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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I made some income on online auction overseas and I havent

Resolved Question:

I made some income on online auction overseas and I haven't filed tax.
Once when I talked to local CPA, she didn't know how to file it.
I have made income during 4 last years and profit is around 20k.
During the 4 years I filed joint income tax return. How can I report it.
What is the likely penalty for not reporting them in the past?
Submitted: 4 years ago.
Category: Tax
Expert:  Merlo replied 4 years ago.
Hello bellcat,

Can you be a little more specific as to where this income came from? Was this income from an auction site similar to Ebay?

Customer: replied 4 years ago.
Hi,
The income came from a Yahoo! Japan WEB site. That is a site like eBay and I believe Yahoo! Japan is a Japanese company.
I lived in Florida for last five years, not in Japan although the auction transactions were made to my bank account in Japan.
Expert:  Merlo replied 4 years ago.
Hello bellcat,

One more question please. Since you have indicated that you have a bank account in Japan, can you tell me if at any time during the year that account reaches a balance of $10,000 or more?

And I am assuming that you are a US citizen or permanent resident in the US. Is that correct?

Customer: replied 4 years ago.
I am a permanent resident in US.
The bank account in Japan has never reached over $10,000.

I think I also should tell you that I have a sales tax account for State of Florida for 4 years.
I registered because there was possibility to buy something from wholesalers in Florida.
After all I didn't buy anything from wholesalers and sold only a few items total of less than $50 in Florida. I have been just filing the sales tax return every quarter on the internet.
Expert:  Merlo replied 4 years ago.
Hello again bellcat,

Thank you for the additional information.

If you are a resident alien here in the US, then you are subject to the same tax laws as US citizens. This means that you are subject to income taxes on your worldwide income, and should be reporting any profits you have from these on line auction sales.

This type of income would be considered self employment income that you are earning as a sole proprietor. To report this income on your tax return, you would simply fill out Schedule C and include that schedule with your tax return. On Schedule C you would report the total sales that you made, and then you would also deduct any expenses you had in connection with this business. Your net income is then what becomes subject to tax. If Japan has also been charging you any taxes on this income, you would be allowed to claim a credit for the foreign taxes paid.

Your income from this business should be reported each year in the year that it is earned. If you have had income in previous years which you did not report, the only thing you can do now is to file amended returns for those years to report the additional income you had. Since this will result in you owing additional taxes, there would also be some penalties and interest which would apply for the late reporting. The penalty amount for the late payment is equal to one half of one percent each month on the tax amount that is due, not to exceed a total penalty of 25% of the tax. Interest rates change quarterly, and there is no maximum amount that applies.

The reason that I asked about your foreign bank account and whether or not it ever reaches a balance of $10,000, is that there is a reporting requirement here in the US that I wanted to be sure you are aware of. If you are a resident alien here in the US and maintain a foreign bank acccount, if any foreign accounts you own ever reach a total balance of $10,000 or more during the year, you are required to report the existence of those accounts by filing Form TDF 90-22.1 with the IRS. This is strictly an informational form and no tax is due with the form, but it is a filing requirement of which not everyone is aware.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you bellcat and let me know if you have more questions.

Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
Merlo and 5 other Tax Specialists are ready to help you

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