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Negative Income on Form 1040

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Hello! I am posting this question for a friend (Dean). His fiancee is going to her interview at the embassy in Manila for a K-1 visa. Dean is self-employed. For his 2014 tax returns, he claimed a net income of $24,053 (this is above the poverty guideline for his household size). This amount is shown on his form 1040, line 12. He also reported carry over net loss from previous years and the amount is reported on line 21. As a result, his adjusted gross income is negative. Is this a problem? His gross receipts, expenses, and net income are itemized in an attached Schedule C. Thanks in advance!

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Line 22 is what they need, it is time to find joint sponsor.


N400

12/06/2014: Package filed

12/31/2014: Fingerprinted

02/06/2015: In-Line for Interview

04/15/2015: Passed Interview

05/05/2015: Oath letter was sent

05/22/2015: Oath Ceremony

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I am really hoping to get more information about this matter. The only reason Dean's tax returns shows a negative income is because he claimed net operating loss from previous years. His schedule C shows he indeed made money last year. The amount meets the income requirement. However, I do understand that consular officers are not tax experts. Would sending a notarize letter from his accountant explaining his income help? Should he re-file his taxes and not claim net operating loss from previous years?

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Hello! I am posting this question for a friend (Dean). His fiancee is going to her interview at the embassy in Manila for a K-1 visa. Dean is self-employed. For his 2014 tax returns, he claimed a net income of $24,053 (this is above the poverty guideline for his household size). This amount is shown on his form 1040, line 12. He also reported carry over net loss from previous years and the amount is reported on line 21. As a result, his adjusted gross income is negative. Is this a problem? His gross receipts, expenses, and net income are itemized in an attached Schedule C. Thanks in advance!

They are not tax consultants at the embassy, so they will only look at line 22 of the 1040 for GROSS income. Dean will have to find a close family member to be a co-sponsor, USEM won't even consider a co-sponsor with the K-1 unless it is a close relative (sibling, parents, etc). USEM will accept a co-sponsor with the K-1, they just very picky when doing so.

Philippines forum: http://www.visajourney.com/forums/forum/129-philippines/


Hank

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*** Country-specific thread moved from K-1 Process forum to the Philippines regional subforum. ***


06-04-2007 = TSC stamps postal return-receipt for I-129f.

06-11-2007 = NOA1 date (unknown to me).

07-20-2007 = Phoned Immigration Officer; got WAC#; where's NOA1?

09-25-2007 = Touch (first-ever).

09-28-2007 = NOA1, 23 days after their 45-day promise to send it (grrrr).

10-20 & 11-14-2007 = Phoned ImmOffs; "still pending."

12-11-2007 = 180 days; file is "between workstations, may be early Jan."; touches 12/11 & 12/12.

12-18-2007 = Call; file is with Division 9 ofcr. (bckgrnd check); e-prompt to shake it; touch.

12-19-2007 = NOA2 by e-mail & web, dated 12-18-07 (187 days; 201 per VJ); in mail 12/24/07.

01-09-2008 = File from USCIS to NVC, 1-4-08; NVC creates file, 1/15/08; to consulate 1/16/08.

01-23-2008 = Consulate gets file; outdated Packet 4 mailed to fiancee 1/27/08; rec'd 3/3/08.

04-29-2008 = Fiancee's 4-min. consular interview, 8:30 a.m.; much evidence brought but not allowed to be presented (consul: "More proof! Second interview! Bring your fiance!").

05-05-2008 = Infuriating $12 call to non-English-speaking consulate appointment-setter.

05-06-2008 = Better $12 call to English-speaker; "joint" interview date 6/30/08 (my selection).

06-30-2008 = Stokes Interrogations w/Ecuadorian (not USC); "wait 2 weeks; we'll mail her."

07-2008 = Daily calls to DOS: "currently processing"; 8/05 = Phoned consulate, got Section Chief; wrote him.

08-07-08 = E-mail from consulate, promising to issue visa "as soon as we get her passport" (on 8/12, per DHL).

08-27-08 = Phoned consulate (they "couldn't find" our file); visa DHL'd 8/28; in hand 9/1; through POE on 10/9 with NO hassles(!).

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They are not tax consultants at the embassy, so they will only look at line 22 of the 1040 for GROSS income. Dean will have to find a close family member to be a co-sponsor, USEM won't even consider a co-sponsor with the K-1 unless it is a close relative (sibling, parents, etc). USEM will accept a co-sponsor with the K-1, they just very picky when doing so.

Philippines forum: http://www.visajourney.com/forums/forum/129-philippines/

Finding a co-sponsor isn't an option for him. Her interview is in two weeks. Amending his tax returns and not claiming previous years' net operating loss would show an adjusted gross income that is above the poverty guideline. It seems like it is the only option for him.

