Over the last year or so, CountingWorks PRO has developed one of the best, if not the best Tax AI products in the nation. It answers tax questions, writes blog articles, responds to client questions and correspondence, develops tax plans based on specific client data and the list goes on. We call it AI Co-Pilot.
Why is ours so good? AI is only as good as the knowledge it has been taught, and we have taught ours well. We have fed it a vast amount of knowledge, including the contents of the Big Book of Taxes the contents of which is updated constantly, All the pertinent IRS Pubs, form instructions, FinCEN brochures, WISP pubs, tax treaties, state pubs, and the following as they are released: New Tax Laws, Internal Revenue Bulletins, Revenue Procedures, Revenue Rulings, Fact Sheets, News Releases, Announcements, and anything tax we run across on a daily basis.
Here is an example of a question posted recently on our CWconnect Tax Forum that posted to our AI Co-Pilot:
QUESTION:
My client’s friend is a citizen of Finland. He comes to the U.S. occasionally to attend game conventions. He sells items at the conventions. The friend does not have a U.S. banking connection, so my client got a credit card processing device for him to use to make sales and then forwarded the net proceeds minus the fees to his friend. However, the credit card company issued a 1099-K to my client in the amount of $16,000 representing his friend’s sales. I have two questions. (1) What are the friend’s U.S. tax filing obligations, and (2) how can my client deal with the 1099-K that is not his income?
AI CO-POLIT ANSWER – This is the actual AI response, please note the detail:
Friend’s Tax Filing Obligations - Your client's friend, being a citizen of Finland, has specific tax obligations when earning income in the United States. Based on the information provided:
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Income from Sales at Conventions: Since your client's friend is selling items at conventions in the U.S., this income is considered business income. According to the U.S.-Finland tax treaty, if he does not have a fixed base or permanent establishment in the U.S., he may not be subject to U.S. income tax on this income. However, if he does have a fixed base or permanent establishment, he would be taxed on the income attributable to that base.
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Tax Treaty Provisions: Article 7 (Business Profits) of the U.S.-Finland tax treaty - generally exempts business profits from U.S. tax unless the individual has a permanent establishment in the U.S. If he does not have a fixed base regularly available to him in the U.S., he should be exempt from U.S. income tax on the sales income.
- Filing Requirements - Even if he is exempt from U.S. tax under the treaty, he may still need to file a U.S. tax return to claim the treaty benefits. This typically involves filing Form 1040-NR (U.S. Nonresident Alien Income Tax Return) and attaching Form 8833 (Treaty-Based Return Position Disclosure) to disclose the treaty position. If the non-resident alien does not have an SSN or ITIN, he will need to apply for an ITIN. This is done by completing the Form W-7, Application for IRS Individual Taxpayer Identification Number. The form should be submitted along with the individual's federal tax return or other required documentation.
Dealing with the 1099-K Issued to Your Client - The 1099-K issued to your client represents income that is not actually his, which can complicate his tax situation. Here’s how your client can address this:
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Documentation - Your client should maintain thorough documentation showing that the income reported on the 1099-K belongs to his friend. This includes records of the sales, the forwarding of proceeds to his friend, and any agreements or communications between them.
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Form 1099-MISC - Your client can issue a Form 1099-MISC to his friend for $16,000, reporting it as "Other Income" in Box 3. This will help to transfer the income to the correct taxpayer. Use the ITIN obtained by the friend to file his 1040-NR.
- Explanation Statement - When filing his tax return, your client should include a statement explaining the situation. He should detail that the 1099-K income was not his and that he has issued a 1099-MISC to the actual recipient of the income.
AI can save hours of work and enhance your credibility with thoroughly researched insights for your clients. It is the wave of the future, and you can join the future now. Explore various subscription options tailored to your firm's size and requirements. Sign up at https://www.taxbuzz.com/pricing and get familiar with AI Co-Pilot during the off season.
The AI Co-Pilot system isn't confined to addressing tax inquiries; it can also draft client letters, devise tax strategies tailored to individual circumstances, compose tax blog articles, and offer a plethora of other services. Its capabilities can save you countless hours of valuable time. Trusted results... better than generic AI tools.
I have attached a link to a YouTube video that demonstrates the power of the AI Co-Pilot.
https://www.youtube.com/watch?v=mGEaZ_AYfW8