My cousin is filing bankruptcy (she told me but doesn't know I am) and she looks after 2 kids after school every day, and gets paid about $350/month in cash for this. She said she is not going to include this in income as they are very close to the median income. She thinks she will not get caught. I want to tell her not to lie to the courts, but she seems to think they will never find out since it is cash. ugh. I hope for her sake it does not get dismissed.
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Honesty.....
.....is always best. She should tell her lawyer about the $350 per month. Does she have other income? She may owe taxes.......
$350 per month is not worth getting the case dismissed over.
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yeah -- what bkruptfool said officially.
However technically-- it depends on how she is paid and what she does with the money when she receives it. If she is ALWAYS paid in straight cash and that cash NEVER touches a bank account, she may be ok. Now if she has ever been paid with a check, that could cause a problem. AND if she has EVER turned around and deposited cash in her bank account, then that gives it a paper trail. Paper trails are traceable.
If it were me, I would report it to be on the safe side -- however -- refer to the above.
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it is mostly cash
but she said if the lady writes her a check she goes and cashes it at HER bank, so nothing ever touches her own bank account. Could they trace that? How would the trustee even know? He would have to check everyone's bank account!
$350/month is $4200/year and they are only $2000 under the median so she doesn't want to get pushed into a chapter 13.Comment
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Buy a safe deposit box, and lock it in house to spend away.Comment
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????
what?Comment
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I would be afraid not to tell them about any income. Seems like they would find it if you were trying to hide it.
~You should always check the source otherwise its just a Tabloid"~TahnyaComment
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She should definately ask her attorney about it. IMO it's better to be safe than sorry.3/30/07 Petition signed
5/21/07 341 Meeting
7/20/07 Last day for Objections
7/25/07 DISCHARGED
7/30/07 CLOSED
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I'm a UK citizen, but I guess the Inland Revenue system over here is rather similar to the IRS?! ......however.....I'm consistently getting around 30% of my income received in cash. My accountant tells me to pay for things like petrol/diesel by sometimes using a credit card, instead of cash, in order to reduce the `unaccountable' income....just so as not to increase the IR tax officers suspicions....they seem to have a `nose' for a set of accounts that doesn't seem quite pukka!....and so far so good since I've followed this advice.
Cheers BSComment
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How long has she been doing that job? If it's been for quite a while, I have one question for you: did she claim this income on her taxes? If she didn't, she's already playing with fire, and she'll either have to (a) not claim the income on her bankruptcy and play with more fire or (b) amend her tax returns to include this income *and* pay the additional tax liability on the previously unclaimed income with interest and penalty.
If she did claim the income on her taxes, she had better claim it on her bankruptcy, since trustees look at filers' tax returns.DISCLAIMER: I am not an attorney. My posts are not legal advice. They are for information only. Please feel free to use them in an academic sense, as I simply wish to share with you what I have learned/researched.Comment
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answers
I am going to share all your answers with her that you all posted!!
She just started doing it in january and will no longer do it after june. the person agreed to pay her cash and not claim "child care" on her taxes as well.
it seems untraceable, but can they somehow find out?Comment
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Hmm.
The reason most murders are solved is that people have loose lips. She ought to keep hers closed. And as far as the safe deposit box, that is a big nono- not only would she create a paper trail, but there is also a specific question on the petition about owning a safe deposit box.
'Mums' the word?Comment
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Yep, they can. IF they want.Originally posted by bkruptfool View Post
The Trustee has the full backing of the Federal Government behind them. If they even sense that you're hiding anything, they'll investigate.
It may take them a while to find something. I've read articles where people were 2-3 years post Discharge when they were caught, but they were caught. And their Discharge was revoked, in addition to the Federal Charges they were up against.
That client lady writes her a check from time to time,........... Even tho she cashes the check at the Lady's bank doesn't mean the Gov't can't tie her to the money. Those checks are a paper trail if anyone cares to look.
All the UST's Office Investigators gotta do is snoop around a bit. Ask neighbors, friends, family a few questions. They could eventually find out about the 2 kids that come to her house every day after school. It won't take much to connect the dots.Filed Ch 7 - 09/06
Discharged - 12/2006
Officially Declared No Asset - 03/2007
Closed - 04/2007
I am not an attorney. My comments are based on personal experience and research. Always consult an attorney in your area to address concerns related to your particular situation.
Another good thing about being poor is that when you are seventy your children will not have declared you legally insane in order to gain control of your estate. - Woody Allen...Comment
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Always tell the truth.
Hitting the median income is usually no problem. It triggers the means test. Don't forget what you're concerned with it passing the means test.
There are a few ways the Trustee might find it.
First, you must supply bank records, I guess this is a non issue if it's paid in cash, then spent in cash, never deposited.
Next, you must supply IRS records. It should be listed on there as income. That's probably the easiest way to find it.
Here's the real result. If you catch the TT's interest, they'll dig for more.Comment
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As for the trustee - from what i've read they don't take kindly to dishonesty...
Also, if that is all she makes, she wouldn't owe much in taxes anyway, maybe even none if she qualifies for the earned income credit.
Also - if the lady claims the amount on her taxes as dependent care, your cousin will be in trouble if that lady is ever audited by the IRS and your cousin doesn't claim the income as well. The same is true if your cousin claims it and the lady doesn't. In fact if your cousin is a household worker making more than $1200, the lady could get in a lot of trouble as she should be paying social security, medicare, and unemployment taxes for your cousin. This only applies if your cousin isn't considered an independent contractor (which babysitters are considered "household workers" on the IRS forms) At any rate they will want to make sure they are on the same page on that issue.
From my experience, the ability to claim dependent care credit pretty much pays for the taxes, so the only benefit to not claiming the $350 is that your cousin doesn't have to pay income tax - which could be 0 - $30 per month
I am not an accountant or a lawyer.Comment
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