If you received a IRS Letter 3531 with Box 1 and Box 7 checked, you need to do two things. First, to address Box 1, you need to sign your tax form - your Form 1040 or 1040SR on the signature line of the form. If it is a joint return, both you and your spouse must sign. For Box 7, you need to complete Form 8332, Form 2120 - Multiple Support Declaration, or attach a copy of the divorce decree which allows you to claim an exemption for a child who did not live with you due to divorce or separation. The IRS is telling you that you have to prove you have the right to claim to claim a child that didn't live with your in order to take the Earned Income Credit. You can explain the source of your income by telling them what you posted in your original question. If you need supporting documentation for you cash income, you can provide them copies of your bank statements showing where you deposited the receipts.
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