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Expatriate Tax Returns

Diane Siriani

Digital Nomad Taxes: What You Need To Know

If you’re a digital nomad, you may be wondering if you need to pay taxes. The answer is – it depends. It’s important to understand the tax rules and regulations in the countries you work in and pay taxes accordingly.

Paying taxes as a digital nomad can be a bit more complicated than if you were a traditional employee because you may be working in multiple countries and earning income from various sources. However, it is possible to stay compliant with the tax rules and regulations.

In this article, we will explore the topic of digital nomad taxes and provide some helpful tips on how to stay compliant.

What are digital nomad taxes?

Digital nomad taxes are taxes that may be applicable to individuals who work online and move from place to place, as opposed to having a permanent physical office. These taxes can apply to income earned from freelancing, online work, blogging, and other activities. Depending on the country, digital nomads may be required to pay income tax, social security contributions, and other taxes.

What are the benefits of paying digital nomad taxes?

Paying taxes may seem like a burden, but there are actually many benefits to doing so. First and foremost, it ensures that you are compliant with the tax rules and regulations in the countries you work in. Additionally, paying taxes can help you build a good credit history, which can be helpful if you ever need to apply for a loan or mortgage. Finally, paying taxes can help you access certain government benefits, such as healthcare.

Who needs to pay digital nomad taxes?

The answer to this question depends on the country you are working in. In some countries, digital nomads may be required to pay taxes on their income even if they are only working in the country for a short period of time. In other countries, digital nomads may only be required to pay taxes if they earn a certain amount of money. In the United States US citizens must file a US tax return reporting their worldwide income. It’s important to research the tax rules in the countries you work in to determine if you need to pay taxes.

How to pay digital nomad taxes?

Paying digital nomad taxes can be a bit more complicated than paying traditional taxes because you may be working in multiple countries and earning income from various sources. Taking the following steps can help the process flow easily. First, you should keep track of all the money you earn from each work source. This includes income from freelancing, online work, blogging, and other activities. Second, you should research the tax rules in the countries you work in and determine how much you owe in taxes. Third, you should set aside money to pay your taxes. This can be done by setting up a separate bank account or by transferring money into a savings account each month. Finally, you will need to pay your taxes. You can do this by filing a tax return or by making a tax payment.

To wrap things up

Paying taxes as a digital nomad can be a bit more complicated than paying traditional taxes, but it is possible to stay compliant with the rules and regulations. By keeping track of your income, researching the tax rules in the countries you work in, and setting aside money to pay your taxes, you can ensure that you are compliant with the tax rules and regulations.

If you want to learn more about expatriate taxes or want to connect with a tax specialist, visit our contact page.

The 5 Most Common Reasons For FBAR Penalties

The Foreign Bank and Financial Accounts Report (FBAR) is a form that is required to be filed by U.S. taxpayers who have foreign financial accounts. The FBAR is used to help the government detect and combat international money laundering and terrorist financing. If you fail to file the FBAR, you may be subject to civil and criminal penalties.

The most common reasons for FBAR penalties are:

  1. Failing to file the FBAR
  2. Filing the FBAR late
  3. Omitting information on the FBAR
  4. Incorrectly reporting information on the FBAR
  5. Failing to sign the FBAR

If you are a U.S. taxpayer with a foreign financial account, it is important to make sure that you file the FBAR correctly and on time to avoid penalties.

Non-filing of the FBAR

One of the most common reasons for FBAR penalties is failing to file the FBAR. The FBAR is required to be filed by U.S. taxpayers who have foreign financial accounts. If you fail to file the FBAR, you may be subject to civil and criminal penalties.

Failure to properly file the FBAR

Another common reason for FBAR penalties is failure to properly file the FBAR. The FBAR must be filed electronically through the Financial Crimes Enforcement Network (FinCEN) website. You must include your name, address, and Social Security number on the FBAR. You must also include the names of all foreign financial institution in which you have an interest, as well as the account numbers for those accounts.

Signing the FBAR under penalties of perjury

When you sign the FBAR, you are declaring under penalties of perjury that the information you have provided is true and correct. If you knowingly and willfully provide false information on the FBAR, you may be subject to criminal penalties.

Filing a joint FBAR when only one spouse has foreign accounts

If you file a joint FBAR, both you and your spouse will be jointly and severally liable for any penalties that may be assessed. This means that if only one spouse has foreign accounts, both spouses may be subject to FBAR penalties.

