A person paid in cash is considered self employed since the employer is not paying payroll taxes.  The applicant should be asked to provide tax returns with schedule C and an affidavit of projected income.  

-Erik

A tax return must be filed.  See page 4-12 of IRS 8823 Audit Guide.  

The tax credit housing program is an IRS program.  People are required to identify their income and pay taxes accordingly.  Where they do not follow this requirement they should not receive the benefit of an affordable unit under this program.