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Solved

Undocumented self employed making money from my home country

Forum|Forum|1 year ago
October 16, 2024
3 replies
0 views

Hi I’ve been trying to look for help / guidance everywhere. I had been in touch with multiple taxes accountants, immigrant taxers accountants and I haven’t had a good experience. (They didn’t even know what to do, or I booked a consultation and they never called).

So my income comes by me as self employed BUT most of money that I earn goes to my bank in my home country. I DO pay taxes in my home country and I’m aware that I have to fill taxes here too, what I don’t understand is if I would have to pay double taxes, also I know that if I fill taxes here I wouldn’t have necessarily to fill taxes in my country, but of course idk what to do or what are the recommendations.
I have never filled taxes here so everything is confusing and new to me.

should I filled taxes based of everything that I earned ?even the money that goes to my country bank account? Even if I filled taxes of that $ in my country?

What form, are multiple forms?

Best answer by pk12_2

Yes it’s been really hard to get help, some of them have told me to talk to a immigrant attorney (about my taxes), of course inmigrantes attorney told me to talk to a taxers accountant, then a taxers accountant told me I had to open a LCC, and he wanted to help me to open a busssines so I was suspicious. Then another was supposed to called me , never called

I’ve been back in forth for years

@Isi26 based on what you have posted so far ( nationality , entry to US, type of self-employment etc. ) , and generally agreeing with all that my colleague @Opus 17 has posted earlier for US federal purposes :

(a) you need to prepare a return on form 1040 ( TurboTax supports this ), you report your global income on Schedule-C , deducting allowable expenses --- About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) | Internal Revenue Service

Pay good attention to all the instructions for Schedule-C

(b) Note that because this is self-employment income (active income ) you are subject to Self-Employment Tax ( SECA at 15.3% of approx 92% of net-income from Schedule-C ) . However, because Chile and US Social Security has a "Totalization Agreement", you will need to participate only in one country. --See here -->U.S. International SSA Agreements | International Programs | SSA

(c) Once you are all done ( note for making software happy you will need to use a dummy Social Security Number like 234-84-5000), print out the return, sign date, replace the dummy SSN with " N R A".

(d) Now go to IRS website and download form W-7 and its instructions. Fill out the form, attach all the documents asked for .

(e) Send the whole package to IRS . This should result in IRS retroactively issuing you an ITIN ( since you are not eligible for SSN ).

(f) In future years you can file normally using the issued ITIN.

(g) Your foreign taxes paid to Chile, may be eligible for Foreign Tax credit.

(h) Given that you have never filed a US return, you probably should consider TurboTax full service or see a tax professional; familiar with International Tax, Schedule-C and Totalization agreement. You can take a printout of this response ( the whole thread ) along with you .

Is there more I can do for you ?

Anonymous_

Employee

No text available

Opus 17

Employee

What is your home country?

If you are a US person (citizen, green card holder, or living in the US and pass the substantial presence test) then you are required to file a US tax return and report all your world-wide income, no matter where you live, perform the work, or where your customers are located.

Whether or not you are require to also file a tax return in your home country is up to the laws of that country.

Some countries have a tax treaty with the US that allow you to take a deduction or credit on your US return for foreign taxes paid, which may reduce double-taxation. But it depends on what country.

Isi26Author

Thank you so much for your help:)

chile !

should I fill then for all the income that I’ve earned right? Do they asked about the sources or what type of documents they asked? Sorry for my ignorance, I ve been trying to do my best.

Opus 17

Employee

It's going to be tough to give you a complete education in US tax law in a couple of paragraphs. You may want to buy a book or read some web sites. Here's couple of blog posts.

https://turbotax.intuit.com/tax-tips/self-employment-taxes/beginners-tax-guide-for-the-self-employed/L2HLojrj5

https://blog.turbotax.intuit.com/self-employed/tax-tips-for-the-self-employed-2297/

Under US tax law, if you are self-employed, you are required to report all your gross income received from the business. You can deduct ordinary and necessary expenses for that type of business. You pay income tax and self-employment tax on the net profit. Income tax is tax on all your income, and self-employment tax is social security and medicare tax you pay on income earned from working (but not non-working income like prizes or investments). Social security and medicare tax goes to your credit for when you retire or if you become disabled. Even if you send most of the cash overseas, you still owe tax on your net profit (income minus expenses) even if you don't keep the cash. What counts as ordinary and necessary expenses depends on the kind of business. Someone operating a food truck has different expenses than someone doing web design out of their home.

Your tax return will contain a schedule C for the business where you list your income and expenses. You don't send proof of your income and expenses, just keep records in case you are audited later. Your net profit will go on your main form 1040, where it is combined with any other income, deductions, or dependents, to calculate your final tax.

You will need an international tax ID number, if you are not eligible for a social security number. To get an ITIN, you need to fill out an application form, and either mail it to the IRS with your first tax return, or take it to an acceptance agent for processing.

https://www.irs.gov/individuals/individual-taxpayer-identification-number

https://www.irs.gov/individuals/how-do-i-apply-for-an-itin

(The IRS doesn't care if you are undocumented as long as you pay your taxes, and they don't inform to ICE. However, if you apply for a green card or citizenship, you will be asked if you paid any taxes you owed.)

If you use tax software, it should walk you through the process of reporting your income, expenses, and other tax situations, including a foreign tax credit, although it won't help with the ITIN.

I'm surprised you could not get professional help. As long as you are in the US at least 180 days and pass the substantial presence test, you file the same tax return as any other US citizen. All the rules and forms are the same, except for the slight addition of a foreign tax credit.

https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

For the foreign tax credit and other issues, I will wait for @pk12_2

pk12_2

Employee

@Isi26 you need to tell us more about the following items :

(a) which country are you from ( you said you have bank account there )

(b) what do you mean by self-employed ? Is it consulting or similar professional services that you do here in the USA for people back in your home country ? Or are you selling things on a website ( like Amazon) and payment is made to you in your home country ? Or what ?

I ask all these because we need to determine whether your earnings are US sourced or not in addition to tax treaty assertions.

Please answer my questions and I will come back once I hear from you

Opus 17

Employee

@pk12_2

Taxpayer says Chile, and says "undocumented" in their original question.

pk12_2

Employee

@Isi26 @Opus 17 , There is a tax treaty between US and Chile including double taxation clause. However, I am still not clear as to the self-employment -- at this point I don't know if it US sourced or not. From the original post it appears to be Chile sourced at least .

Please @Isi26 -- tell us about the "self-employment " as also when and under which visa you entered the USA .