Posts Tagged ‘expat taxes’

2017’s US taxes got borked and the IRS sent me back a notice that I owed them A LOT OF MONEY™ the reason for which THEY WILL NOT TELL YOU™ so you simply have to figure it out yourself and redo everything, paying interest penalties on money you never owed in the first place because it took them 9 months to get back to you because they are slow and they suck.

Anyways, in dealing with the fallout, I found a neat thing called the US/Chile Social Security Totalization Agreement which pretty much absolves you of the need to pay self-employment tax if applicable. 

There is no official tax treaty (yet) between the USA and Chile, but fortunately this agreement, in combination with the FEIE, should help eliminate a good deal of your tax burden if you are a self-employed vagabond in Chile.

Long time since I have posted anything.

So many people have written in or told me how much they enjoyed my writing and how much they miss it. For which I am humbled. Unfortunately, it only came out when I was angry. And I’m just not angry anymore. Nothing in Chile has filled me with the pure, seething, all-consuming anger that seeps from every pore in the same way that Uruguay did.

I deal with anger, awkwardness, and general malaise by trying to bury/hide it in wit and sarcasm; maybe it’s age, maybe it’s environment, maybe it’s the fact that I have stopped watching the news. I’m just not a fission pile of daily rage anymore.

So, what’s been going on with me? Things have coasted along more or less smoothly bouncing back and forth between the USA and Chile over the past few years. I’ve gotten to the point where I am applying for Chilean citizenship. Still waiting on the t’s to be crossed and the i’s to be dotted regarding my Chilean tax situation, which got botched, but it’s nothing that cannot be corrected, and as soon as it’s rectified I can submit all the requisite poop to become an official Chileno.

The tax stuff came down to the SII (Chilean IRS) not having any idea what to do with my situation as a digital vagabond with so many different flags in so many different places. It took them a year to get back to me regarding just how to file, but here’s the cool thing: Unlike the US IRS, who is content to jail you for even a minor breach of rules they do not even understand and cannot (proven time and again) even supply consistent results for, Chile’s IRS will write you an official signed, stamped resolution about exactly how to file, with which you can show them if any issues arise. They just take their good sweet time doing it.

End result is that because of a combination of me paying taxes to the Empire, and because of a neat new loophole I found, my tax burden in Chile is pretty well negligible. I will pay more in accountants’ fees than taxes. Which is fine by me.

What are my plans for the future?

I’ve got a thing in progress with Polish citizenship by ancestry which may or may not bear fruit; I’ve located the missing link, and I merely need to find a record of his birth in Poland. Therein lies the challenge, because Nazis. I have no plans to live in the EU but you can’t ever say no to an extra passport. Well, maybe summertime in Berlin would be nice…

Puerto Rico is the next destination of choice after my Chile chapter is done. For an American digital vagabond, the tax breaks simply can’t be beat, and you get so much more benefit to much less time put in. 6 months of exile per year, right next to home, without technically “having to leave home” in order to absolve you of your US tax burden, plus no more capital gains taxes— where do I sign and how much of my blood would you like? One mortal soul, coming right up.

 

I wrote this for part of my book but I figured it’s stuff that everyone ought to know so… enjoy!

The Foreign Earned Income Exclusion, or FEIE, is a benefit which excludes an amount from your taxable gross income. At the time of writing, for 2013, it gives you an exemption of $97,600.00 per person, provided that you meet certain requirements. And, in addition (yes, there is actually an “in addition”) you can also exclude or deduct certain amounts for the Foreign Housing Exclusion (FHE).

The FEIE is applied based on days abroad, so the total amount is divided by 365 and then multiplied by the number of days you were gone. So, for tax year 2013, $267.40 per person, per day, of your gross income can be tax-exempt by simply living in a foreign country.

According to the IRS website, you qualify for the FEIE if you are:

  • A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
  • A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

And, for that “in addition” part about housing, you may also deduct many of your housing expenses. Whether you may exclude or deduct depends on whether or not you are self-employed; the difference between exclusion (making a portion nontaxable) and deduction (removing from taxable income) is fuzzy at best, and it’s magical mystery voodoo best left to your accountant.

The basics, in the IRS’ own words: “Housing expenses include your reasonable expenses actually paid or incurred for housing in a foreign country for you and (if they lived with you) for your spouse and dependents. Housing expenses do not include expenses that are lavish or extravagant under the circumstances, the cost of buying property, purchased furniture or accessories, and improvements and other expenses that increase the value or appreciably prolong the life of your property.”

This means, in plain English, that you may deduct the following from your gross income:

  • If housing is provided by your employer, its fair rental value.
  • Rent.
  • Utility bills, with exception to telephone.
  • Cost of any repairs.
  • Property or renter’s insurance.
  • Any nonrefundable fees for securing leasehold.
  • Any nondeductible occupancy taxes.
  • Parking fees.
  • Furniture and appliance rental.

And, in addition to that, if, for example, you are working overseas while your family remains back home, you may also apply the second household’s similar expenses to the FHE.

Real estate investment tax advantage:

If you are an employee of your own business, and that business purchases a property abroad and houses you in it, you may then use the FHE to deduct its fair market rental value and general upkeep from your personal gross income.

The business may also write off the purchase as a legitimate expense, and may also be able to write off its depreciation and other expenses that do not fall under the personal FHE. What a deal!

Corporate stipend tax advantage:

Your employer may issue a tax-deductible, per-diem stipend to you, the employee, to help with the pains of living abroad. This may or may not be tax-advantageous depending on the circumstances but may help to pad up your FEIE if you do not earn $97k by taking it from the business and putting it under your income.

Further information can be found on the IRS website (http://www.irs.gov) and the FEIE and FHE may be filed in your tax return using Form 2555.