Ok, so I know someone who is working from home doing something that isn't exactly legal in their state. Nothing crazy, but you aren't allowed to sell food products out of your home in this state, and this person is selling cakes and cupcakes.
My question is related to taxes. We were talking and they expect to make 2-3k this first year (it's a stay at home mom doing it very part-time). I wouldn't be so much worried about getting caught by the health department, but I would be deathly afraid to be caught not reporting the income to the IRS. What would you do in this situation? Do you report the income? If so, how do you do it?