Posts Tagged ‘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.

 

Not a problem. Doing my own taxes and looking for information on filing an extension from abroad, I learned that US citizens living abroad get an automatic 2-month extension on their tax return due date, making the official deadline June 15. One simply need attach a statement to their tax return explaining why they qualify. Check out this link for more details.

U.S. Citizens and Resident Aliens Abroad – Automatic 2 Month Extension of Time to File

You may be allowed an automatic 2-month extension of time to file your return and pay any federal income tax that is due. You will be allowed the extension if you are a U.S. citizen or resident alien and on the regular due date of your return:

  • You are living outside of the United States and Puerto Rico and your main place of business or post of duty is outside the United States and Puerto Rico, or
  • You are in military or naval service on duty outside the United States and Puerto Rico

If you use a calendar year, the regular due date of your return is April 15, and the automatic extended due date would be June 15. If the due date falls on a Saturday, Sunday, or legal holiday, the due date is delayed until the next business day.

Even if you are allowed an extension, you will have to pay interest on any tax not paid by the regular due date of your return.

This is a bit of a bonus (though the lesser of two evils is still evil) since the IRS also announced that it is closing all of its overseas offices, and expats will no longer have access to local assistance with their tax questions.

Holy crap, have a look at this–

Total trip price: $933.35
Airfare: $330
Taxes and fees: $603.35

2014-09-04 09.47.59 pm

The IRS has now finally declared its official stance on Bitcoin: It is to be treated as a capital asset and not currency, yet will be saddled with currency regulations as well. The first and perhaps scariest bullet point is that any gain made on the value of Bitcoin now must be treated as a short-term capital gain (which could be taxed up to 35%!). So, for example, the early adopters who turned pennies into millions, upon cashing out, will owe millions in taxes. Lovely!

So, the onerous list of bullet points:

  • Bitcoin profits treated as short-term capital gains.
  • Mining of Bitcoins is treated as gross income.
  • Any payment in excess of $600 value must be reported.
  • Any payment of Bitcoins to a contractor must be reported and filed with a Form 1099-MISC.
  • Bitcoin payments may be subject to backup withholding.

You can read all the legalese ugliness here.

 

Thanks to LaserBob for the info.

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.

As I am planning a trip to Japan later this year, I am diving into its history, language, and culture to prepare myself for the culture shock I will inevitably receive. As part of my historical bumblings, I came across some fascinating and ominous parallels. Namely, the rule of Tokugawa Iemitsu from 1632-1651. It’s such fascinating stuff that I am still picking through it and writing until 3:30am…

Iemitu

Iemitsu was the grandson of Tokugawa Ieyasu, the founder of the Tokugawa Shogunate, and the third shogun of the dynasty, the one that finally ran its feudal system into the ground. Ieyasu (grandpa) was famous for bringing peace to the warring fiefdoms of the Japanese empire and expanding trade with Europe. Unfortunately, as all sons of empire who inherit peace, Iemitsu could not appreciate that which he never had to fight for, and quickly began to destroy any and all things good. In 1620 he apparently had an argument with his lover at the time, and murdered him in a bathtub which they were sharing. Charming guy, for sure.

Once Iemitsu got into power, he began his reign by ordering his younger brother, Tadanaga, to commit suicide (for the “dishonorable misconduct” of being favored by his mother for the position of Shogun). Then he installed his friends to important posts, followed by all manner of onerous regulations which all citizens had to obey: from laws about fashion to laws about how farmer women had to wash their men’s feet at the end of the day (not just the act, but exactly how, and who and what must be involved in the process, and mandatory attendance of sisters/in-laws and other weirdness). There were taxes on windows and shelves, head taxes on newborn babies, and hole taxes for burying the dead. Rice, one of the currencies of the time, was also taxed.

Perhaps most disturbing about Iemitsu’s daily regulatory decrees is that he quickly learned how people would go to enormous effort to try and curry favor for special treatment under said regulations, in order to regain simple freedoms which they had previously taken for granted. A fact which he openly exploited as a tool to tamper with alliances among the rich and powerful as well as cement loyalties which kept or expanded his power.

Iemitsu established the sankin kōtai, which forced the Daimyo (regional overlords) to spend part of the year in the capital city of Edo and much of the remainder of their time wandering between Edo (now Tokyo) and their home turf, with all of their samurai and functionaries in tow, which effectively neutered them financially and politically, and often bankrupted them. In addition, the wives and children of the Daimyo were forced to live in Edo and could not leave. Overburden the regional leaders with too much regulation and hold their families hostage…

Iemitsu restricted travel. People needed passports just to go from region to region. Their belongings, clothing, and hair were inspected at various checkpoints. These checkpoints demanded that the female travelers be inspected by female agents, which unfortunately were uncommon. No inspection, no passage. Tough for you. Historical accounts from one such female traveler, Inoue Tsujo, who was a famous writer, recall tales of rough and uncomfortable screenings by haggard female inspectors with strange accents. Is all of this stuff starting to sound familiar yet?

How far we have come in 400 years!!!

Getting_Gate_Raped_By_The_TSA

Iemitsu enacted decrees which kept farmers from being able to consume their own produce– it all had to be cleared by a central authority and “properly redistributed.” Sound familiar? It should be no surprise that this sort of behavior brought about famine.

But it doesn’t end there. Farmers feeling the squeeze of too many taxes, too little food, and too much regulation eventually revolted and joined forces with persecuted Christians to form the Shimabara rebellion which burned brightly for a brief period but was then put down with deadly force in the last great battle within Japan. The rebels holed up in a castle and successfully held off the Shogun’s army, but in the end were starved out and then slaughtered.

After that, Iemitsu felt that the only way to keep things “going well” was to shut off all access to outside influences. Clearly it was outside influence that was causing rebellion, and had nothing to do with his asinine policies. He kicked out and/or slaughtered all the Christians, missionaries, and other foreigners, forbade Japanese from leaving the island, forbade any Japanese on foreign soil from returning to Japan, destroyed any seagoing ships that could be used to defect or travel outside of Japan, and closed the island to trade except for extremely regulated contact with the Dutch East India company. Japan’s doors would be slammed shut to the rest of the world for another 200 years.

It might sound like an awful lot to go through to get to this point but keep in mind that Iemitsu managed to do all of this– turning a prospering empire into a stagnant backwater– in just 3 years! After the quelling of the rebellion and the foreign purge he kept his way for another 16 years by ruling with an iron fist.