Hello everybody, I am currently in the process of filling out the CSS Profile for some of the schools that I have applied to. However, there is one huge discrepancy that I am looking to take care of.
Right now, we are only reporting the father’s income. My mother currently lives in the US, but her income is NOT taxed by the US, which would put it under the untaxed income section in the CSS profile and would mean that I DO report it on the file. She told me the reason for this was because of a treaty with the Phillippines (of which she is still a citizen) and I was able to find the treaty between the US and the Phillippines (can be found here: http://www.irs.gov/pub/irs-trty/philip.pdf). Now this information would cause me to believe that it should NOT be reported and go nowhere on the CSS profile since this would make my mother eligible for foreign earned income exclusion.
Then, this is where my head starts to spin. On the IRS website, it says that for foreign earned income exclusion you must be:
A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.
I believe my mother would qualify for the second option, but the problem is she lives in the US (unless it includes her entire life which I would find odd). Can someone please help clarify this? Do we report it or not? I have discussed the situation a lot with both my parents and we are all dumbfounded on what to do. This also makes a significant difference in the amount of aid we are eligible to receive.
Thank you to whoever takes the time to read and respond to this lengthy post. I appreciate any help.
I think you have to report income of both parents regardless whether the income is taxed by the US, or taxed by other countries, or not taxed by any country. The total income of your parents determines the amount of aid you will receive.
It is a separate problem for your parents to figure out if your mom has failed to report and pay federal (and state) income tax on her income - since she is not residing in the Phillipines.
@coolweather I agree, but what causes me problems in this situation is whether what she has is classified as foreign income exclusion, which would mean it is not reported.
@Madison85 But she HAS been paying taxes to the Phillippines. The problem is that she can’t tell me specifically why she doesn’t report it, other than the treaty that I’ve found.
How many years she did not report?
If the amount she makes is less than the minium amount to be filed then she may not need to file return (not sure this is applied to foreign citizen).
She can still file returns with IRS for previous years with some penalty.
What residential status does your mum have? Green card? She lives here for how long at a time? I cannot imagine that if your mum lives in the USA that she doesn’t need to file taxes. She has been filing, right? What about state taxes? Does she earn money?
My mother currently has a green card and she stays in the US. My parents file their taxes jointly and the amount she earns would be less than what the IRS says to file:
The maximum amount of the Foreign Earned Income Exclusion under Internal Revenue Code (IRC) section 911 is indexed to inflation ($91,500 for 2010, $92,900 for 2011, $95,100 for 2012, $97,600 for 2013).
I do not know about how long this has been, but there may be other information I’m missing as to why this happens.
Yoir mom is earning income in the United States. If your parents are filing jointly, I believe her income MUST be reported on that tax form. She is not a resident of the Phillipines. And the money she is earning is being earned in the U.S. Her income alone might not generate enough to be taxed…but in a joint return, the incomes of both spouses are included and are added together.
I don’t know how much your mom is earning, but if this is self employed income, she is also supposed to file if the amount exceeds $400. I think that is the amount.
If your mom has not been reporting her income on their joint tax returns for years, I’m guessing this is an IRS tax issue,mand she should consult with someone who can help with that.
For financial aid purposes, you must report the incomes of both parents, and it doesn’t matter if it’s taxed or not…or earned on the moon. You have to include it.
I think I’ve found why she does not pay US taxes. From the IRS website:
Certain foreign government-related individuals who qualify as an Exempt Individual are NOT subject to United States income tax.
A foreign government-related individual is an individual (or a member of the individual’s immediate family) who is temporarily present in the United States:
As a full-time employee of an international organization,
By reason of diplomatic status, or
By reason of a visa that represents full-time diplomatic or consular status (i.e., an “A” or “G” visa)
She works for an international organization, which I should have mentioned and is why she doesn’t report her income.
@thumper1 I know that it should be reported, and that would mean it would be reported under untaxed income. However, this brings me back to my main point of confusion: does this qualify as foreign earned income exclusion? Because then it would NOT be reported.
Ok, so my mother does work here in the US and she does earn her income here. But, the income is from the World Bank, which is an international organization and she is a nonresident alien, so I’m wondering if working for an international organization can remove that qualification of needing to live in a foreign country (The office is in the US so she needs to be here and can’t do it in the phillippines).
Other than that, it seems as if the other requirements for foreign income exclusion, being a nonresident alien and having the tax treaty are met.
@thumper1 Really hoping for the experts as well. I may happen to report it in the end, but if we find out that we don’t have to report it then we won’t.
My BIL worked for World Bank. He had to report all of his income…even though it was Workd Bank. It was earned HERE. Why would your mom’s income be excluded? She is not residing outside of the United States.
P.S. She may also owe state taxes to your state of residence.
I think the world bank type people would have a worldwide tax accountant as a work perk? I would get your mum to check with her accountant. The IRS could have a field day.
How much does she earn? I would make sure your parents know what forms you are filling in and what info that you are using. If you suddenly expose a significant untaxed income on behalf of your mother there could be significant implications, again, ask her to talk to her accountant. It seems really unlikely that someone working in the USA, living in the USA on a GC and earning money in a globalised institution would have a significant salary untaxed. Her payslips would have withholding information.
From IRS website:
If you work for an international organization in the United States and you are not a U.S. citizen, or you are a U.S. citizen but are also a citizen of the Philippines, your salary from that organization is exempt from U.S. tax.
----This is what I was trying to clarify earlier. It’s specifically between the US and Phillippines. I know I said she had a green card, but frankly, I am not her and could have been wrong about the minute details of it all. However, this is basically why her income is not taxed.
Also, I worked with my parents to fill out the forms, they knew what they were doing and this one section was the only real part where things started to get fuzzy.