, which would avoid the 1099-NEC issue entirely. Alternatively, Company Z could set up an accountable plan for future reimbursements. Also, since you'll be filing a Schedule C with this activity, consider whether you need to make quarterly estimated tax payments if this pattern continues. Even though the net income is zero, having a Schedule C might affect other aspects of your tax situation, like eligibility for certain credits or deductions. The documentation advice everyone gave is spot on - keep everything organized and make sure your expense totals match the 1099-NEC amount exactly. This should resolve your immediate problem, but planning ahead could save you this headache in future tax years!

Don't forget you can also deduct other expenses related to your gig work! I do DoorDash and deduct a portion of my cell phone bill since I need it for the app, insulated bags I bought for deliveries, and even a percentage of car insurance and maintenance based on business vs personal use. Those deductions really add up and help offset the self-employment tax mentioned above.

I was in almost the exact same situation last year! Main job plus two different gig apps, both under the 1099 threshold. Here's what I learned after doing a lot of research and talking to a tax preparer: You absolutely need to report ALL income, even without the 1099 forms. The $600 threshold is just for when companies are required to send you paperwork - it doesn't change your obligation to report every penny you earned. For your Schedule C, you can combine DoorDash and Instacart since they're both delivery services. I did the same thing with Uber Eats and DoorDash. Just report the total $850 income and any business expenses you had. One thing I wish I'd known earlier - start tracking EVERYTHING now for next year! I used an app called MileIQ to automatically log my driving miles, and I kept receipts for things like phone chargers, insulated bags, and even some car maintenance. Those deductions really help offset the self-employment tax you'll owe on that $850. The self-employment tax is what caught me off guard - it's about 15.3% on your gig income over $400. But the business deductions help reduce that burden significantly. Good luck!

If you don't report that W-2 income, you're almost guaranteed to get a letter from the IRS later. They automatically match all W-2s against tax returns. Even small amounts will trigger this process. I learned this the hard way when I didn't report a $275 W-2 from a weekend job. Six months later, I got a notice saying I owed additional tax plus interest. Just not worth the hassle!

Pro tip: if you have multiple small jobs throughout the year, try to keep track of your total estimated income and adjust your W-4 withholding accordingly. I work several part-time jobs as a musician, and made sure each employer withheld enough so I wouldn't owe at tax time.

This discussion has been incredibly comprehensive! As someone who's navigated both the tax and strategic sides of student loan management, I want to add one more angle that might be relevant for your specific situation. Given that you're dealing with $325k in medical school debt, you might also want to consider the state tax implications depending on where you live and work. Some states have their own student loan interest deductions or education credits that could provide additional benefits, though these would still be limited to payments you make yourself, not payments your mom makes. More importantly, if you do decide to pursue the PSLF route that others have excellently outlined, make sure you understand how loan forgiveness will be treated for tax purposes. Under current law, PSLF forgiveness is tax-free, but other forgiveness programs (like income-driven repayment forgiveness after 20-25 years) create taxable income in the year of forgiveness. This could be a massive "tax bomb" if you're not prepared for it. The bottom line everyone has hit on is exactly right - the immediate tax implications of your mom paying your loans are minimal, but the long-term strategic decisions around repayment could impact hundreds of thousands of dollars. Get the big picture strategy right first, then optimize for taxes within that framework. Best of luck with your residency and loan decisions! You're asking the right questions at the right time.

This thread has been absolutely incredible - thank you everyone for such a thorough breakdown! As someone who's been lurking in this community for a while but never posted, I felt compelled to jump in because this hits close to home. I'm currently in my final year of pharmacy school with about $180k in federal loans, and my grandmother recently mentioned she might want to help pay some of them off. Like the original poster, I initially thought there might be some tax advantage for her, but this discussion has made it crystal clear that's not the case. What's really valuable is how everyone pivoted from the simple tax question to the much more important strategic considerations. I had never even heard of PSLF applying to healthcare professionals! I'm planning to work at a federally qualified health center after graduation, which I now realize might qualify me for loan forgiveness. The point about family helping with living expenses instead of direct loan payments is brilliant - it provides the same financial relief while preserving potential forgiveness benefits. I'm definitely going to research this more thoroughly before having any conversations with my grandmother about her offer to help. One question: does anyone know if clinical pharmacists working in hospitals or FQHCs typically qualify for PSLF, or is it mainly physicians? I want to make sure I understand my options before committing to any particular repayment strategy. This community's depth of knowledge is amazing - thank you for turning a simple tax question into a masterclass on student loan strategy!