It’s Your Money > Taxes

Stateside Residency and taxes

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RUFUS:
I would say that if all Mr.X\'s business is done through the USA, to US citizens, through US banks and pays his US taxes but is only conducting business on a laptop while on \"vacation\", the IRS will be happy and the Philippines will have nothing to tax.

Gray Wolf:
I second the opinion of Rufus.  Mr X\'s business was formed in his homestead state and is conducted online, much the same as if he were still in his home state.  Income is reported and taxes paid accordingly to his home country.  No RP taxes would be due or payable.

The same will be true for my business when I relocate.  I\'m a graphic artist and do all of my business online with clients located all over the US.  I report my income to the IRS and pay US taxes.  When I relocate to Ilocos Sur I\'ll continue doing business with my clients.  I\'ll report that income to the IRS and pay any tax due when I file my tax return in April of each year.  No tax will be paid to the RP since my business is not connected to the RP. 

That\'s my story and I\'m stickin\' to it.     ;)   ;D

Gray Wolf:

--- Quote from: B-Ray on April 23, 2010, 12:55:39 PM ---QUESTION: What does a Country have to do with ~~YOUR~~ life when your living abroad?

Got an online business in a ~~TAXING~~ Country, move it to a Country your not living in and no taxes from abroad income! What\'s the problem????

Dealing with a TAXING Country living abroad, therefore receiving ZERO benefits as a Citizen except your passport.................not going to happen here!!!  ;D
B-Ray

--- End quote ---


Easier said than done.  Perhaps that might work with a corporation, but not as a sole proprietorship, such as my situation.  I may be wrong, but I believe you would have to meet residency requirements to register a sole proprietorship in a foreign country.  

The up side is that even after I start drawing my SS, I don\'t plan to make enough extra money from my online business to be taxable.  As long as I keep my reported income low, I won\'t have to worry about the IRS knocking on my door.  There are ways to make this happen without going to all the trouble of attempting to relocate your business name to a foreign country to evade taxation, but they don\'t make it easy to understand.   ;D

From the IRS website:

http://www.irs.gov/publications/p17/ch11.html#en_US_publink1000171896

\"How Much Is Taxable?

If part of your benefits are taxable, how much is taxable depends on the total amount of your benefits and other income. Generally, the higher that total amount, the greater the taxable part of your benefits.
Maximum taxable part.   Generally, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.
    *
      The total of one-half of your benefits and all your other income is more than $34,000 ($44,000 if you are married filing jointly).
    *
      You are married filing separately and lived with your spouse at any time during 2009.\"  

...blah, blah, blah....   Why do they make it so freakin\' hard to understand?   ???   I know, I know.  We\'re not supposed to be able to translate it.

But it does appear there is an amount of additional income that you may earn without paying taxes.  This dollar amount will vary from individual to individual.  If anyone can make heads or tails out of the IRS publication, please share it with the rest of us.  I\'m getting a headache just trying to read all of their goggle-di-gook.     ;D

As an aside, I did send a request by email to a CPA friend asking about the break point.  When (if?)  I receive an answer from him, I\'ll post the response.   :)

Gray Wolf:
Okay, boys and girls.  I received the response to my request for info from my CPA friend in California.
Below is his detailed explanation.  

It\'s up to each individual to do his or her own calculations to determine how this will affect them.  Don\'t ask me.  I\'m still trying to figure out my niche in this mess.   :P   Good luck!    :)

*****
Jack,
 
As in most things in the US tax system, the answer to your question is \"It depends\".  So here goes on my explanation of the current taxability rules regarding social security.  You can quote me on the board if you like:
 
A taxpayer whose \"provisional income\" - i.e., modified adjusted gross income (modified AGI, see below) plus one half of the social security benefits (including Tier 1 Railroad Retirement benefits) received - for a tax year exceed either of two threshold amounts is taxed on a portion of social security benefits received that year, as follows:
 
Tier 1:  If provisional income exceeds a \"base amount\", include in gross income the lesser of:
.....50% of the social security benefits received that year; (Code Sec. 86(a)(1)(A)) or
.....50% of the excess of provisional income over the \"base amount\" (Code Sec. 86(b)(1)(B))
 
\"Modified AGI\" means AGI: (1) determined without regard to the social security benefits; the deduction for qualified education loan interest; the pre-2010 deduction for higher-education expenses; the exclusions for foreign earned income and housing costs, savings bond proceeds for education expenses, employer provided adoption assistance, and income from sources within U.S. possessions and Puerto Rico, and (2) increased by the amount of tax-exempt interest received or accrued by taxpayer during the tax year.
 
The \"base amount\" is $32,000 for married individuals filing a joint return; zero for a married individual filing a separate return who doesn\'t live apart from his spouse for the entire tax year; and $25,000 for all other individuals, such as those filing as single, head of household or qualifying widow(er).
 
Illustration: G\'s modified AGI for the year consists of pension income of $15,000 and $3,000 of taxable interest and dividends.  His social security benefit is $12,000.  He\'s married and files a joint return.  His wife has no income.  The sum of their modified AGI ($18,000) plus one-half of his social security benefit ($6,000) is $24,000.  This is less than their base amount ($32,000), so no part of his social security benefit is taxable.
 
Tier II:  If provisional income exceed an \"adjusted base amount\" include in gross income the lesser of:
.....85% of the social security benefits received that year; or
.....the sum of: (a) the amount included under the above 50% rule or, if less, one-half of the difference between taxpayers \"adjusted base amount\" and \"base amount\", plus (b) 85% of the excess of provisional income over the \"adjusted base amount\".
 
The \"adjusted base amount\" is $44,000 for married individuals filing jointly; zero for a married individual filing separately who doesn\'t live apart from his spouse for the entire tax year; and $34,000 for all other individuals.
 
Caution: Any spike in income, e.g. from the sale of stock or a mutual fund, or a retirement plan distribution, may subject a taxpayer to an unexpected tax on his social security benefits, if the extra income causes him to exceed his base or adjusted base amount.
 
I hope that helps Jack.  It ain\'t rocket science but it isn\'t possible to give people pat answers to tax questions.

*****


I hope this helps everyone.  As for me, I\'m going to take some aspirin for my aching head and see if I can make sense of it.   ;D  

But seriously, please consult a CPA or other tax professional to determine how this affects you and any additional income you may produce.  If I were you I would not allow a \"friend\" who you \"think\" understands this \"good enough\" prepare your tax form.  Consult a certified pro.   ;)

pgoyette:

--- Quote from: Gray Wolf on July 04, 2009, 08:38:43 AM ---For the record, seven states have no state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming. Two others, New Hampshire and Tennessee, tax only dividend and interest income.

--- End quote ---

Thanks for this thread!  While it is somewhat old, the info is exactly what I was looking for!

So I\'ve decided to move from California to Nevada for a few months before leaving the states permanently.  I\'ll re-register the car, get a new driver\'s license, move bank accounts to a Nevada branch and update \"last address on file\" for all the investments and brokerage accounts, etc.  Maybe even find a mail-forwarding service for account statements, etc.

I can\'t avoid US federal taxes, but I\'ll be darned if I\'m going to send another 5% or 10% to Sacramento!   :)

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