Because your expatriate clients are not living in the United States, their tax obligations are more complicated than an average taxpayer.
1 min read
Changes in technology have evolved our standard “9 to 5” jobs to gigs that simply require a computer and internet connection. And with these technology changes, the way Americans work has changed, too. The number of Americans living and working abroad has multiplied in the last several years – 8 million Americans now live abroad.
These expatriates are commonly known as digital nomads, meaning “someone who is location independent and uses technology to perform their job.” Many of these digital nomads own businesses or work for companies that allow them to work outside an office environment. Because these nomads are not living within the United States, their tax obligations are more unique and complicated than an average taxpayer.
The primary reason expatriate taxes become so complicated is not surprising: location, location, location. Here are the basic tax law differences you need to know about when you prepare taxes for clients who live and work outside of the United States:
After they begin working abroad, many taxpayers eventually choose to renounce their U.S. citizenship, often due to staggering U.S. tax obligations. The number of taxpayers trading in their passports has skyrocketed in the past several years. In 2015 alone, 4,279 Americans renounced their U.S. citizenship, up 20% from 2014. That is 18 times as many as in 2008, and the third year in a row that's set a new record. Once these expats renounce their citizenship, they cease their tax filing obligations to the United States.
If your client has moved abroad, then they will need to be aware of how their tax obligations have changed. This overview covers some of the basics that will help digital nomads, but with offshore companies and foreign investments, tax obligations of digital nomads can become far more complicated than this post can realistically cover. If your client’s situation exceeds the scope of these basic filing requirements, consider referring them to a tax attorney or another accountant that specialize in foreign filing requirements.
Interested in learning more about the Foreign Earned Income Exclusion and the Foreign Tax Credit? Check out How to Minimize US Taxes for Expatriates.
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