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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 11821
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I recently started an internet business with its own website

Customer Question

Hello, so i recently started an internet business with its own website selling physical goods online. When i initially started it I didn't expect to make too much off of it so i put it into my girlfriends name. The merchant account where the credit cards were bring processed and the bank account were the money was being deposited were both in her name. I began to profit a lot more then i expected and her account the bank was flagged for the amount of activity. i recently switched over everything to my name but i want to claim all the profits and the business prior under my name as it was my business and would like to prevent her from having any problems with the irs and her bank. Any advise on how I may do that the correct way>
Submitted: 1 year ago.
Category: Finance
Customer: replied 1 year ago.
Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Expert:  Lane replied 1 year ago.

Hi, I see that you requested a call...(I'll past here what I'm seeing)

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(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.

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I'll make the offer now

Expert:  Lane replied 1 year ago.

The bot***** *****ne here, is that you'll need to report your PROFITS (income less expenses to get to a taxable profit) on a schedule C with your tax return.

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Unless the merchant account had over 200 income transactions and 20,000 there should BE no 1099 reporting to here ... meaning IRS wouldn't BE expecting her to report that income

Customer: replied 1 year ago.
The total transactions equalled about 18000 and there were about 230. theres no way for me to just file and claim those as mine so she has no liability
Expert:  Lane replied 1 year ago.

Yes, that's exactly what you do ... Report it as it was ... Your business ... If she dis not have 20,000 there will be no 1099 and no reason for her to report anything.

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The requirement for the 1099-K is 20,000 or over AND 200 ... so she won't be getting a 1099

Expert:  Lane replied 1 year ago.

Sorry this took so long ... My last post before you responded was 4:52 .. looks like you came in around 6:10 (while I was grabbing a bit of dinner)

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let me know if you still have any questions at all

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But yes, she won't report, and IRS won't be getting a 1099 on her so she won't have to.

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Customer: replied 1 year ago.
As far as the bank goes it seems they may have made a suspicious activity report as far as i can see from my research but it should not be filed it the activity has stopped and it was legitimate?
Expert:  Lane replied 1 year ago.

I'm not sure I follow; "suspicious activity report?"

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If very large amounts of cash are received, under the patriot act, amounts of cash in excess of 10,000 are reported.

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And in the case of money coming in from out of the country. amounts over 100,000 are reported to treasury (IRS' parent ... Treasury is the department, IRS is just an agency that administers the tax code)

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But those reports are about the dept of treasury tracking money movement - money laundering, drug money, gun running, etc.

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The bank would likely not have enough knowledge of any business that she might have been running as a sole proprietor to know if, or think that, there was anything suspicious going on.

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Sole proprietors (businesses that are not separate from the person - IRS calls them disregarded entities), businesses that haven't set up an LLC or corporation or partnership, use personal accounts to run their businesses all the time.

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All IRS cares there is that (just as with you needing to report this as it is) you report business income and business expenses correctly ... Might be smarter to keep the business assets separate for accounting purposes, but for a disregarded entity, there's no legal or tax reason to do so

Expert:  Lane replied 1 year ago.

As an aside to the LLC comment ... a single member LLC (single owner, in LLC terminology) that hasn't filed a 2553 to elect to be taxed as an S Corporation or an 8332 to elect to be taxed as a C-Corp is actually a disregarded entity too.

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The LLC provides the corporate liability protection of the corporation, but the flexibilityof a partnership (or sole proprietor, in the case of a single member LLC) ... This is likely why the LLC is the fastest growing entity type out there.

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An LLC might make sense for YOU ... Provides the legitimacy and liability protection of the corporation, but you file your taxes exactly as the sole proprietor does, just reporting your income and expenses on the Schedule C, an attachment to the 1040

Expert:  Lane replied 1 year ago.

But again, because she was under the 20,000 number there shouldn't be a 1099 sent to her (nor the IRS copy sent to them, that's the procedure) ... so all that needs to happen is for you to report your income and expenses on your schedule C.

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Next year, if your receipts are in excess or 20K and there are at least 200 transactions YOU'LL get that 1099-K from the settlement company (merchant card provider) and they'll be EXPECTING that schedule C

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This year you'll just be among the thousands of other business owners that report on the schedule C and DON'T always get 1099's on every transaction.

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Hope this helps to clarify ... let me know if you still have questions

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Lane

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Expert:  Lane replied 1 year ago.

If this HAS helped, (and you don’t have additional questions on this),I'd really appreciate your positive rating …(by using the stars on your screen) … … That’s the only way I'll be credited a portion of what you've paid JustAnswer.

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Thank you,

Lane