US Expatriate Entrepreneurs - States with No Income Tax

US Expatriates are not required by law to maintain a state of residency or pay state income taxes. However many expatriate entrepreneurs need to locate a corporation or other business entity for their  business, but do not want to have to pay state income taxes.  The following states have no income taxes and may be suitable to keep a US presence (and form a corporation or LLC located there for your business) but not subject yourself to state income taxes:

1. Nevada
2. Washington
3. Texas (does have a franchise tax on corporations)
4. Alaska
5. Florida
6. South Dakota
7. Wyoming 

We can assist you in forming a Corporation or LLC in these states, advise you on the best US tax elections to make (Subchapter S corporation election, etc) and the best way to utilize these entities with your offshore business operations.  We have helped hundreds of US Citizens doing business abroad in the same manner with great success.

If you went abroad, or are going abroad, and you live in California, Virginia, New Mexico and several other states that make it very difficult to give up your tax domicile (they want to keep taxing you after you have left the state to live outside the US) you may want to consider switching your legal residency (either before or after you have left) to one of these states and transfer all other indices of residency to one of these income tax free states.  It can avoid big potential problems later with the State you lived in (if it has tough rules on abandoning your tax domicile).

If you have questions email us at ddnelson@gmail.com or visit our website at www.TaxMeLess.com .

IRS Putting Together "SWAT" Team To Go After Transfer Pricing Cheats

Transfer pricing is a booming field of global tax law strategies. It involves multinational corporations that are constantly moving goods, services and assets from one subsidiary to another in different countries, and how they account for these "transfers." By carefully manipulating the pricing of such moves, companies can effectively shift profits to low-tax countries from high-tax ones, lowering their overall tax costs.

Small US Entrepreneurs with operations abroad and foreign corporations also take advantage of this procedure as well as the giant corporations.  The IRS is forming a task force in order to be certain reasonable profits are taxed in the US rather than transferred to  low tax or no tax countries and thus escape US taxation. A good  example is Apple which has accumulated Sixty Billion Dollars in Cash abroad  (in low tax or no tax countries) and will not remit it to the US which would subject it to US taxes,  though they would get a credit for any taxes it did pay (if any) on those funds in other countries.

READ MORE in the ACCOUNTING TODAY ARTICLE HERE

Quick US Tax Facts for Expatriate Business Entrepreneurs Abroad

QUICK TAX FACTS FOR US EXPATRIATES WITH BUSINESSES ABROADBy Don D. Nelson, CPA, Attorney, International Tax Expert

Your earnings from Self employment or Wages (paid by a US employer or one abroad) may be eligible for the $92,900 Foreign Earned Income Exclusion if you qualify. The same is true for wages earned by your spouse. You can be paid a salary from your own US Corporation to work abroad and if you satisfy the requirements still use this exclusion on your personal tax return.

• You can take a credit for foreign taxes you pay on your personal income to your foreign residence country which will in most situations offset your US tax on that income taxed on your US form 1040.
• If you foreign financial assets exceed , you must file form 8938 each year with your US tax return or be subject to a large penalty.
• 
  You must file a US tax return each year on your worldwide income.
• If you operate your business through a foreign corporation, LLC, partnership, etc. you are required to file special forms with you US tax return (5471,8865, )
• If you are an independent contractor under the laws of the foreign country in which you work, you will have to pay US self employment tax (social security) on your net profit unless you live in one of the few countries that have a Social Security agreement with the US.
• If the combined balances in your foreign bank accounts, financial accounts, pension plans (including cash surrender value to foreign life insurance) ever during the year exceed $10,000US you must file the FBAR form by 6/30 following the end of the calendar year or may be liable for a $10,000 penalty for late filing or non filing.
• If you purchase a foreign mutual fund (or have substantial investments in a foreign corporation) you own a Passive Foreign Investment Company and must file a special form each year to report your income or risk adverse US tax consequences when you finally sell out.
• Generally contributions by you or your employer to foreign pension plans (similar to US 401Ks) are taxable on your US return (unless there is a treaty exemption) and you must report the earnings each year. Also, you may have to file form 3520 and 3520A to report that pension fund to the IRS.
• You can open a US IRA or 401k (if self employed) if your taxable earnings from employment exceed the foreign earned income exclusion amount (not to exceed your earnings that exceed that amount.
• If you claim the foreign earned income exclusion you can deduct your housing expenses in excess of up to . This maximum ceiling amount varies by country and can go as high in Hong Kong. Housing expenses include rent, utilities, repairs, maintenance, taxes and house cleaning.
• You can elect with respect to certain legal business entities in most countries to have that entity treated for US tax purposes as a flow through. That means the net income (or loss) of the foreign entity will flow through to your personal US tax return. This allows you to benefit from losses and avoid paying taxes twice on that income. Such an election also allows you to claim any foreign taxes paid by the foreign entity as tax credits on your personal tax return offsetting the US taxes on that income.
• Most allowances for education, housing, transportation, etc. that are not taxable to you in many foreign countries are taxable to you on your US tax return.
• There are no restrictions on taking money abroad, opening a business, buying real estate or bringing money back to the US so long as you file the proper reporting forms with the IRS.
• If you are a US Citizen, per manent resident, or green card holder you assets abroad are still subject to US gift and estate taxes if applicable.
• If you are married to a US nonresident spouse, and live outside of the USA, you do not have to include their earnings, assets, etc., on your IRS tax filings.
  · Download your 2011 US tax return questionnaire prepared expressly for Americans living in Abroad HERE.
  
  

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 Don  D. Nelson, CPA, Attorney (Kauffman Nelson LLP) has been assisting US Citizens , Permanent Residents and nonresidents in over 40 countries around the world with their US tax planning, tax return preparation, and other tax / legal matters for 20 plus years. He offers his clients attorney-client privilege which is not available from other tax accountants. He has helped hundreds of US expatriates around the world “catch up” filing their past late returns most often with little or no tax cost to you the delinquent taxpayer. His main office is at 34145 Pacific Coast Highway #401, Dana Point, California 92629 USA.

• Visit our websites at www.TaxMeLess.com  or  www.expatattorneycpa.com .
• Email Don at ddnelson@gmail.com.
• US Phone 949-481-4094 or US fax 949-218-6483.
• Don's skype name is: dondnelson.

Our Tax Services Include

• US Expatriate and International Tax Return Preparation.
• US Nonresident return preparation.
• Review of IRS International Tax Forms Prepared by you or your tax preparer.
• Preparing and filing tax returns for past years – Our “Catch Up” tax service.
• Surrender of US Citizenship or Green Card Tax Planning and Assistance.
• International Business Tax Planning and compliance.
• IRS Offshore Voluntary Disclosure Reprsentation and filing.
• IRS Audit Representation with respect to Expatriate and International Tax Issues

Mini Tax Consultations are available for you to discuss your situation with Don your personally and secure his counsel resolving your tax problems and future tax planning by phone or email. No personal visit is required. All consultations are subject to the absolut privacy and confidentiality of Attorney-client privilege. LEARN MORE HERE.