To file or not to file?? that is the question.

[oceanlovin'ea]

Client and wife moved in November of 2015 to Columbia, South America. They went on their own to work with religious group in the country. In 2016 they had no income (lived off savings). In 2017 they purchased and sold 2 vehicles, Land Cruisers. They are not in the business of selling vehicles. Since the sale of the vehicles are a Schedule D transaction and they have no other income, the tax return has no tax liability. There was no reporting of the transactions.

Do they really need to file a tax return? Do I need to use their Columbian address on the tax return? The last one I filed I used her mothers address since getting mail in foreign countries is sometimes difficult and not reliable.

Or could they just keep accurate records in case of letters from IRS?

Thanks

Linda F

[spanel]

Client and wife moved in November of 2015 to Columbia, South America. They went on their own to work with religious group in the country. In 2016 they had no income (lived off savings). In 2017 they purchased and sold 2 vehicles, Land Cruisers. They are not in the business of selling vehicles. Since the sale of the vehicles are a Schedule D transaction and they have no other income, the tax return has no tax liability. There was no reporting of the transactions.

Do they really need to file a tax return? Do I need to use their Columbian address on the tax return? The last one I filed I used her mothers address since getting mail in foreign countries is sometimes difficult and not reliable.

Or could they just keep accurate records in case of letters from IRS?

Thanks

Linda F

Lets remove the "they don't reside in the US" for a minute.

You didn't mention if they made a profit on the sale of the vehicles... lets assume that a yes.

If the IRS gets any info, they will ONLY get the sale, not the cost. You need to file a return to not only show the sale, but the cost basis. Also, surely they have other income (interest off savings??)

Chris

[ATSMAN]

Client and wife moved in November of 2015 to Columbia, South America. They went on their own to work with religious group in the country. In 2016 they had no income (lived off savings). In 2017 they purchased and sold 2 vehicles, Land Cruisers. They are not in the business of selling vehicles. Since the sale of the vehicles are a Schedule D transaction and they have no other income, the tax return has no tax liability. There was no reporting of the transactions.

Do they really need to file a tax return? Do I need to use their Columbian address on the tax return? The last one I filed I used her mothers address since getting mail in foreign countries is sometimes difficult and not reliable.

Or could they just keep accurate records in case of letters from IRS?

Thanks

Linda F

Are they US citizens or Permanent Residents? If their income for 2016 and 2017 was below the filing threshold and they sold personal property (cars) at a loss that is not deductible I see no reason to file a tax return.

[New York Enrolled Agent]

In 2017 they purchased and sold 2 vehicles, Land Cruisers. They are not in the business of selling vehicles. Since the sale of the vehicles are a Schedule D transaction and they have no other income, the tax return has no tax liability. There was no reporting of the transactions.

Do they really need to file a tax return?

The test is not whether there is a tax liability or the transactions were reported but rather how much gross income did they have in 2017? IRC §61(a)(3) says gross income includes gains from dealings in property.

Only you know the amount of gross income - the rest of us do not. For a married couple (assuming they had not attained age 65) gross income in 2017 had to exceed $20,800 to create the need to file a 1040 return. Do the math.

[oceanlovin'ea]

answers

Yes they are US citizens. Under 65. No other income. you can live much cheaper in other countries. Vehicles sold to individuals so I do not think anything will be reported.

They did make a profit on selling the vehicles of $15,473. Sold vehicles for $20,750 minus expenses of purchasing and fixing up vehicles. So even the selling price is under the filing requirement.

Thanks for your input. I really appreciate it.

Linda F

[TaxGuyBill]

Although they may not be required to file, you may give them the option to file anyways.

It can sometimes be beneficial to file the tax return because (1) it starts the statute of limitations, (2) it can alert you if anybody filed a false tax return in your name (or prevent one from being filed) and (3) some agencies require a tax return as proof of income for certain benefits (such as Medicaid, FAFSA, etc.).

I usually send the client an email that says they are not required to file a tax return, but I also outline the reasons above, and let them decide if they want to pay you to file a tax return or not.