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jusZ
Level 1

Do I pay taxes on money I collect on behalf of a foreigner and forward to them?

If wife collects payments through paypal but she lives in a foreign country that paypal doesn't allow transfers to bank accounts for because the local law doesn't yet have consideration for digital payments. If she were to direct those payments to my paypal account and I then transfer to her through western union for example do I have to report that as part of my taxable income?

Also if she allowed me to keep some part of that money would that be consider as part of my taxable income?

It should be noted also that my wife is not a citizen of resident of the US.

3 Replies
JeffreyR77
Expert Alumni

Do I pay taxes on money I collect on behalf of a foreigner and forward to them?

It depends. 

 

If you and your wife file a joint tax return, than the portion of the total payments retained by either of you is your combined taxable income. 

 

You may receive multiple Forms 1099-K from multiple PayPal accounts showing the gross amounts of the transactions and  will  need to show the disbursements to the individuals funds were collected for so you are only paying tax on your net taxable income. 

 

If you file separate tax returns. you would each file using Married Filing Separate filing status. 

 

You would report your income from your Form 1099-K Paypal account and show as expenses the transfers through Western Union you make to reduce the amount to only your net taxable income.

jusZ
Level 1

Do I pay taxes on money I collect on behalf of a foreigner and forward to them?

Thank you so much for your reply Jeffrey however the situation is a little different than you have stated. My wife does not file a tax return as she is not a citizen or resident of the United States. We also just got married so I am not even filing married yet; which I assume when the time comes I would be filling married and separately. 

It does sound like I can extrapolate the answer however.

It sounds like as long as I show evidence of the western union transfers as expenses as you said I won't have to count that in my net taxable income. Only counting any amount I retain if I do so. I hope I can do all this with turbo tax.

JeffreyR77
Expert Alumni

Do I pay taxes on money I collect on behalf of a foreigner and forward to them?

Yes, you will be able to list the Western Union wire transfer fees as expenses.   You will need to use TurboTax Self-Employed to deduct your business expenses so you only pay tax on the net income amount.  

 

Your filing status will be whether you were married on December 31, 2020.  If you got married in 2021, you are still single for the 2020 tax return.

  

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