Cash Tips For i-864

[TJL 89]

So.... Somebody I know makes over 50% of his annual income via cash tips that may or may not have been claimed on his taxes.

 

Now, he needs to file an i-864 and prove income, but the AGI on his tax return doesn't reflect his tips, and falls short of the 125%.

 

Can he submit proof of cash deposits into his bank account? What are the risks of this?

 

I'd LOVE to tell him the best way to approach this situation.

 

Thanks!

[nullaccount234 882]

Best approach would be to back-file, include cash tips.

[TJL 89]

1 minute ago, LizM said:

Best approach would be to back-file, include cash tips.

Thank you for your post!

 

Since refunds have been paid, etc., how would he do this?  Would he file an "amended" return and then owe taxes due?

 

(Sorry... I want to be sure to give him correct information.)

[nullaccount234 882]

No worries. Yes exactly, if he has already filed for 2018 he should amend it. If the I-864 is needed soon you may want him to look into the timeline, it can take a while for the IRS to accept an amended return I believe.

[aaron2020 11,651]

14 minutes ago, ThomasLyon said:

So.... Somebody I know makes over 50% of his annual income via cash tips that may or may not have been claimed on his taxes.

 

Now, he needs to file an i-864 and prove income, but the AGI on his tax return doesn't reflect his tips, and falls short of the 125%.

 

Can he submit proof of cash deposits into his bank account? What are the risks of this?

 

I'd LOVE to tell him the best way to approach this situation.

 

Thanks!

Bwaaaaa!!!!!!

 

Do you think that the US Embassy is going to accept unreported income and be okay with tax evasion?  Hey, buddy, perfectly okay to commit tax fraud, so here's a visa for your family.

 

[TJL 89]

1 minute ago, LizM said:

No worries. Yes exactly, if he has already filed for 2018 he should amend it. If the I-864 is needed soon you may want him to look into the timeline, it can take a while for the IRS to accept an amended return I believe.

Great advice.  Thank you.

 

He JUST got his NOA1, and this is for a CR1, so it might not be an issue until next year's taxes, anyhow.  They only need to see one year above the 125%, right?  In that case, he'll have to be sure to include his tips this year (or perhaps not take as many business deductions!)

[TJL 89]

Just now, aaron2020 said:

Bwaaaaa!!!!!!

 

Do you think that the US Embassy is going to accept unreported income and be okay with tax evasion?  Hey, buddy, perfectly okay to commit tax fraud, so here's a visa for your family.

 

I know, right!?!?

 

I told him that he's walking a very fine line, but I'm still trying to be helpful.  We'll see!  It'll be an entertaining thing to watch, nonetheless.

[Ben&Zian 4,397]

Yep amend the taxes, and warn him he probably is going to owe a ton of money back to the IRS haha. Not going to be fun, but has to be done.

[aaron2020 11,651]

2 minutes ago, ThomasLyon said:

I know, right!?!?

 

I told him that he's walking a very fine line, but I'm still trying to be helpful.  We'll see!  It'll be an entertaining thing to watch, nonetheless.

He's not walking a fine line.  It's not a fine line to commit tax fraud.  Not reporting earned income is not a fine line.  It has never been a fine line.  It's fraud.  

[Ben&Zian 4,397]

Yea but we know almost all servers/waiters/bartenders/ect don't report the tips. It's straight under the table as that's where most of their money comes from. Doesn't mean it's right, but that is the reality of it. Trust me, I got taxed like hell every year haha.

Edited March 22, 2019 by Ben&Zian

[nullaccount234 882]

For moral (and legal) reasons I'd of course recommend that he amends as far back as he can, which is three years.

 

They always look at the individual case, so there's no telling that they'll only care about the year leading up to the interview. If I saw someone who'd been working at the same place for three years and only (fittingly) received cash tips in the last year, I might wonder about that. In my case they did ask about a discrepancy in my husband's income, but I had a good explanation in that he'd been studying in the two of the three prior years. Just have him be prepared to explain himself.

Edited March 22, 2019 by LizM

[TJL 89]

Just now, Ben&Zian said:

Yea but we know almost all servers/waiters/bartenders/ect don't report the tips. It's straight under the table as that's where most of their money comes from. Doesn't mean it's right, but that is the reality of it. Trust me, I got taxed like hell every year haha.

That's exactly his situation.  He is a server at a high-end restaurant and it's not uncommon for him to get a $100 tip just for one table.  (I'm kinda jealous, actually.)

 

We'll see what happens.   I just got MY NOA1 too, but I'm good. (Luckily!)

 

1 minute ago, LizM said:

For moral (and legal) reasons I'd of course recommend that he amends as far back as he can, which is three years.

 

They always look at the individual case, so there's no telling that they'll only care about the year leading up to the interview. If I saw someone who'd been working at the same place for three years and only (fittingly) received cash tips in the last year, I might wonder about that. In my case they did ask about a discrepancy in my husband's income, but I had a good explanation in that he'd been studying previously. Just have him be prepared to explain himself.

Awesome.  Thank you!

[databit 328]

Note: The IRS usually goes back though the past 3 years when you amend, but they can go back 6 years.

[TJL 89]

Just now, databit said:

Note: The IRS usually goes back though the past 3 years when you amend, but they can go back 6 years.

Roger that.  Thank you!

[aaron2020 11,651]

29 minutes ago, Ben&Zian said:

Yea but we know almost all servers/waiters/bartenders/ect don't report the tips. It's straight under the table as that's where most of their money comes from. Doesn't mean it's right, but that is the reality of it. Trust me, I got taxed like hell every year haha.

Just because everyone is committing tax fraud doesn't really fly with the US Government.  

The reality of bringing a spouse over should be a consideration; ergo the current situation.  There are consequences to failing to report income, and this is one of the moments where it can bite someone in the #######.