I am self employed and I made US$25K 2006, & I need to pay 30% of money to my business partner in Malaysia?

Question

How do I report this expense in my tax return, I did not make that much mony last year, but I need to pay my foreign business partner for 30% of my profit because it is our agreement. And I am self employ doing importing and exporting. Do i report this as commission expense or some kind of profit sharing?? Please help me in what schedule?? Is it Legal??

Answer 1

You have a partnership. You must therefore file a partnership return, Form 1065, and allocate the net income between you and any partners. Your foreign partner will need an ITIN and may need to file a US 1040NR return. (If he refuses to get an ITIN, I'd hold back any payments to him until he does so and pay the taxes on it as your income. Then file amended returns once he comes to his senses.)

Answer 2

Since your partner is outside of the U.S. the 30% you pay him becomes an expense to you and should be reported that way. This is a question you should ask your CPA about. If you don't have a CPA go to your local IRS office and ask about it.

An Individual Taxpayer Identification Number (or ITIN) is a United States tax processing number issued by the Internal Revenue Service. It is a nine-digit number that begins with the number 9 and has a 7 or 8 in the fourth digit, example 9xx-7x-xxxx or 9xx-8x-xxxx. The IRS issues ITINs to individuals who are required to have a taxpayer identification number but who do not have, and are not eligible to obtain, a Social Security Number.

ITINs are issued regardless of immigration status because both resident and nonresident aliens may have Federal tax return and payment responsibilities under the Internal Revenue Code. Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception.

In 2006 1.4 million people used ITIN when filing taxes, of which more than half were illegal immigrants. Federal tax law prohibits the IRS from sharing data with other government agencies including the INS, ensuring illegal immigrants that the tax information will be confidential and not be used to deport them.[

Answer 3

Legally it really is form of of a gray section truly and also you truly want to provide some extra coaching, How a lot administration does your better half have over the artwork he does, can he chosen his operating hours? prioritise what artwork he does? subcontract? is he to blame for providing the equipment or raw elements he makes use of? The extra it is your companions duty, the added certain it really is he should be classed as self employed. It appears like on the instantaneous he's self-employed, there is not any longer some thing legally incorrect with it, yet when he's operating completely for this guy in an entire time potential, then the guy should be hiring him as an worker. extremely it appears like he would not wasn't to take on the added overheads, and if he's not any longer providing your better half a job then your better half in elementary words has the alternative of being self employed. Your better half is ideal in that he's self-employed, and realistically that isn't substitute until eventually the guy he works for supplies him a position as an worker.