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    #1

    foreign income Sch C?

    I have a client who has lived and worked in another country for 9 years. I got the client when they bought rental property here (in VA) and needed a tax preparer.
    She still lives and works as a teacher in another country. She is in town and wants to see me tomorrow.

    Here are her 2 concerns.

    1- How does she earn one more credit for Social Security?
    She had 9 before she moved and needs one more to qualify to receive SS when she retires. (9 might not have been the right number, but you understand... she needs one more) After talking to the SS administration, she decided that she now has some self employment income correcting papers. The work is done out of the country, but when she is here, she could correct papers here, too. She said it is only $1500-3000 this year. She wants to file a Sch C and pay taxes on it.
    2-She also wants to file a VA State tax return because her daughter wants to go to college here and she wants to pay in state tuition.

    Why am I so suspicious? I thought I heard her say that she regularly did this work, but when I questioned how long she had this income, she said it was a new gig.

    I really can't tell if the work is real or not. When it started, or if she has been hiding income from me.

    Now it looks like I'll have the foreign income and some US income in addition to the rental.

    How do we deal with situations like this? Trust that the client is telling the truth? I don't pretend to be an auditor, and would get out of this business if it came to that. But, I am so suspicious.

    I'll meet her face to face for the first time tomorrow.

    Hope you are having a cool summer....
    ~possi
    "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey
    Tags: None
    #2
    Go with your gut feeling on this one. Grading papers is a new "gig"? I doubt it.

    As for now preparing a VA tax return, what as, a resident? when she has been living outside the country and not filing as a resident? Again, I doubt it.

    I had an Alabama client one time wanting me to prepare her daughter's return as if the daughter were a Georgia resident when i knew she wasn't. Lost a client, too. But
    it was the right thing (not) to do.
    ChEAr$,
    Harlan Lunsford, EA n LA

    Comment

      #3
      Similar but different

      I had a client referral (family member) from my taxpayer client. The referral is living in Argentina, has set up a business there through the internet (as I understand it), didn't want to pay Argentina taxes, so was not reporting, but wanted to claim income for US taxes for SSA quarters.

      I have a thread somewhere here on the Board.

      After researching, I provided as much info as I could, and then respectfully declined, and my taxpayer client was okay with that.

      Also had another one this year, that all of a sudden after moving to Mexico, wanted to file US taxes to obtain a Loan. I also respectfully declined that return and sent them information for someone that had a website - I think Peachie or someone (thread is also here on the board) assisted me with that.

      You will have to look at the "foreign" tax requirements, as well as VA most likely non resident (based on your OP)

      I agree with Harlan, go with your "inner most feelings" you will make the right decision.

      Sandy

      Comment

        #4
        Originally posted by Possi View Post
        .
        2-She also wants to file a VA State tax return because her daughter wants to go to college here and she wants to pay in state tuition.
        She would have to file a non-resident VA return so I doubt that will help her for resident tuition. You have to be physically present in the state 183 days or more, have VA income and/or have a residence, pay taxes in the state, vote in the state, have a VA driver's license, or some other evidence that she is a resident. (VA will allow dual residency.) Her daughter may be able to claim VA residency if she is not a dependent. She could let her live in the rental property and pay her to manage it, if it were a duplex for example.

        I had a relative who had the same problem with Social Security credits. And she actually was able to set up a job with a company here to pay her for one year on a contract basis so she was able to qualify for SS.
        Last edited by Burke; 07-15-2010, 01:32 PM.

        Comment

          #5
          More questions for OP (Possi)

          Since she has been gone for 9 years you say, what IS her home state? And has she for
          those nine years been filing income tax returns with that state? My guess is that she has
          not been filing state returns, just a hunch, though.
          And then when she acquired rental property in Virginia, thought that might make her and daughter a resident? I think not.
          Possible also that she bought this "rental property" for daughter to live in in same city as
          the university or college. Hmmm...!!
          ChEAr$,
          Harlan Lunsford, EA n LA

          Comment

            #6
            Originally posted by Possi View Post
            After talking to the SS administration, she decided that she now has some self employment income correcting papers. The work is done out of the country, but when she is here, she could correct papers here, too. She said it is only $1500-3000 this year. She wants to file a Sch C and pay taxes on it. Hope you are having a cool summer....
            ~possi
            The income you mention would meet 1099 requirements. Can she produce one? Or copies of checks she has received? Bank acct statements where they are deposited showing the amounts? If not, I would decline.

