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caymandm
Returning Member

Erroneously issued 1099-K to foreigner

A foreigner from Mexico with family in the US opening an account for processing credit cards for his business in Mexico but listed his familys US address and used a US account.  He never filled out a W-9 as he is a foreigner and now received a 1099-k and the issuer refuses to accept a W-8BEN from him, what is the easiest resolution?

6 Replies
LaunieR_EA101
Employee Tax Expert

Erroneously issued 1099-K to foreigner

Currently TurboTax does not process NonResident tax returns. I did find this helpful article from our partner Sprintax related to a US nonresident who receive a 1099-K https://blog.sprintax.com/form-1099k-reporting-tax-return-nonresidents/ .

 

According to the above article it looks like a US tax return will need to filed to inform the IRS how this the income reported on the 1099-K was used. This income is fully taxable and should be reported to the IRS. The good thing is that there may also be expenses related to this income that could reduce the taxable portion of this income. 

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caymandm
Returning Member

Erroneously issued 1099-K to foreigner

So you would not invoke the double taxation treaty alleging that the person has no permanent establishment in the US and has declared the income and paid taxes in their home country?  Was that an oversight?  

Opus 17
Level 15

Erroneously issued 1099-K to foreigner

Whose name and Social Security number is on the 1099 – K?

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
Opus 17
Level 15

Erroneously issued 1099-K to foreigner


@caymandm wrote:

So you would not invoke the double taxation treaty alleging that the person has no permanent establishment in the US and has declared the income and paid taxes in their home country?  Was that an oversight?  


Person A, who is not a US citizen and does not live in the US, only owes a non-resident tax return for US-sourced income.  Selling merchandise to customers inside the US does not create US-source income for person A as long as person A does not live or work in the US.  However, person B, is a US taxpayer who apparently lent their name and bank account to the project, has some issues to deal with. 

 

Person A needs to stop the business arrangement and find another way to get paid.  I don't know this side of the business so I don't know if person A needs to open a US bank account, or can get their money deposited to a foreign account.  The payment processor is correct to issue a 1099-K to the account holder who actually received the money, and is correct not to re-issue a W-8BEN for past payments.  Person A needs to change the setup for future payments. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
caymandm
Returning Member

Erroneously issued 1099-K to foreigner

Mexican national lived in the US 15 years ago with student visa and had social security number.  He has a business in Mexico and not in the US just uses credit card collection services and did put old SS number on application but never did a W-9 and money went in to a US account he maintains.  He has not been physically inside the US at all and declares taxes and pays in Mexico where the consulting business is.  

Opus 17
Level 15

Erroneously issued 1099-K to foreigner

If no tax was withheld, then ignore the 1099-K.  If you get a letter from the IRS, you can explain that you have no US-source income because, although you sell merchandise in the US, you have no physical presence in the US.

 

(Did you have a green card?  If student visa, did you really get an SSN or was it an ITIN -- international tax ID number.  ITINs expire if they are not used.  I don't know if this will affect you.  You might need to apply for a new ITIN if you get a letter that the old one is expired, but that does not make your income taxable in the US.  If you have a green card, then you are subject to US tax on all your world-wide income until you surrender it.  You have to file a US tax return for your world-wide income, but you get a credit for foreign taxes paid on the same income.)

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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