Missionary, expat, donations for support, overseas...what is taxable?

[karnold002]

Hello, I am in Ohio.

My daughter is a missionary in Uganda - she spends maybe 5 months in the US, the rest in Uganda. She is lightly employed by a USA 501c3 but paid by their Ugandan branch - no taxes are withheld. Her husband is a native Ugandan and got his green card in June, 2018. He became a dual-citizen in February 2019. They have 1 (and soon 2) US-born children. He is employed fulltime by the same 501c3, and again no USA taxes are withheld. If it matters, while they are here in the USA they do some fundraising both for themselves and for the 501c3, but they are not paid the the 501c3 specifically for this time/effort.

Questions please:

1. Is income earned by her in Uganda taxed as an independent contractor in the US Federal/State taxes? She is not receiving a paycheck while she is here in the USA.
2. Is income earned by him in Uganda (as a Ugandan citizen) taxable in the US Federal/State taxes?
3. Some of their support is charitable donations. For example:
A. People at our church or other churches would donate money to them. They know that some of that money is used directly in their "missionary" responsibilities, but some of that money is also used in their personal support. They have not tracked how much went to each. The church tells us they do not do any specific reporting of this to the IRS.
B. Some people make DIRECT payments to them, with the same understanding. Would both 3.A and 3.B be considered "gifts" and not taxable in the US?

It is difficult for me to determine what, if any, taxable income they have.

Thank you for your consideration!
Kevin

 

[Zigner]

I would suggest that they ask their employer for information and a referral to an experienced tax pro who has helped other employees in the past.

 

[Taxing Matters]

1. Is income earned by her in Uganda taxed as an independent contractor in the US Federal/State taxes? She is not receiving a paycheck while she is here in the USA

I assume that she is a U.S. citizen. He is now a green card holder. For U.S. federal income tax purposes they are taxed by the U.S. on their worldwide income. So yes, they must include what they received on their U.S. income tax return. For him, it is included at least from the date he got his green card, and income from earlier would be taxable in the U.S. if he met the substantial presence test.

The money that donors give them directly is not deductible to the donors. The money they get in fund raising from individuals is considered part of their self-employment income as raising money is part of the process of their self-employment activity.

However, they may qualify for the foreign earned income and/or housing exclusions.

 

[LdiJ]

I assume that she is a U.S. citizen. He is now a green card holder. For U.S. federal income tax purposes they are taxed by the U.S. on their worldwide income. So yes, they must include what they received on their U.S. income tax return. For him, it is included at least from the date he got his green card, and income from earlier would be taxable in the U.S. if he met the substantial presence test.

The money that donors give them directly is not deductible to the donors. The money they get in fund raising from individuals is considered part of their self-employment income as raising money is part of the process of their self-employment activity.

However, they may qualify for the foreign earned income and/or housing exclusions.

According to the OP they spend 5 months of the year in the US. Therefore they are not going to qualify for the foreign earned income exclusion or the housing exclusion. If they are paying any taxes to Uganda they would qualify for the foreign tax credit.

They need a consult with someone who specializes In this area. They might speak to others in their organization about who does their taxes to help find someone qualified.

 

[Taxing Matters]

According to the OP they spend 5 months of the year in the US. Therefore they are not going to qualify for the foreign earned income exclusion or the housing exclusion.

Correct, for years in which they spend that much time in the U.S. they will not qualify. But in the future they could qualify if they change how much time each of them spends in the U.S.

 

[karnold002]

Thank you for your comments.

I've reached out to the organization to try to find tax experts, or others in a similar situation but I don't think they have any. And I've not yet heard back from them.

How would you go about finding an independent tax consultant who would be knowledgeable n such subjects? Perhaps someone who works with ExPats in general with taxes? I assume you won't find these specialists at your local tax/H&R Block/TaxesRUs shop?

Thank you again!

 

[LdiJ]

Thank you for your comments.

I've reached out to the organization to try to find tax experts, or others in a similar situation but I don't think they have any. And I've not yet heard back from them.

How would you go about finding an independent tax consultant who would be knowledgeable n such subjects? Perhaps someone who works with ExPats in general with taxes? I assume you won't find these specialists at your local tax/H&R Block/TaxesRUs shop?

Thank you again!

Often those kinds of professionals are actually found overseas themselves. Although I have my doubts about finding someone in Uganda. You have actually asked your compatriots who does their taxes? You also might ask at the nearest embassy or consular office if they have any suggestions.

Its true that you are unlikely to find those kind of services at one of the national tax firms, although you cannot rule that out. I would guess however, that an independent firm, that is open year round and is located in a major point of entry for the US, would likely have someone aboard who is experienced in that arena.

 

[Taxing Matters]

One possibility is contacting one of the Big 4 accounting firms. Any one of those will have people knowledgeable in this area.