Tax Law And Litigation Services For Businesses And Individuals

Do you have to report foreign earned income?

On Behalf of | May 23, 2022 | Tax Law |

Sometimes, when you work in more than one country, you’ll have earnings from both. Depending on the tax laws of the countries you’re working with, you may believe that you only have to file in the foreign country and not the United States.

The truth is that if you are a U.S. citizen or resident, you do need to report your income to the United States even if you didn’t earn it within the U.S. Sometimes, though, you can get exemptions that help reduce your taxes significantly or eliminate them completely.

Whether you are paid off-shore or have foreign business income, you may need to report it

Although you may live in a foreign country for at least part of the year, travel there regularly or only earn income from it, you may still have to pay business and personal taxes in the United States. You may, in some cases, qualify for the Foreign Earned Income Exclusion, which allows you to pay taxes in the foreign country and minimize taxation in the U.S., if your income is low enough. For example, the foreign earned income exclusion is now $107,600 for individuals, and there may be additional allowances for meals or lodging by a foreign employer, as well.

Do you have to pay into Social Security if you have an offshore corporation?

No, you may not need to pay into Social Security. If you incorporate in a country that doesn’t tax your income or draw a salary from a foreign corporation, you may eliminate social tax obligations.

There are many factors that determine if you have to pay taxes in the United States

Depending on where you set up your business, where you live, how long you live in each country and how you draw your paycheck, you may find that you don’t have to pay U.S. taxes at all. This is a complicated area of law, so it’s valuable to look deeper into federal tax laws and to take steps to verify that your company is set up in a way that will best minimize its tax obligations within the U.S. and abroad.