I registered it as what they call an "individual enterprise" in Turkey, which is basically their version of a sole proprietorship. There's no separate legal entity - the business and I are the same for liability purposes. Does that change anything about how I should approach the US tax side?

That's good news! If it's truly equivalent to a US sole proprietorship with no separate legal entity status, then you're on the right track with Schedule C reporting. Just make sure you keep documentation showing the legal status in Turkey in case of any IRS questions. Just be aware that as your business grows, you might want to consider the implications of potential liability exposure since you're personally liable for the business. Many people with foreign operations eventually set up an LLC in the US that owns the foreign business operations to create some liability protection while still maintaining pass-through tax treatment.

I used TurboTax Self-Employed last year for my Canada-based consulting business and it handled the Schedule C foreign expenses fine. You just enter everything in USD after converting the amounts yourself. The software doesn't help with the currency conversion or FBAR filing though - you have to handle that separately.

That's a good point! All of these expenses are legitimate photography equipment (new lenses, lighting, a laptop used only for editing) and documented travel to shooting locations. My business income that year was around $36,000 so the $7,800 in additional expenses isn't out of proportion. Do you think that's going to raise any red flags?

Those expenses sound reasonable given your business type and income level. Photography equipment is clearly a necessary business expense, and as long as your travel was primarily for business purposes and you have documentation (like client contracts showing shoots on those dates), you should be fine. The $7,800 compared to $36,000 in income is a perfectly reasonable ratio for a photography business, which typically has higher equipment costs. Just make sure to categorize everything correctly on your Schedule C - put the equipment under "Equipment" not "Supplies" if it's over $2,500 per item and will last more than a year (might need to be depreciated rather than fully expensed, depending on whether you took Section 179 or bonus depreciation).

Yes! This happened to me. I amended to add some business expenses like OP is planning to do, calculated I was due about $1,300 back, but the IRS sent me $1,467. The difference was interest they added because of how long it took them to process the amendment.

Thank you for that tip about separate envelopes! I definitely would have put them all in one package thinking I was being efficient. Did you receive any kind of confirmation when they received/processed the returns? I'm worried about them getting lost in the mail.

You should definitely send them certified mail with return receipt requested through USPS. That way you'll get confirmation they were delivered. As for processing, it took about 4-5 months before we saw any activity - they're very slow with paper returns. Eventually, we received notices for each return - either bills for what was owed (with penalties) or notices about refunds. If you're really concerned, you can check your husband's IRS transcript online about 6-8 weeks after sending them to see if they show as processed.

Yep, this is correct. I worked for a tax firm and we had clients who lost out on thousands in refunds because they waited too long. The 3-year rule for refunds is strict, but the IRS can come after you for taxes owed for much longer!

Could it be that the dad is thinking about the gift tax? Like maybe he's thinking that since he didn't charge interest, it counts as a gift and he has to pay gift tax on it?

You're on the right track. In theory, the forgone interest on an interest-free loan can be considered a gift from the lender to the borrower. But there are two important points here: First, the annual gift tax exclusion is $17,000 per person (in 2023), so the imputed interest on a $9,500 loan would be well below that threshold. Second, even if it were above the threshold, it would just require reporting on a gift tax return - actual gift tax typically wouldn't be owed until someone gives away millions over their lifetime. So either way, there shouldn't be any actual tax payment required. The dad might be confused about these concepts or might be trying to retroactively charge interest and calling it a "tax" to make it seem official.

That's interesting! Which states have different rules? I'm in California and planning to loan money to my sister for her down payment, so now I'm worried!

Really? What browser extensions would cause that? I'm using Chrome with adblock and a few others. Could that be why I'm only seeing credit card options too?

I think it was my ad blocker causing the issue. It was blocking some elements on the TurboTax payment page. I'm not 100% sure which extension was the culprit, but when I tried in Edge with no extensions, everything loaded properly. Another possibility is to try clearing your cache and cookies for the TurboTax site. Sometimes data from previous sessions can cause weird display issues.

How long did you have to wait on hold? I tried calling TurboTax last week about a different issue and gave up after 45 mins on hold.