Table of contents

Child pages

US taxes

Free file

Good free file providers

• H&R Block's free file walkthrough seemed pretty good when I was using it in 2019.  I tried it after trying olt.com and it got me to a position where I got the impression my filing was done more-or-less correctly.

Not-so-good free file providers

• OnLine Taxes (olt.com) was not so helpful when I was using it in 2019 to report self-employment income and didn't yet understand the law (I didn't even know I was classified as "self-employed").  It was giving me error messages that I couldn't make sense of:   And when I tried to fix them I actually ended up with more error messages, including the ones I was trying to fix.

Self-employment / Freelancing

• If you work on Upwork, you're probably considered "self-employed" for tax purposes.
  • Upwork.com - Freelancer vs. Independent Contractor vs. Employee (How to Know What You Need)

    • What’s important to note is that freelancers are self-employed individuals who function as their own business. Freelancers are typically individuals who:

      • pay self-employment tax

      • do not have employees (but they can subcontract)

      • set their own rates

      • work remotely at their own location

      • choose which project and clients they want to work with

      • work with multiple clients

  • Upwork.com - Report Income from Upwork

    • Most freelancers won't receive any tax forms from their contracts on Upwork. However, there are two important exceptions:

      • W-2 Exceptions - If you and your client agreed that you are an employee. 

      • 1099-K Exceptions - Freelancers who are U.S. Persons and receive over $20,000 with more than 200 transactions through Upwork

1099s

• Q: When do you need to worry about these?

1099 Taxes

• 2017.02.24 - S33 Electrical - 1099 Independent Contractor Taxes
  • 2:31 - Step 1 - File DBA. 'Doing Business As'.
    • Go to the IRS website and they'll give you an EIN number. Tell them you're only doing it for accounting purposes.
  • 3:33 - Step 2 - Apply for an EIN with the IRS.
  • 4:00 - Step 3 - Open a business bank account.
  • 4:00 - Step 4 - Open a personal bank account (if you don't already have one).
  • 5:54 - When you fill out the W-9 form for the company you're working for, you use your business name and your business EIN.
  • 6:30 - Step 5 - File a W-9 form under your business name and EIN.
    • Your employer should write your weekly check to your business name. You'll deposit that money to your business account.
  • 7:45 - Any expenses you have that will be deductible should be paid for from your business bank account. Nondeductible expenses should be paid for from your personal bank account.
    • Examples of deductible expenses:
      • tools, transportation, clothes, maintenance
      • He also pays for his rent from his business account because he has a portion of his apartment set up as a dedicated home office, and his CPA will help him figure out what portion of the rent can be deducted.
      • computers, office supplies
      • Get a debit card for your business account, and for anything you pay for with it (which should all be deductible expenses), save the receipt. He uses Excel to tally up all the receipts at the end of the year.
      • Cell phone (if it's used for business purposes)
    • Examples of personal expenses:
      • groceries, entertainment
  • 12:40 - Write checks to yourself, from your business account to your personal account. You'll want to hold 25% of that amount for taxes. He recommends putting that 25% into your savings account.
  • 16:15 - Now that he has everything set up, he actually prefers working as an independent contractor rather than a W-2 employee because he can write off a lot of his expenses.

Legal tax reduction

S Corp

• 2017.10.10 - OnlineTaxman - When to switch from LLC to S Corp
  • So with this you don't pay any self-employment tax, because you're technically an employee of this corporation.  But you do pay some kind of new tax on the corporation.
  • Summary
    • The right time to convert your LLC to S Corp
      • From a tax perspective, it makes sense to convert an LLC into an S Corp, when the self-employment tax exceeds the tax burden faced by the S Corp.
      • In general, with around $40,000 net income you should consider converting to S Corp. Depending on your circumstances the breakeven point could even be as low as $25,000 net income.
    • How to convert an LLC to S Corporation
      
      • For federal tax purposes you can simply make an election for the LLC to be taxed as an S Corporation. All you need to do is fill out a form and send it to the IRS.
      • It is important to note that one must convert to an S Corp by March 15 in order to be applicable for the following year, or within 75 days of opening the LLC to be applicable for the year of opening
      • Even though the IRS classifies the LLC as S Corp, it is still an LLC and may be taxed as such by the state where it is formed.

Change domicile to a state with no income tax

• Undated - Form8621.com - Effect of State Domicile on Expat Moves: Helping Taxpayers Determine When and How to Keep or Terminate State Domicile
• 2012.11.02 - InternationalLiving - Moving Overseas: Save Big When You Leave from a “No-Tax State”
• 2017.02.27 - Greenback Expat Tax Services - Tax for Expats: What You Should Know About State Taxation

California

• How to determine if you're considered a resident:
  • California Franchise Tax Board - Nonresidents and Part-Year Residents
• How to change your domicile:
  • Rex Halverson & Associates - California Domicile & Residency Issues
• Cancel your driver's license.
  • California DMV - Request for cancellation or surrender of a driver license or identification card

Registering companies abroad

Singapore

• 2018.03.07 - Twitter - @levelsio - Would you be interested in using a service that helps you register your remote company in Singapore as an LLC?
  • There are some useful replies.

Estonia

• e-Estonia.com - About (Source)
  • Apparently you can register a company in Estonia and not pay taxes or something.

Paying taxes while living outside the US

• IRS - Social Security Tax Consequences of Working Abroad

While "self-employed"

• You can request the "foreign earned income exclusion" to reduce your federal income tax.
  • Important: Your "federal income tax" is a different tax from the federal Social Security / Medicare taxes, even though those are also calculated based on your income!
  • Important: You need to submit your tax forms and include Form 2555 (FEIE form) to tell the IRS you want to use this exclusion to receive it, otherwise the IRS won't give it to you and you'll have to pay the federal income tax!
    • So, for example, if you move abroad and work as an English teacher for 10 years and never bother to submit your tax forms, and then the IRS for some reason decides to go after you, my understanding is that you will not be able to get the benefit of the FEIE, because you can only request it if you're submitting your tax forms on time (or something like that).
    • Note that the "Free file" software out there is able to handle this request / form, so it's not like you need to print out the form and mail it to the IRS or anything.
  • Wikipedia - Foreign earned income exclusion
• You need to pay the "self-employment tax", which pays for Social Security and Medicare.
  • My understanding is that your payments into Social Security are tracked by the IRS and increase the amount you get to collect when you retire.  So it's not like someone can lay low outside the US and never pay taxes, and then suddenly ask for and receive Social Security when they reach the age to collect.
  • IRS - Social Security Tax Consequences of Working Abroad
    • If you are living abroad and you are a self-employed U.S. citizen or resident you generally are subject to the self-employment tax. This is a social security and Medicare tax on net earnings from self-employment of $400 or more a year.
  • 2018.09.26 - FitSmallBusiness - Self Employment Tax Rates 2018 & How to Lower Your Tax Bill
    • your “self employment taxes” consist of 12.4 percent in Social Security taxes (up to $127,200 for the 2017 tax year) and 2.9 percent in Medicare taxes (with no income limit). This is a combined 1099 tax rate of 15.3 percent.
  • 2017.12.05 - OnlineTaxman - Self-employed abroad – 7 Things US expats and nomads need to know about self-employment tax on foreign income
    • This looks like a well-written article.