Many of us view the pandemic as a perfect opportunity to work from a remote location, move abroad or become a digital nomad (5 million US citizens per Gallup) and work wherever they like. Not surprisingly, more and more countries hit by the lack of tourism have created programs to lure travellers who want to relocate and work abroad. If you happen to live abroad or just contemplating your next move there certain things you need to know about the US and foreign taxes.
- Working and/or living abroad does not exempt you from filing and paying US taxes. US citizens are required to pay taxes on income earned outside the country (worldwide). This is in addition to any taxes owed to the local authorities. - The majority of the US citizens living abroad should be able to offset all of their foreign earned income with the credits offered by the IRS: - Foreign Tax Credit - Foreign Earned Income Exclusion - Foreign Housing Exclusion - Most of these credits, however, might not apply to the business travellers and digital nomad category as the IRS requires to be physically present in a foreign country for 330 days out of a 365-day period, and no immediate intention of moving back to the US. - Tax treaties prevent double taxation. The US has tax treaties with 68 countries. Because tax breaks vary by country, you might want to review the treaty with the host country to find out how your income will be taxed. - Foreign Bank Account Report (FinCEN form 114) must be filed with the US Treasury if the aggregate balance(s) of all your foreign bank accounts exceed $10,000. This is the US initiative to thwart tax cheats hiding money abroad.
Costa Shepin CPA