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Hi when it comes to the IRS THEY ARE IN NO HURRY TO HELP YOU amending the previous tax losses is only going to slow you down cuz they won't have the newest ones in time for her interview so be prepared for a 221 i know it sucks this late into your journey , but i think if you go into the irs office they might be able to help you faster if you explain your situation to them so give it a try, good luck

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Finding a co-sponsor isn't an option for him. Her interview is in two weeks. Amending his tax returns and not claiming previous years' net operating loss would show an adjusted gross income that is above the poverty guideline. It seems like it is the only option for him.

wow. I want you to pause a second and really understand what you are suggesting here. Not everyone may be aware of schedule C and line 21/22 but I know what you are talking about and the numbers here are not peanuts.

So you are stating the 2014 return is good- its around the 24k mark. So lets leave that alone.

Previous years show a negative number on line 22. Some may not realize this is possible, but if you have a business it is possible to show a loss as income on that line. Your schedule C would show (at the top) all the money you took in (so Im going to make up numbers here) like 50k and then you wouldve listed over 50K in expenses like 55K making your LOSS 5K reflected as -5,000 on line 22.

What you are suggesting is he ammends his taxes and takes away ALL the deductions (in that situation above) all 55K of what I assume to be legitimate deductions and pay tax on the whole 50k in expenses. Or maybe take away half the deductions and make his income 24k- to be at the poverty line to be approved for immigration purposes.

NOW THIS IS NOT ILLEGAL in anyway. Just because you can deduct something doesnt mean you must. However this is going to cause significant tax ripples. One- a huge tax bill will probably be generated once the new figures are calculated. Two- red flags will most likely be slapped on with the IRS- because this is a most awkward thing to do. They dont know if you are having second thoughts and realizing you didnt have proof for some deductions and trying to take them back before getting caught, attempting to pad your income for benefits and misrepresent it, or what you can be involved in. So they will be looking at future returns as what just occurred was quite unusual from a tax benefit perspective. Any future deductions your friend must be sure they have proof of and keep the records of and are filed properly.

While its a personal choice and a tough one- because it is an emotional crunch when the visa date comes near, I would think hard about stirring one agencies waters to appease another one. Is there truly no co-sponsor?

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For a self-employed person it is the income shown on the most recent tax year's form, not preceeding years. So a recaluclation would only mean paying taxes on the new income number for one year (2014 in this instance).

Edited by Anh map

I-864 Affidavit of Support FAQ -->> https://travel.state.gov/content/visas/en/immigrate/immigrant-process/documents/support/i-864-frequently-asked-questions.html

FOREIGN INCOME REPORTING & TAX FILING -->> https://www.irs.gov/publications/p54/ch01.html#en_US_2015_publink100047318

CALL THIS NUMBER TO ORDER IRS TAX TRANSCRIPTS >> 800-908-9946

PLEASE READ THE GUIDES -->> Link to Visa Journey Guides

MULTI ENTRY SPOUSE VISA TO VN -->>Link to Visa Exemption for Vietnamese Residents Overseas & Their Spouses

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As close as the interview date is, there isn't much he can do now, or would want to do (Damara lays that argument out nicely).

Couple of things he can do.... he can find a co-sponsor and bring the paperwork to his interview, but with the understanding it may or may not help his cause as USEM does not accept too many K1's with a co-sponsor.

Second, he can take his return and see where that will take him with the likelihood that he will be denied but maybe, they will consider the entire tax return knowing that he had "one bad year". If this was the case for the OP then bringing two prior tax returns years with him to the interview would show that more times then not he can support her but just had bad luck for 2014.

The last thing is if he is denied the k-1 then he marries her in the Phil and starts a new petition, a CR-1. USEM then has to except a co-sponsor, she gets approved and she is on her way to the USofA.


Spoiler

Adjustment of Status

AOS March 5, 2014 Submitted AOS with EAD/AP package to Chicago USICS

Delivered March 8, 2014 AOS packaged delivered to USCIS drop box

Accepted March 19, 2014 Text message with receipt numbers

Biometrics April 16, 2014 Biometrics completed

EAD May 23, 2014 Employment Authorization Document approved and went to card production

TD May 23, 2014 Travel Document approved and went for card production

Receipt EAD/AP May 30, 2014 Received combo card EAD/AP

Green Card Approved July 11, 2014 Approved, no interview. Went to card production.

Green Card received July 17, 2014 GC received without interview

Removal of Conditions

Mailed I-751 Dec 16, 2015 Submitted ROC (removal of conditions)

Received Dec 18, 2015 USPS notification of successful delivery

Check Cashed Dec 21, 2015 Check was cashed

NOA-1 Issued Dec 21, 2015 NOA-1 for ROC issued

NOA-1 Issued Dec 26, 2015 NOA-1 Received

Biometrics Appt. Jan 29, 2016 Biometrics Appointment Scheduled [Completed]

 

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wow. I want you to pause a second and really understand what you are suggesting here. Not everyone may be aware of schedule C and line 21/22 but I know what you are talking about and the numbers here are not peanuts.

