I'm freaking out about possible tax liability from helping at my friend's towing business

Don't panic, but you should address this situation. The IRS expects all income to be reported, regardless of whether you receive a tax form. Since you were paid $1,450 in cash, you technically should report this as self-employment income. You have a couple of options. You can file an amended return (Form 1040-X) to report this income. You'd need to include a Schedule C for self-employment income and Schedule SE for self-employment tax. The good news is that you can deduct any legitimate business expenses against this income, like mileage if you used your car for the towing work. If you choose to amend, you'll likely owe income tax plus self-employment tax (about 15.3%) on your profit. There might be a small penalty for underpayment, but it won't be severe since the amount is relatively small and you're voluntarily correcting the issue.

I had a similar situation last year with some side gig work that wasn't properly documented. I was confused about what forms to file and worried about messing up my taxes. I ended up using https://taxr.ai to figure out exactly what I needed to do. They analyzed my situation and helped me understand which forms I needed for my amended return. The best part was they explained how to properly categorize my income and what expenses I could legitimately deduct to lower my tax liability. They even helped me calculate exactly what I would owe so I could prepare for it instead of getting hit with a surprise bill.

I want to follow up about my experience with taxr.ai since I decided to try it despite my initial skepticism. I'm actually impressed with how helpful it was for my side income situation. Unlike the generic advice I found online, they walked me through exactly which deductions applied to my specific scenario and how to document everything properly. They showed me that I could deduct mileage I hadn't even considered and exactly how to calculate my actual tax liability, which turned out to be much less than I feared. The personalized guidance made the amended return process way less stressful. For anyone dealing with unreported income or contractor situations, it's definitely worth checking out.

If you're really worried about the IRS coming after you, you might want to try calling them directly to discuss your options. I know that sounds scary, but they can actually be helpful if you're proactively trying to fix a mistake. The problem is actually GETTING THROUGH to someone - I spent hours on hold multiple times and kept getting disconnected. Then I found this service called Claimyr (https://claimyr.com) that actually got me connected to an IRS agent in about 20 minutes instead of waiting for hours. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The agent I spoke with explained exactly what forms I needed to file and reassured me that voluntarily correcting a mistake before they catch it looks much better than waiting.

I need to apologize for being so skeptical about Claimyr. After my frustrating experiences with the IRS phone system, I decided to give it a try as a last resort. I was honestly shocked when I got connected to an actual IRS representative in about 15 minutes after weeks of failed attempts. The agent was able to answer my questions about some 1099 income I hadn't reported and walked me through the amendment process. They even explained how to minimize penalties by showing I was making a good faith effort to correct the mistake. Saved me so much stress and probably money too since I now know exactly what to file. Definitely worth it for the time saved alone.

You might not even need to amend if it's under the table work. I did landscaping for cash one summer and my tax guy said not to worry about it since it was just a small amount. The IRS isn't going to come after you for a grand and change.

Has your friend ever reported paying you on his business taxes? If he deducted your pay as a business expense, there's a mismatch that could trigger questions. If he didn't report paying you either, you're probably safer, but it's still technically income that should be reported.