With the world becoming a global village, people are constantly on the move, looking for opportunities to work overseas. For US citizens who live abroad, taxes can be quite a hassle and is definitely an inescapable liability. However, there are many provisions that you can use if you are living abroad. Some tips can help you make those tax decisions easily.
Ed Lloyd & Associates, PLLC shares insights on the subject.
What are Tax Breaks on Foreign Income?
It all depends on how much money you make. You can exclude housing expenses and all your income from taxation in the United States if you meet the guidelines as specified by the Foreign Earned Income Exclusion. The money you earn while working overseas can be deducted from your income that is taxable. This is applicable only up to certain limits after you have been a resident of that country for a specific period. So when you pay taxes to another country, claim Foreign Tax credit. To avoid any kind of mistakes here, make sure you review your return carefully. And do not exclude more income than you are reporting.
Find out about the Medicare Taxes
There are many countries that the United States has agreements with to eliminate taxes on dual Social Security. Find out which these are. These are called totalization agreements. They should be taken into account to make sure you know what you are paying for. These are meant to secure your retirement benefits in case you are torn working between two countries.
What to do in case of Self-Employment?
If you are working independently, you are not required to pay any self-employment taxes to the U.S. government (if only you work with a country sharing a totalization agreement with U.S.). You usually have to apply to Schedule C business income.
At all points, you have to be extremely careful about the paperwork that goes into filing taxes and Ed Lloyd & Associates, PLLC suggests it’s best to hire a full-time professional for this.
To know more about why it may be good to outsource the accounting services, read – Ed Lloyd Associates PLLC tells you why it is important to outsource accounting services