
Originally Posted by
rickdugan
The IRS doesn't care how you earn your income, just that you report it and pay appropriate taxes on it.
The people who DO care about where your money comes from are lenders and anyone else who might become a creditor, like a landlord. Just have a good story about what you do, along with appropriate tax returns and bank statements for proof of income and you should be fine for the most part. Where it might get tricky is if you apply for a mortgage, or try to rent in a higher end place, and someone scrutinizes your tax returns. They might find it a little odd if you do not have business expenses on your Schedule C consistent with whatever cover story you are using, so if I were you I would pick something like life coach, personal trainer, fortune teller (lol), tutor or something else that is a direct service requiring few supplies.
When someone said don't deposit it all in the bank, I think she meant don't make single deposits over $10k. But based upon what you already said, it doesn't sound like a big risk for you yet anyway. It is important to get as much in the bank as possible because the only verifiable income that you will have for landlords and lenders is whatever deposits they can see go into a bank account and what is reported on your tax forms (which should more or less match up).
As to your question about how to report the income, it is not a gift. You are being paid for services rendered, whatever those are. Ideally you report it as business income from your "Life Coach" or other business. You do not need to be licensed or registered in any formal way in order to report income as business income to the IRS.
I agree with eagle that you should talk to an accountant. For starters, once you start depositing income, you will need to start making quarterly estimated tax payments, so it might be a good time to get a jump on this stuff now.
Good luck!
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