Here are three quick things to know about working abroad.
Issue 1: Section 199A
To qualify for the Section 199A deduction, your business income must be effectively connected with the conduct of a trade or business within the United States. The preamble to the proposed Section 199A regulations clarified that in almost all circumstances, this means the income has to be U.S.-source income to qualify.
Issue 2: Income Tax
You have two ways to reduce or eliminate the U.S. income tax on your foreign-source income. The only way you’ll know for sure is to calculate your return using either method and pick the one with the better outcome.
Issue 3: Self-Employment Tax
If you file a Schedule C, you already know you need to pay self-employment tax on your net Schedule C income. However, the U.S. has totalization agreements with certain countries to avoid double Social Security taxation. These agreements usually apply to self-employed individuals.
The IRS expects to see self-employment tax when there is a Schedule C on a tax return, there are two steps that you will need to take satisfy the IRS and avoid costly audits.
If you have an interest in or signature authority over foreign financial accounts or other foreign financial assets, you may have to file special forms in addition to your tax return.
If you don’t file the forms but had a filing requirement, the penalties could be severe: as high as $10,000 per form per year.
If this is your situation contact us so we can develop a tax plan.
We're Here to Help
Get advice from our experienced network of financial managers.
Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.