So you are stating the 2014 return is good- its around the 24k mark. So lets leave that alone.

Previous years show a negative number on line 22. Some may not realize this is possible, but if you have a business it is possible to show a loss as income on that line. Your schedule C would show (at the top) all the money you took in (so Im going to make up numbers here) like 50k and then you wouldve listed over 50K in expenses like 55K making your LOSS 5K reflected as -5,000 on line 22.

What you are suggesting is he ammends his taxes and takes away ALL the deductions (in that situation above) all 55K of what I assume to be legitimate deductions and pay tax on the whole 50k in expenses. Or maybe take away half the deductions and make his income 24k- to be at the poverty line to be approved for immigration purposes.

NOW THIS IS NOT ILLEGAL in anyway. Just because you can deduct something doesnt mean you must. However this is going to cause significant tax ripples. One- a huge tax bill will probably be generated once the new figures are calculated. Two- red flags will most likely be slapped on with the IRS- because this is a most awkward thing to do. They dont know if you are having second thoughts and realizing you didnt have proof for some deductions and trying to take them back before getting caught, attempting to pad your income for benefits and misrepresent it, or what you can be involved in. So they will be looking at future returns as what just occurred was quite unusual from a tax benefit perspective. Any future deductions your friend must be sure they have proof of and keep the records of and are filed properly.

While its a personal choice and a tough one- because it is an emotional crunch when the visa date comes near, I would think hard about stirring one agencies waters to appease another one. Is there truly no co-sponsor?

A co-sponsor is TRULY not an option. Believe me, I have presented these scenarios to him. You are way off on your calculation though. After deducting all business expenses, he reported a net income of $24K for 2014. He is paying self-employment tax on the $24K. When he claimed a net operating loss (NOL) from last year, it brought his personal taxable income to a negative number. If he files an amendment and un-claim his NOL from last year, he will have a taxable income of around $12K (the tax for this is about $1300). He is NOT padding his income in any way. He is just not taking the loss from last year as a deduction.

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Hi when it comes to the IRS THEY ARE IN NO HURRY TO HELP YOU amending the previous tax losses is only going to slow you down cuz they won't have the newest ones in time for her interview so be prepared for a 221 i know it sucks this late into your journey , but i think if you go into the irs office they might be able to help you faster if you explain your situation to them so give it a try, good luck

If he amends his tax return, his fiancee would be bringing the amended return to the embassy.

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As close as the interview date is, there isn't much he can do now, or would want to do (Damara lays that argument out nicely).

Couple of things he can do.... he can find a co-sponsor and bring the paperwork to his interview, but with the understanding it may or may not help his cause as USEM does not accept too many K1's with a co-sponsor.

Second, he can take his return and see where that will take him with the likelihood that he will be denied but maybe, they will consider the entire tax return knowing that he had "one bad year". If this was the case for the OP then bringing two prior tax returns years with him to the interview would show that more times then not he can support her but just had bad luck for 2014.

The last thing is if he is denied the k-1 then he marries her in the Phil and starts a new petition, a CR-1. USEM then has to except a co-sponsor, she gets approved and she is on her way to the USofA.

2014 IS the good year. He reported a net income. However, claiming a net loss from last year as a deduction brought his personal taxable income down to a negative number.

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2014 IS the good year. He reported a net income. However, claiming a net loss from last year as a deduction brought his personal taxable income down to a negative number.

There in lies the problem. If he brings 2013 and 2012 which I'm assuming shows that he produces at a level that satisfys the required income level for his family size, then they will probably pass as it shows he can sustain the required income and that 2014 was a "bad year". I would suggest that he be at the interview to help explain if needed. Just my opinion.


Spoiler

Adjustment of Status

AOS March 5, 2014 Submitted AOS with EAD/AP package to Chicago USICS

Delivered March 8, 2014 AOS packaged delivered to USCIS drop box

Accepted March 19, 2014 Text message with receipt numbers

Biometrics April 16, 2014 Biometrics completed

EAD May 23, 2014 Employment Authorization Document approved and went to card production

TD May 23, 2014 Travel Document approved and went for card production

Receipt EAD/AP May 30, 2014 Received combo card EAD/AP

Green Card Approved July 11, 2014 Approved, no interview. Went to card production.

Green Card received July 17, 2014 GC received without interview

Removal of Conditions

Mailed I-751 Dec 16, 2015 Submitted ROC (removal of conditions)

Received Dec 18, 2015 USPS notification of successful delivery

Check Cashed Dec 21, 2015 Check was cashed

NOA-1 Issued Dec 21, 2015 NOA-1 for ROC issued

NOA-1 Issued Dec 26, 2015 NOA-1 Received

Biometrics Appt. Jan 29, 2016 Biometrics Appointment Scheduled [Completed]

 

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