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Author Topic: Taxes? Richard Hamilton Phenomenal Film Handler Posts: 1341 From: Evansville, Indiana Registered: Jan 2000 posted 06-03-2008 11:18 AM                     Just wondering your opinions about taxes based on a comment from another thread. quote: however when you get to send all your profit to Uncle Sam... I recently got into a heated discussion with my mom about taxes, she works for a CPA. When I started negotiating a service contract overseas, she asked me about it, and she stated that about a third of it must be set aside for taxes. My immediate response was "bullshit". In this case it will be over $25,000 per year in taxes. Why should I pay that much money to the IRS when I spend most of my time out of the country? I don't have my own company and I work out of my cell phone.  |  IP: Logged Paul Mayer Oh get out of it Melvin, before it pulls you under! Posts: 3836 From: Albuquerque, NM Registered: Feb 2000 posted 06-03-2008 12:13 PM                        My next contractor job may be in Doha, Qatar so I've been reading up on this stuff. For US citizens working overseas in 2007, one can earn up to $85,700 and pay no US federal income tax. But you'll probably be paying taxes to the country where you are living. To qualify for the US income tax exemption, you have to establish a foreign residence and show that you actually live there. Generally to have a foreign residence (a "tax home" under IRS rules) you have to show that you've had said residence for at least one complete tax year (1 Jan to 31 Dec) and that you've physically been there a minimum of 330 days within that year. If you don't qualify or only partially qualify for the overseas income exemption, you pay tax like you normally would. The full tax benefits of living and working overseas begin when you've been established overseas for a full tax year. See IRS Publication 54 - Tax Guide for U.S. Citizens and Resident Aliens Living Abroad for lots of fun reading.  |  IP: Logged Richard Hamilton Phenomenal Film Handler Posts: 1341 From: Evansville, Indiana Registered: Jan 2000 posted 06-03-2008 12:53 PM                     Paul, I got a headache just looking at the link you posted, then when I clicked on it, my head almost exploded!!! Just a quick question...If I charge them less than $85,700, does that mean I won't have to pay taxes? I've lived there off and on for a few years  |  IP: Logged Mike Blakesley Film God Posts: 12767 From: Forsyth, Montana Registered: Jun 99 posted 06-03-2008 01:35 PM                        quote: Richard Hamilton My immediate response was "bullshit". Wow, you said "bullshit" to your Mom?  |  IP: Logged Paul Mayer Oh get out of it Melvin, before it pulls you under! Posts: 3836 From: Albuquerque, NM Registered: Feb 2000 posted 06-03-2008 03:04 PM                        Richard, you'll just have to hunker down and read through all that stuff just like the rest of us former/current/wannabe ex-pats. It's not a bad deal, a couple days reading time can set you up to not pay taxes on the first $85,700 next year. I'm no tax guy, but I think the "off and on" part of your time in China will be the expensive part, tax-wise. Under the rules, you need to establish a home over there, and stay there. None of that "off and on" stuff. Obviously you can leave for vacations and the like (that's the 330-day rule), and there are exceptions for things like being forced out due to things like wars and civil unrest. But to fully qualify for the tax exemption you must stay out of the US for at least the first full tax year. That's my understanding anyway, from having worked and talked with lots of people that have done it. We both need to read further. Your US citizenship (and the IRS) follows you everywhere. If you don't qualify for the tax exemption in a given year, you file and pay (or not) as usual, depending on your deductions (and as a self-employed contractor, there should be no problem finding deductions! ). If you do qualify and make less than $85,700 in a given year, you still file and probably pay no tax. If you're self-employed (and receiving 1099's and/or the Chinese equivalent) then you need to keep track of and pay your own quarterly estimated tax withholdings to the IRS no matter where you live. Once the overseas exemption kicks in you'll get all or most of that back anyway. As for Chinese taxes, I have absolutely no clue. But if you're not paying foreign taxes by claiming you are not a resident, the IRS uses that to establish your continued US residence status and deny the overseas income tax exemption.  |  IP: Logged Tim Reed Better Projection Pays Posts: 5246 From: Northampton, PA Registered: Sep 1999 posted 06-03-2008 04:33 PM                       quote: Richard Hamilton My immediate response was "bullshit". Class.  |  IP: Logged Bill Enos Film God Posts: 2081 From: Richmond, Virginia, USA Registered: Apr 2000 posted 06-03-2008 08:16 PM                     How does the IRS know how much you may have earned in another country? Do countries swap earnings info?  |  IP: Logged Leo Enticknap Film God Posts: 7474 From: Loma Linda, CA Registered: Jul 2000 posted 06-04-2008 04:44 AM                        Interesting - this became an issue from our end recently. The British government proposed to levy a one-off tax of £30,000 per year to all 'non-doms' [non-domeciled workers]: non-British citizens who live and work here but remain resident for tax purposes in their country of citizenship. Because Britain has one of the highest levels of income tax in the developed world (40% if you earn over the equivalent of around $80k a year), a large number of high-earning businesspeople currently work here under 'non-dom' status. The US protested strongly about the £30k fee to register as a non-dom, on the grounds that their citizens working here as non-doms (i.e. they're still registered with the US authorities as living in the US) still have to pay federal income tax at their end, and so a middle-earning professional working here who does not apply for full UK residency will effectively get hit with two lots of income tax. The millionaire bankers aren't going to care about the odd £30k, but an engineer or professor or senior IT professional certainly would.  |  IP: Logged Charles Greenlee Jedi Master Film Handler Posts: 801 From: Savannah, Ga, U.S. Registered: Jun 2006 posted 06-04-2008 05:03 AM                        The rich keep on getting richer, and everyone else getting poorer.  |  IP: Logged

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