Archive for Olivier Wagner

Americans Abroad On Self-Employment Taxes On Foreign Income

Olivier Wagner - Self Employment Taxes On Foreign Earned Income

How does self-employment tax work for those Americans, who live abroad, travel the world and work for themselves? Well, you still have to pay US taxes on foreign income if you are a freelancer, independent contractor, digital nomad or entrepreneur abroad. Yes, US tax laws apply no matter where in the world you live and perform the work.

The self-employment tax is a social security and Medicare tax on net self-employment income. You must pay this tax if your net self-employment earnings are at least USD$400 in a year. But don’t panic, we know the ways to legally minimise tax burden for self-employed Americans abroad.

1. Filing Requirements For Self-Employment Taxes 

You fall under different filing threshold category if you are self-employed US person who reside abroad. As we mentioned earlier, earning USD$400 in a year already triggers a filing requirement for a tax return. As the US is one of the two countries which practice citizen-based taxation, it’s necessary to take care of US tax obligations even while living abroad. Who does the IRS consider to be self-employed? If you belong to any of the following categories:

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U.S. Taxes On Foreign Income: Who Should File A U.S. Expatriate Tax Return?

Olivier Wagner- Filing An Expatriate Tax Return

While many Americans abroad wonder if they have to pay US taxes on foreign income, the real question is about filing tax return itself. Many of US citizens living overseas do not owe any taxes to IRS. However, it doesn’t mean they don’t have to report their income on Form 1040. Majority of US expats confuse the filing threshold with Foreign Earned Income Exclusion. The latter one doesn’t determine your filing liabilities. It is there to exclude all or part of your foreign-source wages and self-employment income from U.S. federal income tax. Yet you need to file federal tax return and form 2555 to use Foreign Earned Income Exclusion.

There are a few things to remember about US tax filing obligations. First of all, determine if you are a U.S. person for tax purposes, as you do not necessarily need to have a US passport to possibly have US tax filing obligations. You may even need to file even if you don’t earn any money yet you are married to someone who has income. Yes, we know that US taxes can be quite complicated!

Tax Tip 1: Even though we have already mentioned FEIE above, don’t rush to select Foreign Earned Income Exclusion on your US expat tax return. In many cases, choosing Foreign Tax Credit is more beneficial. Tax professionals prefer the latter for a number of reasons.

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U.S. Expatriates Can Claim Foreign Tax Credit Filing Form 1116

Olivier Wagner - Form 1116
What Is Form 1116 And Who Needs To File It?

When talking about US taxes and taxation of US citizens who live abroad, you may have heard of Foreign Tax Credit and the possibility to offset the US tax owing by using the taxes paid to another country. That way you can narrow the tax owing down to zero!

Most of the US international tax experts prefer claiming Foreign Tax Credit (Form 1116) on client’s U.S. tax return rather than preparing form 2555 (Foreign Earned Income Exclusion), since it is more beneficial. Read further to learn why FTC is a better way to save money on your US expat taxes.

Here are 5 quick facts about IRS Form 1116 and US tax returns:

  1. You claim Foreign Tax Credit on your US expat taxes by filing Form 1116
  2. You attach this form to a Form 1040, your individual US tax return
  3. The credit reduces your US tax liability on expat income dollar for dollar
  4. You cannot take Foreign Tax Credit against income which you have previously excluded by the Foreign Earned Income Exclusion
  5. And you can’t receive a refund of foreign taxes paid through your US tax return

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US Expatriate Taxes: A Guide For Filing Taxes As An American Living Abroad

Olivier Wagner - Guide To Expatriate Tax Filings

Most of the Americans abroad agree that US expatriate taxes can be intimidating. The U.S. and Eritrea are the only two countries in the world which impose taxes on their citizens regardless of their residence. Taxes are an already complicated matter but it is even more difficult for U.S. expatriates who need to comply with two different tax systems and also keep an eye on ever-changing U.S. tax laws. Tax situations become more complicated when Americans abroad haven’t been filing for years or have foreign corporations and offshore bank accounts.

1. U.S. Taxes On Foreign Income: Who Needs To File A U.S. Tax Return?

Let’s gain an understanding of what the U.S. taxes on foreign income mean to Americans living overseas. First things first, who needs to file a U.S. tax return?

Firstly, you are a U.S. citizen or a Green Card holder living abroad. Secondly, your worldwide income is above the filing threshold. By income, we mean wages and salaries for any US and non-U.S. sources, dividends and interests, rental income etc. You can check here the tax table for U.S. expatriates. Self-employed Americans have to file the U.S. tax return if their annual income equals $400 or more.

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What U.S. Expat Needs To Know About Foreign Earned Income Exclusion

Olivier-Wagner- What U.S. Expat needs to know about Foreign Earned Income Exclusion

While all Americans are taxed in their worldwide income regardless where they reside, they also have Foreign Earned Income Exclusion to reduce the tax burden. And this is what our today’s tax infographic is about. In 2018 you can eliminate up to $104,100 of foreign earned income on your U.S. expat tax return. Let’s look into details and what this exclusion is about. Read more

Renouncing/Relinquishing Your U.S. Citizenship And Taxes

Citizenship, Expatriate taxes

We received a question from Denise from Canada.

