Tax help!

[demokritos]

See here is a good example. Citygirl took the time to post some information yet you come back with a response like "can I claim exempt from taxes? I don't understand how that's legal".

So all I'm saying is how about you take the time to read the law and find out why what Citygirl is saying is legal and what is and isn't allowed. That's all I'm saying.

I appreciate the links; I've read both of these before, and I'm still not clear on the term "tax home", as it is not clearly defined, especially outside of the context of bona fide foreign residency.

I understand your hesitancy to give direct advice about these questions, as you're not an accountant or tax attorney. But if you're feeling charitable, since it sounds like you have some experience with this:

"If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work."

If someone spends more than 6 months in Argentina and is legally liable for income tax here, it seems easy enough to claim that as their tax home. But for an itinerant worker not staying in any single country long enough to qualify for local income tax, what does the phrase "your tax home is wherever you work" signify? You claim each country you work from as a tax home, or none at all?

Edit: sourced from http://www.irs.gov/Individuals/Inte...ncome-Exclusion---Tax-Home-in-Foreign-Country

 

[demokritos]

JMHO, but with matters as serious as taxes and IRS, I'd take the time to read it and get to know the law.

People on these message boards are often times wrong and lots of misinformation out there.

It's been my experience that people are usually too lazy to do any due diligence at all or research yet don't want to pay a professional for advice.

What if someone posted something like "yeah you can take whatever deduction you want". Wouldn't you rather do the research and know what is and isn't allowed? It won't take 5 hours.

Good luck.

In fairness to the OP, I've read through all the IRS links and they don't provide examples of people working remotely for a company in the US; rather, they give examples of workers reporting to offices/places of business outside the US, or transferred to a foreign office/subsidiary. It's conceptually difficult for me to wrap my head around the idea that income can be "foreign earned" if I'm a US citizen working for a company located in the US, exclusively with US clients and dealing in USD going to my US bank account, and the only thing "foreign" is my place of residence while performing the work. My first thought when reading through the information on the IRS web site was also "how/why is this legal?"

 

[demokritos]

Apologies for hijacking the thread, I'm interested to see what people say as I hadn't seen a thread on this before here.

 

[citygirl]

In fairness to the OP, I've read through all the IRS links and they don't provide examples of people working remotely for a company in the US; rather, they give examples of workers reporting to offices/places of business outside the US, or transferred to a foreign office/subsidiary. It's conceptually difficult for me to wrap my head around the idea that income can be "foreign earned" if I'm a US citizen working for a company located in the US, exclusively with US clients and dealing in USD going to my US bank account, and the only thing "foreign" is my place of residence while performing the work. My first thought when reading through the information on the IRS web site was also "how/why is this legal?"

Yes, actually they do. The IRS is quite clear about this. If you are outside of the US for more than 330 days in a 12 month period, this means you probably meet the physical presence in a foreign country test. It doesn't matter if you work for a US company and dealing with US clients. They have very specific examples about this.

Again, if you read the IRS website, it's quite clear. You can also call the IRS and ask them about it.

ETA - As I stated before, this exemption would only be applicable to the employee portion of taxes. If you are a 1099, you would still have to pay the 15.3%, regardless of whether you meet the physical test or not.

 

[demokritos]

Yes, actually they do. The IRS is quite clear about this. If you are outside of the US for more than 330 days in a 12 month period, this means you probably meet the physical presence in a foreign country test. It doesn't matter if you work for a US company and dealing with US clients. They have very specific examples about this.

Again, if you read the IRS website, it's quite clear. You can also call the IRS and ask them about it.

I'll give them a call when I'm back in Argentina, internet is too spotty for VoIP now. I've read through all of the documentation on irs.gov regarding the exclusion, and I don't find it clear, though I appreciate your input.

You keep bringing up the physical presence test, but that's only one of 3 requirements; the other two are designating your tax home as a foreign country, which is not obvious in the case of a "permatourist" not paying taxes in Argentina, especially if not surpassing the 6 month tax-threshold in Argentina or any other single country.


"To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:
A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months."

And no, the IRS does not give any examples of working "for a US company and dealing with US clients". When I say example I literally mean "Example 1:" etc. - the examples are of offshore construction, relocating to a foreign office, etc. Not working "remotely" or telecommuting.

Not trying to get in an argument with you; it sounds like you have been through this before, and I'm interested in what you have to say. I don't think the IRS is clear and to that point different accountants will claim different deductions when provided with the same info, depending on how conservative they are and what they believe a client's risk for audit is.

 

[citygirl]

Yes, I am aware it is only one of the 3 tests.

Tax Home: Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes.

Foreign Earned Income:
Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements.

• Your tax home is in a foreign country.
• You meet either the bona fide residence test or the physical presence test.

And the 3rd, I've already discussed - either physical presence of 330 days outside of the US (not one specific location) or bonafide residence test (wherein you can prove you have domiciled in a foreign country).

I'm not an accountant, I do have experience with this (although none as a 1099 internationally) and I will again reiterate that if you have questions, you are best served by working with an accountant.