The civil penalty for non-willful violations

The civil penalty for non-willful violations of the FBAR filing requirements is up to $10,000 per violation. A violation is defined as each year you fail to file the FBAR or each foreign financial account you fail to report on the FBAR.

If you want to learn more about how to file expatriate taxes, visit our contact page to connect with us.

Things to Know When Considering an Early Withdrawal from Retirement

Unexpected events happen to everyone. Unfortunately, some people must make necessary financial sacrifices to withstand such circumstances. One of the sacrifices people make is withdrawing from their retirement early. This quick-cash method can produce significant tax penalties if enacted. Consider the following information before pulling from your retirement early:

  • Flexibility Within 401(k), 403(b), and 457(b) Plans

Taxpayers can withdraw from these plans only if an event of hardship occurs. A Hardship Distribution is when a taxpayer withdraws from their retirement savings earlier than their declared withdrawal date. The date is normally set to sometime after the taxpayer turns 70. Support needed for spouses or dependents is included in these policies.

The withdrawal is limited to the financial need of the taxpayer. Repayments for hardships are not permitted. The eligibility for early distribution should be accurately stated within the plan description. Withdrawals made before the set age or date are subject to an early withdrawal penalty.

  • Distribution Related to Divorce

If a taxpayer is experiencing a divorce, they may be eligible for early distribution. If a withdrawal from a traditional IRA is made early to supplement divorce requirements, the amount is subject to a 10% early withdrawal penalty. Exceptions on this income tax can be made according to the case.

The options listed in this article are not exhaustive for taxpayers. The IRS provides many helpful alternatives for hardships. If you want to learn more about what to do when considering withdrawing early from retirement, contact us by visiting www.expatriatetaxreturns.com. We are excited to give you the help you need.

Generosity Extended: The IRS Mileage Rate

The IRS is looking out for American taxpayers. For the remainder of 2022, the optional standard mileage rate has been increased by the IRS. For the rest of the year, taxpayers can receive reimbursement for using their automobiles for business travel and other similar purposes. Once mileage is calculated, drivers can determine what they’ll receive for their business travel expenses.

Taxpayers driving for business trips have a new reason to be excited! The standard mileage rate, once initiated, will be 62.5 cents per mile. The updated rate for moving (sector for active-duty people in the military) and medical reimbursement is 22 cents per mile. Both rates were increased by 4 cents per mile. These increases will be put in place on July 1, 2022, and will last for the rest of 2022. The only rate that did not receive an increase is the rate for charitable organizations, which remains at 14 cents per mile.

2022 has introduced all kinds of challenges worldwide. One of the main challenges America has been facing this year is inflated gas prices. The American average price for fuel is $4-$5 per gallon. Nationwide, all drivers must deal with the inflated prices to be on the road.

Out of generosity, the IRS adjusted the optional standard mileage rate for taxpayers. According to Chuck Rettig, the IRS Commissioner, the IRS made this increase to shine a light on the challenging circumstance of high gas prices. This change is unique because the IRS consistently updates these rates yearly. Any previous business travel costs should be calculated using the former rates before the increase. This information can be found in Notice 2022-03.

The IRS is not only generous but also flexible. If taxpayers would like an alternative to the business travel reimbursement, they can calculate the vehicle cost instead of the optional standard mileage rates. If you have questions, call us or visit www.irs.gov for more information.

Refund Myths

As you await your tax refund, we would like to debunk some common myths via information directly from the IRS.

  • Myth #1 Reaching out to the IRS will increase your refund speed. Utilize the Where’s My Refund? tool to check the status of your refund. An IRS representative cannot get your refund to you faster.
  • Myth #2 Visting Wheres My Refund many times a day will keep me updated.
  • The website updates once a day, and delays may occur.
  • Myth #3 Tax Professionals Can Speed Up Your Return

Although we would love to, our team has no impact on the speed at which your return is processed. We can guarantee accurate and fast filing of your returns but cannot handle speed once your return is submitted. Be diligent in researching tax information. A tax professional or the IRS website is your best bet for accurate information. As always, contact us with any questions or concerns you may have. 

Filing an Extension

Tax Day 2022 is not a done deal! If you filed an extension by April 18, you have until October 17 to file your 2021 return. If you are an expat, you get an automatic extension until June 15, which means that it’s not too late to extend to October 17. Keep in mind that extensions only apply to filing, not paying! If you owe tax it was due by April 18…interest and penalties apply to all payments owed to the IRS after that date.