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January 6, 2017 - Phil Hodgen

Digital Nomads and Eliminating Social Security Tax

American Digital Nomads With U.S. Corporations

This article is for entrepreneurs who, for valid reasons, need to have a U.S. corporation to operate their businesses. Maybe the customers are in the United States. Maybe there is an office full of employees in the United States. Maybe banking and financial transactions are simpler when there is a U.S. corporation.1

The entrepreneur, however, decides to live abroad. Let’s use the phrase “digital nomad” (the current favorite appellation). This person is going to travel from place to place, working for the U.S. business, but staying below the radar in the various foreign countries.... continue reading

Americans Living Abroad Friday Edition
January 3, 2017 - Phil Hodgen

How to Mail Your Form I-407 (And Why)

Conclusion

A joke should always be told punchline first. Right?

Here’s the conclusion of this little essay:

If you plan to file Form I-407 to abandon your green card, do it in person. If that is impossible, do not just mail in the form. Send it by certified mail, return receipt requested.

Tax Effect of a Green Card

The U.S. tax effect of holding a green card visa is that you are considered a “resident alien” until the visa status is terminated. This means you must file a resident’s income tax return every year (Form 1040). You are taxable on your worldwide income, and must satisfy all of the paperwork requirements imposed by the U.S.... continue reading

Expatriation
December 23, 2016 - Phil Hodgen

The Green Card Holder’s Gift Tax Loophole

Green card holders living abroad can have a weird hybrid (tax) life. They are U.S. residents for income tax, but can be U.S. nonresidents for gift tax purposes.1

This is a useful tax planning tool. We use it for people who wish to abandon green card status because they no longer wish to live in the United States. By making large gifts, they can avoid covered expatriate status for purpose of the exit tax. But any green card holder who is permanently settled abroad can use this to solve cross-border tax problems.

Definitely a U.S. Resident for Income Tax

A person holding a permanent resident visa (aka the green card) is a “resident alien” for income tax purposes.... continue reading

Americans Living Abroad Friday Edition
December 20, 2016 - Phil Hodgen

Make Big Gifts in the Year Before Expatriating

Bottom Line Up Front

If you make a large gift before expatriation and in the same year, you will pay a large gift tax. The unified credit does not apply to you.

Make your big gifts in year 1, and expatriate in year 2.

Objective: Avoid Covered Expatriate Status

A covered expatriate is someone who has a net worth of $2,000,000 or more when relinquishing U.S. citizenship (or giving up a long-held green card).1

If you have a net worth of more than $2,000,000 but less than $7,500,000, it is possible to give away enough assets — with no gift tax — to avoid covered expatriate status.... continue reading

Expatriation
December 9, 2016 - Phil Hodgen

Who’s On the Hook for Withholding Tax Failures?

This week I want to cover a real estate situation, and the perils of being a withholding agent when there is a foreign seller of U.S. real estate.

Foreign Corporation as Seller

From time to time I see foreign corporations as direct owners of U.S. real estate. This can work from a U.S. tax point of view (i.e., it can block the application of estate tax on the real estate if the shareholder dies).

But it creates a host of practical problems. And solving those practical problems will sometimes beget more practical problems.

This time I am going to explore the fine points of withholding tax on the sale of U.S.... continue reading

Friday Edition Nonresidents with US Activities US Real Estate Investments