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  1. #1
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    Can American deduct expense paid to non american entities?
    Some guy bought traffic and consulting from me. I charge him 70% of his revenue earned though my teaching.

    Latter he said that he should deduct taxes from that because he had to pay for the whole thing.

    We agreed that he didn't need to before. He told me that he wasn't aware that I wasn't an american.

    If an american biz, or individuals, pay someone else for his biz, can that individuals deduct that?

  2. #2
    ...and a Pirate's heart. Convergence's Avatar
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    pluver,

    This is not an Affiliate Tax question.

    You've basically asked this question before:

    http://www.abestweb.com/forums/affil...ml#post1086888

    Don't believe I would change my answer...
    Salty kisses, Sandy toes, and a Pirate's heart...

  3. #3
    OPM and Moderator Chuck Hamrick's Avatar
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    Moved to a better forum. Check this forum as it seems this came up recently.

  4. #4
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    I think your answer is wrong convergence.

    In any case, this time, it's a different issue. The issue is whether the country of the expense recipient matters.

    It's not partnership. It's an expense.

  5. #5
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by pluver View Post
    I think your answer is wrong convergence.

    In any case it's a different issue. The issue is whether the country of the expense recipient matters.

    It's not partnership. It's an expense.
    While I'm not a CPA, I do have nearly 30 years of accounting experience. My original reply pertained to claiming expenses as deductions and had nothing to do with a partnership.

    We'll have to agree to disagree...
    Salty kisses, Sandy toes, and a Pirate's heart...

  6. #6
    Full Member Lanny's Avatar
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    Form 1099-MISC for U.S. Persons, other form for non U.S. persons
    Disclaimer: I'm not a C.P.A. or I.R.S. Enrolled Agent. You should check with one of those tax professionals!

    @OP If you were a "U.S. Person", and if you were paid more than USD$600 in a tax year (for example, 2010 or 2011), the payer would be required to file an I.R.S. Form 1099-MISC for that. One copy to the I.R.S. and one copy to you.

    If you are not a "U.S. Person", and you are not in the USA or in a U.S. Territory, there is another I.R.S. Form those earnings should be reported on.

    The person or company who paid the money to you can deduct that, as an Expense, when they compute Net Earnings/Loss from their business. If the person is an Individual, that's reported to the I.R.S. on Schedule C.

    If you are doing business with U.S. entities, you can get an ITIN number from the I.R.S. and then you should provide your ITIN number to those you earn $ from in the U.S.

  7. #7
    ABW Ambassador Boom or Bust's Avatar
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    Original question: "Can American deduct expense paid to non American entities?"

    A business expense is a business expense. Business expenses are deductible in the US...



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  8. #8
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Boom or Bust View Post
    A business expense is a business expense. Business expenses are deductible in the US...
    Again, if it is an INDIVIDUAL it all depends on that person's tax liability. If expenses do not exceed their standard deductions then it's a moot point.

    Also, it is a common mistake for people to think just because it's an expense that they can DEDUCT it from their tax liability. While in fact, it's only a percentage.

    If we could deduct the full amount we all would be spending like crazy on PPC and having Uncle Sam foot the bill.

    So yes. Legitimate expenses are tax deductible providing all criteria are met...
    Salty kisses, Sandy toes, and a Pirate's heart...

  9. #9
    The Seal of Aproval rematt's Avatar
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    I believe what the OP is saying is that he receives 70% of the revenues generated by his client's site as his consulting fee and his client is paying income taxes on 100% of the revenue and wants to deduct a portion (70%?) of the taxes from his payments to the OP. I don't believe that this type of arrangement is correct. There are other ways that the client can deduct the fees paid to the OP. In addition, none of the networks that I work with withhold taxes (unless the IRS has deemed that an individual has proven to be not trustworthy in the past) so the client may never actually end up paying any taxes at all on the revenue earned based on his current earnings and tax situation.

    Both the OP and his client need to consult with an accountant to determine what would be the best way to structure their arrangement.

