Question: I took a year off before starting college and spent the bulk of it working with my parents at our business. The problem is that I was paid under the table so there is no proof of me actually working there. Should I report my time working at my parents' business to college admissions offices when applying?
Yes, of course, you should report your work for your parents since it seems to have taken up a big chunk of your gap year. Colleges are not going to be looking for proof of earnings. (The IRS wants documentation but, thankfully, admission offices don't. :) )
Because the employment sections of most applications allow no room to elaborate, you might want to write your primary essay about this experience or, alternatively, explain it in the "Additional Information" section or in a separate, unsolicited letter or essay.
Admission folks will be interested in what you did and what you learned during your time off from school but not in how much you made.
That’s why you want to use your authentic voice when writing any college essay.
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