Client reassessed by IRS

triunbad · Post by **triunbad** » Tue May 10, 2016 7:11 pm

I filed a personal tax return for a person who is a US citizen, who lives in Canada. In addition, her husband has a company in Canada. She is not a shareholder in the company; however, all of the work that is done by either her or her husband has been put through this company, and the company paid tax here in Canada. Unfortunately, when she did some work for a US company, she didn't report to this business she was working under the company name, but under her own name. This company has issued 1099's in her name, and since she didn't report this income on her US tax return, she has been reassessed for these amounts. Any suggestions as to how to resolve this issue?

nelsona · Post by **nelsona** » Tue May 10, 2016 9:16 pm

Amend her US and Cdn returns to add the income. The Cdn tax on her Personal CDn return attributable to that portion of income can be claimed as a foreign tax credit on form 1116.

What do you think the solution is?

triunbad · Post by **triunbad** » Wed May 11, 2016 11:10 am

My concern was the fact that we have already reported the income on the corporate tax return of the Canadian company. I suppose we can just reverse the income on the corporate side, and have it reallocated to her personally. Are there any issues with claiming the corresponding expenses on the US side after this reassessment has already been made for the income? The client had been out of the country for a few months, and the reassessment notice for this 2013 income was mailed to her in December. At the end of the day, the expenses can bring the income down low enough that there wouldn't be any US tax anyways.

nelsona · Post by **nelsona** » Wed May 11, 2016 11:34 am

She can claim expenses.

triunbad · Post by **triunbad** » Wed May 11, 2016 3:40 pm

Thanks Nelson