Do I need to pay taxes?

[sdrocks]

I live in Indonesia with my girlfriend. I've lived her the past 18 months. She is an independent online chathost who collects checks from an American based website. It took her two months to cash her checks so we changed her account so her checks would come to me at my US address. My parents would deposit the checks and then we can withdrawl it from ATM here.

Last year I was out of the country during tax time so my father did my taxes and he included my girlfriends money and I owed a lot of taxes and this year will be more.

In order for me to get her checks she appointed me to be her representative. That means I collect her checks, under my name, and if she has any problems with the website I can talk on her behalf. I've done this for three other girls that work for her too. All the checks come to me and my girlfriend takes out the money. I've gotten no money from this. I have not done any bookeeping since I didn't think I'd be obligate to pay taxes.

The actual business is in and operated from Indonesia. To sign up to be her rep and to get checks mailed to my US address I had to use my US address and therefore they sent the tax forms there. On my girlfriends registration and the other girls registration they used the indoensia addresss. It's not a registered company there so they are not paying any taxes in indonesia either.

So what do I do? Can i get my money paid last year? Do I need bookeeping to reduce my taxes or can I just get my girlfriend to sign a contract stating I get no money and that I only cash her checks for her?

Thank you for any help with this.

[abezon]

It depends on how meticulous you were setting up the account. Is there any of your money in the account? If you have never comingled funds, you don't have to pay taxes on her money. If you have, you have to keep good records of what money is hers & what's yours. And set up a separate account now.

If US companies are sending tax forms out in your name, you'll have to include that income on your own Sch.C. However, you list "contract labor" equal to the $$ received & issue her a 1099-MISC for the full amount. She'll need to get a US tax ID number. See the IRS web site for forms. Then she files a US return excluding the money from her income because it is not "US-source income" to her. (This is because the work is done outside the US & she has no fixed base in the US.)

You can amend your 2004 taxes this way & get the extra taxes back.

Also, since you're outside the US, you should probably be having a pro with international experience do your taxes instead of Daddy.