Tax Considerations for Digital Nomads and Off-Shore Entrepreneurs
Forget business travel – more and more entrepreneurs are becoming permanent digital nomads, living and working anywhere and everywhere they want (or wherever they can find a strong WiFi signal).
It’s no wonder this is such a growing trend. The benefits of being “location independent” are extensive: making money while seeing the world, enjoying a low-cost of living while still getting paid in your home currency, and creating a mobile office wherever the heck you want.
But what happens at tax time? Even if you’re working and living abroad, making money from clients back home means you still have to answer to Uncle Sam. In fact, depending on what country you’re in, you may still have to pay taxes to the IRS even if you’re getting paid in a foreign currency!
Here are our top tax considerations for digital pioneers:
1. Figure out the rules
Teaching English in Saudi Arabia is different than tutoring in Paris, at least where Uncle Sam is concerned. Your tax responsibilities will vary depending on where you are in the world and what you’re doing there.
If you’re making money in U.S. dollars, have a U.S. bank account and are getting paid by U.S clients, you’ll definitely need to pay taxes. If you’re a U.S. citizen getting paid in foreign dollars by a foreign government, you may or may not owe the IRS a percentage of your earnings. Keep in mind that you may also need to pay taxes to the government of the country in which you’re working!
Talk to your tax professional, or read what Uncle Sam has to say by clicking here.
2. Track your spending
If you’re traveling while working, or traveling for work, you may be able to write off a lot of expenses you wouldn’t normally be able to at home.
For instance, a travel blogger traipsing around Southeast Asia may be able to write off meals, accommodation and even entertainment costs as travel expenses.
The IRS is interested in knowing where your “official” home base is; i.e., the physical location of the place you do business. If that place is constantly changing, you may do well to keep a permanent residence back home while continuing to travel the globe.
Be sure to snap photos of your receipts and upload them to your Shoeboxed account for easy processing while abroad. Since many countries around the world deal primarily in cash, getting a record of the transaction is more important than ever. Have the vendor hand write you a receipt if need be, then beam it to your Shoeboxed account and assign it an appropriate category.
3. Digitize the tax process
Being location independent makes going digital more than a luxury – it’s an absolute necessity! You’re not going to be able to mail paper receipts and tax documents to your accountant from the middle of Nepal, so the entire tax process needs to happen online.
By creating one-click reports within your Shoeboxed account, you’ll be able to give your tax professional everything they need to finish your taxes swiftly and accurately.
Accuracy is crucial when filing from abroad. While the IRS now offers direct deposit in lieu of paper checks, much of their correspondence still happens through hard copies. If there is a mistake on your return, such as an inaccurate bank account number, the IRS will try to mail you a check instead. A check you won’t get if you’re in working from Siberia!
4. Digitize your mail
Speaking of the perils of snail mail, why not digitize that too while you’re at it? Earth Class Mail is a service that will receive mail on your behalf, open it for you, scan it, and post it to a secure online account.
With Earth Class Mail, you’ll never have to wonder what mail you’re missing back home – you’ll have instant online access as it’s delivered (even from 7,000 miles away).
Are you a digital nomad? How do you manage your taxes from abroad?