The question is: “I’ve heard a lot of words to describe people who were no longer U.S. citizens – “surrendered”, “relinquished”, “renounced” U.S. citizenship. What is the difference between these three terms?” Read more

U.S. Expat Taxes For Americans Living In Germany

Olivier Wagner - Germany-US Expats Taxes

Are you a US citizen living in Germany? It’s important to understand the US tax liabilities for Americans living abroad. While you are enjoying your expat life in Germany, don’t forget to file your US taxes!

In this article we will cover the following topics:

  1. US expat taxes for Americans living in Germany,
  2. Double taxation Germany-USA and how to avoid it,
  3. Who is considered as a German resident,
  4. Germany taxes for US citizens, including Income tax for foreigners
US Expat Taxes: Filing US Tax Returns From Germany

First of all, you need to determine if you are required to file a US tax return. It doesn’t matter where you live in the world as the US government taxes their citizens regardless of their residence. Is your annual income above the filing requirement of USD 10,400? Well, then you are required to file taxes with the IRS.

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US Expat Taxes For U.S. Citizens Living In Australia

Olivier Wagner- US Expats Living In Australia And Taxes

Every day we receive a lot of questions about US expat taxes for US citizens living in Australia. No wonder there is a big demand as there are over 200,000 US expats living down there. For a few years, Australia tops ratings as one of the best expat destinations. It’s the English-speaking country with high-quality living conditions, warm weather, and beautiful beaches. And it’s expat friendly! Do you know that 1/5 of the Australian population was born outside the country?

But let’s talk about US citizens residing there. Well, if you are an American living in Australia and thinking you escaped the Uncle Sam, that’s not quite true. Whether you are a US citizen or a Green Card holder living abroad, you should file a tax return each year. There are filing income thresholds and if you earn above it, you need to say hi to the IRS by June 15th (automatic deadline for US expats).

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Passport Revocation By The IRS: What You Need To Know

Olivier Wagner, Passport Revocation By The IRS

More than a year ago, Congress passed law HR 22. It resulted in IRC section 7345 “Revocation or denial of passport in case of certain tax delinquencies”

This is a far-reaching law which covers all taxpayers owing more than $50,000 in back taxes. The intent of the taxpayer to leave the country is not a criterion. Nor it is limited to criminal cases, civil penalties are enough.

Before the IRS can revoke your passport, or prevent you from obtaining a new one, these seriously delinquent tax debt needs to be debt for which a:

  • The government has issued a notice of federal tax lien and all administrative remedies under IRC § 6320 have lapsed or been exhausted
  • The government has issued the levy

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What A Digital Nomad Needs To Know About U.S. Taxes

Olivier Wagner, Digital Nomads And Taxes

Are you a US digital nomad or a self-employed American living abroad? This blog post is for you! All U.S. persons (and green card holders) are subject to U.S. tax on their worldwide income regardless of current residence:

  • whether you live in the U.S. or outside the U.S.
  • have a dual citizenship,
  • or are an Accidental American that has never set foot in the U.S.

your tax obligations remain the same as any other U.S citizen living in the U.S. 

How To Deal With Taxes On Income Earned Through Online Work In Multiple Foreign Countries?

All U.S citizens whose gross income exceeds the applicable threshold of $10,400 for a taxpayer filing single in 2017 and/or $400 for people with self-employment income must file a US tax return. Now, as a Digital Nomad, you may be traveling from country to country in a short time span. Due to that, you’re not a resident of any of the countries you visit. 

Let’s take a look at the general rules. The wages are sourced where the work is performed. So far, so good?

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Bona Fide Residence Test For U.S. Expats Explained

Olivier Wagner, Expatriate Tax Expert

We want to talk about Bona Fide Residence Test, which one shall pass to qualify for FEIE. Are you an American abroad and you earn more than $10,000 USD a year? Then you are required to file U.S. federal tax return. If this is news to you, then you probably should know more about filing requirements for U.S. persons abroad.

However, if you are a U.S. expat who is aware of their tax obligations, then you probably heard about FEIE. It stands for Foreign Earned Income Exclusion. It allows you to exclude up to $104,100 for 2018 tax year from your taxable income. But in order to qualify for such exclusion, you need to meet requirements. One of them is to pass either Bona Fide Residence Test or Physical Presence Test.

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U.S. Expatriates Offshore Banking: Best Countries For Overseas Banks

Olivier Wagner, Best Banks For U.S. Expatriates, Expatriate Tax Advisor

We are regularly asked about expat offshore banking, best overseas countries, and banks for US citizens. It’s a well-known fact that a right bank can save money for US citizens traveling or living abroad. Many Americans abroad are looking into ways to invest through financial institutions. It can be either in their place of residence, in popular financial city centers or in offshore destinations. When choosing a bank, everyone usually pays attention to following criteria:

  • ease of opening,
  • Investment access and liquidity,
  • taxes,
  • asset protection,
  • foreign transaction fees,
  • exchange rate used to convert foreign transactions to USD,
  • wire transfer charges,
  • customer service etc.

Read further if you want to learn more about opening an overseas bank account as an American abroad.

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