What proof is needed for cash income from self-employment?

[dina13]

Hi all, I'm new here. I just read an overview of bk process in Nolo book, and I wonder - if me and my husband are self-employed, and we both work for cash, how can we prove our income without pay stubs?

[HHM]

What do you do with the cash once you get it. Do you deposit it?

The only alternative would be to get receipts from your customers (which you should be doing anyway).

On a side note, if both of you are self employed,, that is not really a bankruptcy that should be done without a lawyer. Already you have one major pitfall, no way to prove income. Do yourself a favor, figure out a way to get an attorney, it will make the process go much more smoothly and increase your chances of success,

[DaisysMom]

Hi Dina, I am self employed also. I brought in my monthly balance sheet, showing my gross and what deductions I had to take before I got my net pay. IE: taxes, self employment insurance(Social Security), workers comp payments, phone, liability insurance, mileage, etc.....which were mostly verified by my bank statement showing the payments. I also had to bring my last two tax returns. There was quite a bit of info needed when I filed, but when I got to my 341, all he wanted to know was what kind of business it was. Quick, simple and now I am just waiting for discharge. Hope it goes as easy for you.

DM

[dina13]

Thank you, HHM and DaisysMom, for your responses. We are both self employed artists, so we basically sell paintings that we create, when they sell (which doesn't happen often in this economy), and we also have few private students. We deposit our cash only when we have to pay for rent and bills. However, in the past year, we rarely made more money than we were depositing to a checking account. What kind of records am I "obligated" to keep if I'm just paid in cash for my service, or a painting in some cases?

[keepsmiling]

You might need Profit and Loss Statements. That's what we were told.
Attorney also wanted two years of bank statements.

[dina13]

Keepsmiling, do you mean Schedules C of 1040 income tax form? We have those. And I can get bank statements. I hope that would be sufficient enough. (A breath of relief )

[oregonpilot]

Welcome dina....ah yes, a breath of relief.
I also am self-employed. wallpaperhanger ...some of my jobs are paid to me in cash.
I have a simple program with my Profit N Loss. or Income n Expense statement....one line for income (have a column for ca (cash) also and other lines with all my expenses.

My trustee asked for those statements from the beginning of the year. I fied in Aug and asked for only bank statements for that same time period.
Had to provide the 2 yrs of complete tax returns (schedule C ) and nothing more was required. It all worked out fine.

[dina13]

Thank you, Oregonpilot. Now I'm feeling much better. I believe then our bk will go smoothly, as we have nothing to hide and we have no assets, except for our paintings, which will be extremely hard for a trustee to sell at any profit in this market.

[Resigned2BK]

Hi all, I'm new here. I just read an overview of bk process in Nolo book, and I wonder - if me and my husband are self-employed, and we both work for cash, how can we prove our income without pay stubs?

Bank statements (you should be despositing the cash in an account before doing any kind of owners draw to pay for your own personal bills) and profit loss statements should still be something you can do with even a cash only biz.

[keepsmiling]

Keepsmiling, do you mean Schedules C of 1040 income tax form? We have those. And I can get bank statements. I hope that would be sufficient enough. (A breath of relief )

No, P and L's are different...The one who told us we needed them and all those statements was a current tt. Actually I was decluttering and had shredded a bunch of old ones (pre bk contemplation), closed the bank acct (to whom we owed a bunch of $) and no longer had access to those statements. Another reason we've dragged our feet. So... if there is any chance you will owe your current bank, print out NOW as far back as you can. Some banks charge 75$ and more to do each one.

It should be fairly self evident that you aren't getting rich with your art. Although I do hope you get "discovered" post BK of course!

[ValleYum]

Your paintings can likely be exempted. Federal BK exemptions are available in PA.

[dina13]

Thank you, Keepsmiling, I'll follow your advise on bank statements. Can you tell me more about profit and loss statements? Is it something you have to fill with your income tax forms every year, or is it something else?
I plan on filing in the end of May, as we got summons from Capital One, and hearing is on June 4th. I have to file before that.
And yes, I do hope to get discovered as an artist some day

ValleYum, yes, I believe paintings will be exempted, but because it's so hard to put a value on them, and we have so many - a whole attic full of artwork - I console myself that even if for some reason federal exemptions won't totally cover them, trustee won't want to deal with selling them anyway.