            Comment

              #7
              Virginia? Is there a Santa Claus?

              Originally posted by ChEAr$ View Post
              More questions for OP (Possi)

              Since she has been gone for 9 years you say, what IS her home state? And has she for
              those nine years been filing income tax returns with that state? My guess is that she has
              not been filing state returns, just a hunch, though.
              And then when she acquired rental property in Virginia, thought that might make her and daughter a resident? I think not.
              Possible also that she bought this "rental property" for daughter to live in in same city as
              the university or college. Hmmm...!!
              I am so naive that the purchase of rental property for her daughter to claim VA residency never entered my mind.

              The last state she lived in was VA. IF she was not a foreign resident, IF she did not pass the test for foreign income, then she would have to file VA. She has not been filing a VA return, and has not been required to do that.
              HOWEVER, she has lived and worked in Romania for 9 friggin years. I guess it's the woman in me, but I get a little worked up in situations like this. Leave the country so you don't have to pay taxes here, then when you need "US" come back for a few months and bring home the money... Our money... We, the US Taxpayers who dutifully pay our high self-employment taxes while you are gone will pay your social security. We'll just throw it in with the extra state taxes we pay so your kid can get a break in our schools. argggg

              okifeelbetternow.....

              I should not have "feelings" and keep it professional. I really want NOT to do their tax return next year when all this comes to fuition, but I need to justify myself. They were referred to me by a realtor who together with his daughter, refer A LOT of clients to me. So, I really need to throw some facts at her and politely bow out.

              We did not meet last week as planned. Something came up with her son, and she couldn't make it. Don't know if I'll see her live in person before she goes back to Romania. I'm going away on Thursday and won't be online for 3 weeks. So, don't think I'm gone for good... or long gone... just a "temporary absence!" You can still claim me!
              "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

              Comment

                #8
                I don't know...

                Originally posted by Burke View Post
                The income you mention would meet 1099 requirements. Can she produce one? Or copies of checks she has received? Bank acct statements where they are deposited showing the amounts? If not, I would decline.
                ... but I doubt there will be a 1099... I have no problem declining... read my reply just above this entry...
                "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

                Comment

                  #9
                  Since her state of residence was Virginia 9 years ago, it was still Virginia during the interim
                  and I think Virginia will agree. She should have been filing those returns all the while.

                  Sounds like she wants to have her cake and eat it too.
                  ChEAr$,
                  Harlan Lunsford, EA n LA

                  Comment

                    #10
                    Originally posted by Possi View Post
                    I am so naive that the purchase of rental property for her daughter to claim VA residency never entered my mind.

                    The last state she lived in was VA. IF she was not a foreign resident, IF she did not pass the test for foreign income, then she would have to file VA. She has not been filing a VA return, and has not been required to do that.
                    HOWEVER, she has lived and worked in Romania for 9 friggin years. I guess it's the woman in me, but I get a little worked up in situations like this. Leave the country so you don't have to pay taxes here, then when you need "US" come back for a few months and bring home the money... Our money... We, the US Taxpayers who dutifully pay our high self-employment taxes while you are gone will pay your social security. We'll just throw it in with the extra state taxes we pay so your kid can get a break in our schools. argggg

                    okifeelbetternow.....

                    I should not have "feelings" and keep it professional. I really want NOT to do their tax return next year when all this comes to fuition, but I need to justify myself. They were referred to me by a realtor who together with his daughter, refer A LOT of clients to me. So, I really need to throw some facts at her and politely bow out.

                    We did not meet last week as planned. Something came up with her son, and she couldn't make it. Don't know if I'll see her live in person before she goes back to Romania. I'm going away on Thursday and won't be online for 3 weeks. So, don't think I'm gone for good... or long gone... just a "temporary absence!" You can still claim me!
                    And chances are you will never hear from her again. Even if you do, you don't have to justify refusing her as a client. There are no laws, federal or otherwise, saying we have to serve anyone who knocks on our door.
                    ChEAr$,
                    Harlan Lunsford, EA n LA

                    Comment

                      #11
                      She is coming back

                      Originally posted by ChEAr$ View Post
                      And chances are you will never hear from her again. Even if you do, you don't have to justify refusing her as a client. There are no laws, federal or otherwise, saying we have to serve anyone who knocks on our door.
                      I'm sure she will want me to do her taxes next year. I just won't meet her in person like we planned.
                      "I am proud to pay taxes in the United States. The only thing is I could be just as proud for half the money." Arthur Godfrey

                      Comment

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