I use TurboTax to do my taxes and usually do the taxes of a few close family members. I usually just enter the info into TurboTax for relatively straight forward tax situations (Read: I am comfortable with basic tax situations but, like most people, if something complicated turns up I’m stumped).
One relative has a spouse who is not a US citizen. She works for an international organization and her income is, according to the organization, tax exempt. She does not receive a W2 or a 1099 or any other document that I can enter into the program. I have an employment verification form which lists her salary, and a letter stating that the income is tax exempt.
I’m wondering if I should report this income at all on their taxes. If I should report it I have no idea how or where to enter this income. My main concern is that the itemized deductions will be greater than the income of the American citizen spouse. This may throw up a red flag as ignoring the tax exempt income could qualify them for earned income which, I’m fairly certain, would be incorrect to claim just because I ignored the tax exempt income.
Is anyone familiar with how to report tax exempt income? Also, if I ignore it on the tax forms would they then be eligible for earned income or any other benefits that they might not qualify for if the income is reported? I can’t imagine that this would be the case but I’m stumped.