    -rematt
    "I know that you believe you understand what you think I said, but I'm not sure you realize that what you heard is not what I meant." - Richard Nixon

  10. #10
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by rematt View Post
    I believe what the OP is saying is that he receives 70% of the revenues generated by his client's site as his consulting fee and his client is paying income taxes on 100% of the revenue and wants to deduct a portion (70%?) of the taxes from his payments to the OP. I don't believe that this type of arrangement is correct. There are other ways that the client can deduct the fees paid to the OP. In addition, none of the networks that I work with withhold taxes (unless the IRS has deemed that an individual has proven to be not trustworthy in the past) so the client may never actually end up paying any taxes at all on the revenue earned based on his current earnings and tax situation.
    My take was this:

    Client is in the US. "Consultant" is in another country. Client purchased traffic and "advice" from "Consultant" with payment to be 70% of the PPC revenue earned by US Client.

    Client tells "Consultant" that client has to pay taxes on 100% of the revenue made and wants to deduct that tax amount from the 70% agreed upon with the "Consultant".

    "Consultant" wants to know if the 70% fee owed him can be deducted by the client as an expense so the burden of the taxes owed falls on the client and not the "Consultant".

    My point was it all depends on the client's tax liability overall, not just this one single transaction of 70%.


    Quote Originally Posted by rematt View Post
    Both the OP and his client need to consult with an accountant to determine what would be the best way to structure their arrangement.
    Absolutely!
    Salty kisses, Sandy toes, and a Pirate's heart...

  11. #11
    ABW Ambassador Boom or Bust's Avatar
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    Quote Originally Posted by Convergence View Post
    Again, if it is an INDIVIDUAL it all depends on that person's tax liability.
    To reduce tax liability from business income, the tax payer must file Schedule C, Profit or Loss from Business. Business expenses are subtracted 100% from gross business income, including PPC costs which would probably be entered as advertising.

    The OP and the thread title seem to be confusing two different questions and I won't attempt to decipher the original intent any further.



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  12. #12
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Boom or Bust View Post
    To reduce tax liability from business income, the tax payer must file Schedule C, Profit or Loss from Business. Business expenses are subtracted 100% from gross business income, including PPC costs which would probably be entered as advertising.

    The OP and the thread title seem to be confusing two different questions and I won't attempt to decipher the original intent any further.
    It appears that we're all assuming something different. I'm assuming that the "Client" is just an average Joe Blow trying to do some PPC arbitrage. Why do I assume that? Because anyone who is serious about doing that is probably already aware of deducting business expenses and probably wouldn't have told the "consultant" that s/he needs to subtract the income tax from the amount to be paid to "consultant", but merely looking at it as raising his/her gross earnings for the year and subsequently raising his/her taxable income.

    Then there is a myriad of exclusions as to what is a legitimate deduction including whether or not the "Consultant's" country has any "boycotts" or is on the United States' naught list.

    Yes, they should both consult a tax adviser - BEFORE entering into an agreement...

    Quote Originally Posted by Boom or Bust View Post
    The OP and the thread title seem to be confusing two different questions and I won't attempt to decipher the original intent any further.
    Betcha...
    Salty kisses, Sandy toes, and a Pirate's heart...

  13. #13
    ...and a Pirate's heart. Convergence's Avatar
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    Quote Originally Posted by Convergence View Post
    Also, it is a common mistake for people to think just because it's an expense that they can DEDUCT it from their tax liability. While in fact, it's only a percentage.
    Even I got myself confused.

    What I'm trying to say is there is a difference between tax "deduction" and tax "credit". Meaning you may have a tax deduction of $2,000 but that does not equate to a $2,000 tax credit.

    A tax credit lowers your tax bill dollar for dollar. A deduction shaves money off your taxable income, so the value depends on your tax bracket.
    Salty kisses, Sandy toes, and a Pirate's heart...

  14. #14
    ABW Ambassador Boom or Bust's Avatar
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    Quote Originally Posted by Convergence View Post
    Betcha...
    HA! You know me too well...



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