Income Taxes in the US & Argentina

[hepdoll]

Hey guys!

So this year I started a job here in Argentina. (en blanco, temporary residency visa, etc.) I've also had some freelance income from a US company thanks to some work I've done via the Internet.

I'm hoping to do my income taxes myself, like I've done in past years, so I can avoid paying for an accountant. (The job doesn't pay THAT much!) But I expect things will be a little more complicated.

Have any of you dealt with this before, and could you give me some advice on where to start and how I can get the information I need to file my 2010 taxes correctly in the US, including accounting for my Argentina income? I will be visiting the US around the holidays so I'm also wondering if there's anything I should make sure to take care of while I'm there in person.

And, is there an equivalent process in Argentina that everyone does every year, like we do in the US, that I'd need to do too?

Thanks in advance for your help. (Can you believe 2010 is already almost ending??

 

[sergio]

The US embassy has a tax specialist available at tax time. Call them for details. If you intend to pay taxes in Argentina, you will need an accountant but beware -- once you start you will no longer be under the radar and you might open a Pandora's box.

 

[Lala]

Hi Hepdoll,

For the US taxes, you just need to fill in the form 2555 (Foreign Earned Income Exclusion) and send it in with the rest of your tax forms - it is easy to do it yourself especially if you use a program like Turbo Tax.

I don´t know about the Argentine side of things. I asked around in my Argentine circle of friends (who all work in blanco like me) about filing here, and they all looked at me like I was crazy. I personally wouldn´t worry about it if you only have temp residency. I suppose the situation may be different if you had permanent residency.

Hope this helps.

 

[mcaffa]

Question: Let's suppose a friend of mine from the US has been working legally in Argentina for a few years now and has never reported their earnings to the IRS. Realistically, what is the likelihood that anyone will find out about his or her unreported income?

 

[Lala]

I´m not sure what would happen for not reporting taxes, but there really isn´t any reason not to file, as you don´t pay any taxes on your income earned abroad up to U$91,400 anyway. You simply keep your paperwork up to date with the IRS and avoid any sticky situations that may arise years later (if you get audited or something).

 

[mcaffa]

you don´t pay any taxes on your income earned abroad up to U$91,400 anyway.

Thanks for the info. I wasn't aware of that.

 

[Lala]

clarification - to qualify for the foreign earned income exclusion, you need to either be physically present outside of the US for 330 days a year or prove that you are a bona fide resident of another country. So, you can´t be living in the US and get paid from another country and be excluded from paying taxes. I doubt that is an issue for many people, but just so the info is out there.

The IRS website has more info here.

 

[gouchobob]

I´m not sure what would happen for not reporting taxes, but there really isn´t any reason not to file, as you don´t pay any taxes on your income earned abroad up to U$91,400 anyway. You simply keep your paperwork up to date with the IRS and avoid any sticky situations that may arise years later (if you get audited or something).

This is true but if you are self employed you are subject to the self-employment tax, which generally a lot higher than income taxes. Basically this is Social Security and Medicare taxes, runs about 15.7% of net profit for the self employed person. A link to the IRS on this subject follows:

http://www.irs.gov/publications/p54/ch03.html

 

[gouchobob]

Question: Let's suppose a friend of mine from the US has been working legally in Argentina for a few years now and has never reported their earnings to the IRS. Realistically, what is the likelihood that anyone will find out about his or her unreported income?

If all his income was earned in Argentina there would be no way for the IRS to find out about it. However working for a U.S. company freelance in Argentina is probably going to result in a 1099 being generated by the U.S. company which informs the IRS of your earnings. If you don't file a return you could get hit with penalties, back taxes, and interest from the IRS at some point. Probably not someplace most people want to go.

 

[Lala]

gouchobob brings up a good point - I was in a situation my first 2 years here where a portion of my earnings were subject to the self employment taxes as I was issued a 1099 for them. The portion that I earned through the Argentine company is what was excluded. The last 2 years I have been paid exclusively by Argentine employers, but I still file anyway, even though I don´t owe anything.