topic Re: Undocumented income in CH7 in Bankruptcy

Undocumented income in CH7

GeorgieBush — Tue, 22 Nov 2022 15:24:06 GMT

In 2021, I had ~$20,000 of undocumented landscaping income (Venmo and Paypal) from customers who paid >$600. I have received no 1099s. I failed to report this on 2021 tax return. I have no official or registered business. My only other income was $1500 W2 from separate job.

Intend to file CH7 ASAP. Due to the risk of these transactions and tax return discrepancy being uncovered in bankruptcy, I'm wondering if and how I should amend 2021 tax return. The risk is probably slim, as my bankruptcy is otherwise very simple (virtually no income, assets, accounts, marriage, transactions etc.) and there has been none of this undocumented income or transactions for over 9 months.

I had related expenses: probably ~$5000 paid under the table to various helpers (Venmo) as well as transportation, equipment rental, tool purchases, etc. I failed to include anything related to this business on taxes.

If I report income from my customers, it presumably becomes obvious to IRS that customers failed to file their 1099s. I'm concerned about potential liabilities/risks to my customers as well

Does anyone have experience with how their Venmo or Paypal is looked at in CH7? Do they just ask you if you have those accounts and then ask for recent statements if you do? What if the accounts have been closed?

The main reason behind all this is that I've been struggling throughout this time with increasing health problems from my cancer treatment that have interfered with my ability to work, manage finances and life in general.

I've started the process with upsolve.org

Re: Undocumented income in CH7

FireMedic1 — Tue, 22 Nov 2022 22:04:24 GMT

@GeorgieBush wrote:
In 2021, I had ~$20,000 of undocumented landscaping income (Venmo and Paypal) from customers who paid >$600. I have received no 1099s. I failed to report this on 2021 tax return. I have no official or registered business. My only other income was $1500 W2 from separate job.

Intend to file CH7 ASAP. Due to the risk of these transactions and tax return discrepancy being uncovered in bankruptcy, I'm wondering if and how I should amend 2021 tax return. The risk is probably slim, as my bankruptcy is otherwise very simple (virtually no income, assets, accounts, marriage, transactions etc.) and there has been none of this undocumented income or transactions for over 9 months.

I had related expenses: probably ~$5000 paid under the table to various helpers (Venmo) as well as transportation, equipment rental, tool purchases, etc. I failed to include anything related to this business on taxes.

If I report income from my customers, it presumably becomes obvious to IRS that customers failed to file their 1099s. I'm concerned about potential liabilities/risks to my customers as well

Does anyone have experience with how their Venmo or Paypal is looked at in CH7? Do they just ask you if you have those accounts and then ask for recent statements if you do? What if the accounts have been closed?

The main reason behind all this is that I've been struggling throughout this time with increasing health problems from my cancer treatment that have interfered with my ability to work, manage finances and life in general.

I've started the process with upsolve.org

Welcome @GeorgieBush

Here we will always say seek legal advice when it comes to all these situations outside of a simple debt no assest case. But:

"Under the American Rescue Plan Act, people who sell goods or services on platforms like Etsy, eBay and other sites that use third-party transaction networks – like PayPal, Cash App and Venmo – will be issued a tax form called a 1099-K for online sales totaling $600 or more starting next year. "

https://www.augustachronicle.com/story/news/2021/11/16/irs-1099-tax-limit-guidelines-for-online-bank-transfers/6372523001/

Looks like it might show up next year once the bookeepng is done.

Re: Undocumented income in CH7

GeorgieBush — Tue, 22 Nov 2022 22:24:51 GMT

I have virtually no assets: no funds, no cash, no valuables, no vehicle, no real estate. All I have are basically just everyday possesions. A handful of $500 items.

That law applies to designated business transactions. These were designated personal.

Re: Undocumented income in CH7

DogwoodLynx — Wed, 23 Nov 2022 02:09:16 GMT

@GeorgieBush wrote:
I have virtually no assets: no funds, no cash, no valuables, no vehicle, no real estate. All I have are basically just everyday possesions. A handful of $500 items.

That law applies to designated business transactions. These were designated personal.

Only way to know for sure is to talk to an attorney. Mine did a free consult.

Re: Undocumented income in CH7

Shooting-For-800 — Wed, 23 Nov 2022 03:56:56 GMT

It seems like you are breaking the law.

I would not continue to do so through BK.

Re: Undocumented income in CH7

FireMedic1 — Wed, 23 Nov 2022 11:55:37 GMT

@GeorgieBush

PayPal Policy:

https://www.paypal.com/us/smarthelp/article/HELP543

"If you meet the IRS threshold in a given calendar year, PayPal will send you a Form 1099-K in January of the following year and file this form with the IRS by the required due date."

Re: Undocumented income in CH7

LakeLife — Wed, 23 Nov 2022 14:25:11 GMT

@Shooting-For-800 wrote:
It seems like you are breaking the law.
I would not continue to do so through BK.

This would definitely be my advice as well.

Re: Undocumented income in CH7

DogwoodLynx — Wed, 23 Nov 2022 15:19:10 GMT

You could probably benefit from talking to a lawyer that is also a CPA before talking to a BK lawyer.

Re: Undocumented income in CH7

GeorgieBush — Wed, 23 Nov 2022 15:37:10 GMT

Any leads on finding a CPA who is also BK attorney? I don't know where to start. Seems like anyone in the US would work

Re: Undocumented income in CH7

DogwoodLynx — Wed, 23 Nov 2022 15:40:38 GMT

@GeorgieBush wrote:
Any leads on finding a CPA who is also BK attorney? I don't know where to start. Seems like anyone in the US would work

Where do you live? You should be able to search your state bar associations website.

Re: Undocumented income in CH7

pizza1 — Thu, 24 Nov 2022 21:01:14 GMT

So, when you file, and you eventually go to your 341 hearing, you are specially asked under oath with the judge there if there's any other income, that hasn't been reported, any monies that have transferred to family or other accounts, any other items of value like tractors, tools, jewlery, etc that you or someone else is keeping for you, etc.... if you answer no, then you're lying in a federal court, and if its found out later, then your case will be dismissed, and there could be fines and/or jail time. Its not worth it. So just report it and amend your taxes to show it.

Re: Undocumented income in CH7

GeorgieBush — Mon, 28 Nov 2022 16:20:12 GMT

@DogwoodLynx wrote:
@GeorgieBush wrote:
Any leads on finding a CPA who is also BK attorney? I don't know where to start. Seems like anyone in the US would work
Where do you live? You should be able to search your state bar associations website.

WA State Bar Association website has no info to indicate whether a lawyer is CPA

Re: Undocumented income in CH7

DogwoodLynx — Mon, 28 Nov 2022 18:56:43 GMT

@GeorgieBush wrote:
@DogwoodLynx wrote:
@GeorgieBush wrote:
Any leads on finding a CPA who is also BK attorney? I don't know where to start. Seems like anyone in the US would work
Where do you live? You should be able to search your state bar associations website.

WA State Bar Association website has no info to indicate whether a lawyer is CPA

Ok. So you will want to Google search "dually-licensed attorney CPA (YOUR CITY/COUNTY)".

You should get a list and then youll want to get a consult with a few of them.

Let me know if you need any specific help. You can DM me.

Disclaimer to those that read this later:

*** I am unable to give professional legal or financial advice. I am not an attorney nor a CPA. Im just good at finding resources lol ***