Just wanted to add something important about Venmo specifically: Starting from 2023 tax year, Venmo/PayPal/Cash App are required to send 1099-K forms for business transactions totaling more than $600/year. "Business transactions" are ones specifically marked as "goods and services." But here's the important part - even if your friend never marks anything as "goods and services" and only uses personal transfers, the money is STILL taxable if it's income. The 1099-K reporting is just one way the IRS catches unreported income, but not the only way. The IRS can also: - Notice patterns of large deposits that don't match reported income - Audit businesses that paid your friend and see those payments - Use their data matching systems to flag discrepancies Your friend should really look into setting up as a proper business (sole proprietor at minimum) and start reporting this income before it becomes a much bigger problem.

As someone who learned this lesson the hard way, I want to emphasize what others have said - your friend needs to act NOW, not wait for the IRS to find him first. I was in a similar boat a few years ago with side consulting work through PayPal. I thought using "personal" payments would keep me under the radar, but that's not how it works. The IRS looks at the substance of the transaction, not the label you put on it in the app. Here's what I wish someone had told me earlier: 1. **Keep detailed records** - Every payment, every business expense, every receipt. Your friend will need these whether he reports voluntarily or gets audited later. 2. **Calculate what he owes** - At $25-50k annually, he's looking at significant self-employment tax (15.3%) plus income tax. Better to know the number now than be surprised later. 3. **Consider quarterly payments** - If he's still taking jobs, he should start making estimated tax payments to avoid underpayment penalties. 4. **Get professional help** - This isn't DIY territory anymore. A CPA who specializes in small business/contractor issues can help minimize damage and set up proper systems going forward. The good news is that voluntary compliance usually results in much better treatment than getting caught. The IRS would rather work with someone who comes forward than chase someone who's hiding. Your friend's paranoia is actually his conscience telling him to do the right thing - he should listen to it.

Just wanted to share a practical tip that's worked for our family. We established a clear written policy for our kids' custodial accounts that we follow rigorously. We only withdraw for: - Educational enrichment beyond basic schooling - Specialized equipment for talents/interests (sports, music, etc.) - Medical expenses not covered by insurance - College visits and preparation - Special savings for major future expenses (car, first apartment deposit) We document everything and keep all receipts. This approach has kept us safe for years, and we've never had issues with audits or questions. Our accountant reviewed our policy and said it was a solid interpretation of the "benefit of child" standard.

Great question about enforcement! While there isn't active day-to-day monitoring of custodial account withdrawals, the enforcement becomes real in a few specific situations: 1. **Child challenges as adult**: Once your child reaches the age of majority, they can legally challenge how you managed their account. If they believe funds were misused, they can take legal action against you as the former custodian. 2. **IRS audits**: If you're audited, the IRS may scrutinize large or frequent withdrawals from custodial accounts, especially if they suspect the funds were used for your benefit rather than the child's. 3. **Divorce proceedings**: Custodial account management often gets scrutinized during divorce cases, particularly if one parent alleges the other misused the child's funds. 4. **Financial aid reviews**: Colleges reviewing financial aid applications may question large withdrawals that don't clearly benefit the student's education. The rules aren't just theoretical - there have been court cases where adult children successfully sued parents for improper use of custodial funds. The key is that while day-to-day enforcement is minimal, the legal framework is there and can be enforced when circumstances warrant it. Better to be overly cautious than face potential legal and financial consequences later.

One thing I'd add to all the great advice here - make sure you're also considering the timing of your purchase for maximum tax benefit. Since you bought the Tesla in 2025, you can take the Section 179 deduction this year, but if your 1099 income varies year to year, you might want to think strategically about when to claim the deduction. For example, if you expect your business income to be higher next year, you could elect to take less than the full allowable deduction this year and save more for when you have higher business income to offset. The Section 179 election is flexible - you don't have to take the maximum amount available. Also, don't forget about the potential for bonus depreciation on top of Section 179. For 2025, you might be able to combine both depending on your situation. Definitely worth having a tax professional run the numbers to see which depreciation strategy gives you the best overall tax outcome given your specific income mix. Keep those mileage logs detailed and contemporaneous - that's going to be your lifeline if you ever get questioned on the 90% business use!

This is such a helpful thread! I'm in a similar situation with dual income sources and just bought a vehicle for my consulting business. One thing I wanted to add that I learned from my CPA - make sure you understand the difference between the Section 179 deduction and regular depreciation when it comes to recapture if you ever sell the vehicle. With Section 179, if you sell the Tesla before holding it for the full depreciation period, you might have to "recapture" some of that deduction as ordinary income rather than capital gains. This is especially important since you're using it 90% for business. If your business use percentage drops significantly in future years (say you change jobs or your 1099 work decreases), you could face some unexpected tax consequences. Also, @Ava Kim, since you're making good money on both the W-2 and 1099 side, you might want to consider whether taking the full Section 179 deduction in one year is actually optimal from a tax bracket perspective. Sometimes spreading the depreciation over several years can keep you in lower tax brackets and result in better overall tax savings. Just something to discuss with a tax professional who can model out different scenarios for your specific situation!

Has anyone here actually been audited for cash income? What did they specifically ask for? I'm a bartender and get a lot of cash tips that I report honestly, but I don't have any real "proof" besides my bank deposits.

For cash income documentation during an audit, the IRS typically accepts what they call "contemporaneous records" - meaning records made at or near the time of the transaction. Your notebook approach is actually on the right track, but you'll want to enhance it. Key documents that strengthen your case: 1) Daily cash receipts log (your notebook counts, but make entries consistent and detailed), 2) Bank deposit records that correlate with your logged income, 3) Any receipts or invoices you provide to customers, 4) Photos of completed work or service agreements, and 5) Calendar or appointment book showing scheduled jobs. The IRS understands that cash businesses often have less formal documentation, but they look for consistency between your reported income, lifestyle, bank deposits, and spending patterns. Your bank statements showing regular deposits that match your notebook entries will be very helpful. Consider also taking photos of completed work and keeping simple service agreements or at least text messages with clients about job details - these all help corroborate your income claims. The key is showing a reasonable, consistent system rather than perfect documentation.

2 Might be late to the thread, but have you tried checking your mother-in-law's previous year's tax return to see what TIN was used then? Sometimes the software will save this information from year to year. Also, if she used a different tax preparer last year, they might have the correct information in their records.

11 This is such a frustrating but common issue! Banks often don't understand that the Payer's TIN is legally required information on 1099-R forms. A few additional suggestions that have worked for me in similar situations: 1) Ask to speak with the bank's tax department specifically, not just customer service. They're more likely to understand the requirements and have access to the correct EIN. 2) Reference IRS Publication 1179 which outlines the requirements for information returns - sometimes mentioning specific IRS guidance gets their attention. 3) If the bank still refuses, file a complaint with your state's banking regulator. Banks are required to provide accurate tax information, and regulatory pressure often gets results quickly. 4) For future reference, you can also look up any bank's Charter/FDIC Certificate information online which will show their correct EIN. The good news is that even if you have to file with incomplete information this year, it's very unlikely to cause major problems - just potentially a notice later that's easily resolved with documentation of your efforts.