[mannykannot]

But if it was not an erroneous transfer (maybe, as some have speculated, an unannounced bug bounty) and this is not made clear before estimated tax payments are due, I suspect the default IRS response will be to charge penalties and interest on any late payments. One might get them waived, but not without considerable trouble and cost.

[mrguyorama]

The IRS is pretty chill if you aren't purposely trying to evade taxes.

As a college student working multiple jobs, I had complicated taxes for a bit. Years later, the IRS sent me a letter that said "you forgot to declare this W2, so you owe us $270". I get nervous about phone calls and couldn't find a web portal to pay it, so I uh, "put it off" for a while. I never actually got in contact with the IRS. They just sent me a letter the next two years saying they took my state tax refund to pay it off and now it's done. I think I spent a couple bucks on interest over the course of multiple years.

People have this weird concept that the IRS will do no knock raids on normal average americans for simple mixups. This perception is mostly driven by people who are ideologically against taxes entirely. Instead, the IRS is predominantly average people with accounting experience who are used to getting simple money mistakes solved. They also don't want to take you to court because they don't have enough money in their budget to take everyone they could to court.

[skipwalker]

Unless there's a 1099 sent to the IRS and the receiver, why would one report it as income?

[jrochkind1]

Because if it was legally income, it is a crime not to report it. If the IRS discovers it later, they can charge you the taxes, plus interest, plus penalties, and in some cases prosecute you criminally (see Al Capone). Whether it needs to be legally reported as income or not is not determined by whether someone else already filed paperwork for it or not. I don't know if this would need to be reported as income or not, under what circumstances; I'd talk to a lawyer or CPA. whether someone filed a 1099 or not is not determinative.

[jtbayly]

But it can’t be income if he has to give it back, which is the starting assumption here.

[jrochkind1]

I'd talk to a lawyer or accountant when dealing with a mystery $250K instead of making "starting assumptions". It's certainly not determined by whether a 1099 was filed.

[jtbayly]

Lol. I’d start with the very safe assumption that I’m not going to be able to keep $250k that was clearly given to me by mistake.

[djitz]

I absolutely love that (see Al Capone) is the example used while discussing some dude who was accidentally sent money by google.

[jrochkind1]

Hey, he was prosecuted for not reporting income that definitely nobody filed a 1099 for. :)

[bastawhiz]

If you run a business, do all of your customers send you a 1099 for the money they pay you? No, that would be wild. Your revenue is still income (corporate or individual income). 1099s are only applicable for certain situations.