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Question for the Money Doctors

Question submitted on Sep 20, 2012.

Question

My questions has a few parts to it. Here is my situation.

My Goal: Find employement that will let me travel and live in various latin american locations

I''m looking for a U.S. company that will let me work remotely while traveling through Latin America. I''m currently a New Jersey resident. When I find a job that will let me do this I want to know how I should structure my move so that I lower my tax burden. Essentially I will be working remotely, from say Brazil, but I will be paying Federal and State income taxes, even though I''m living abroad. Also how can I structure my move so that I can travel throughout Latin America and not necessarily be tied down to one country?

I''m guessing the best option might be to establish residency in a low tax latin american country, or a country that doesn''t tax foreign earned income and then travel at will.

What type of deal suites me best to strike with my employeer? Contract? What''s the best way for them to pay me in order to make things easier?

Answer

Generally speaking, setting up your own business internationally may be a good approach for you.  You would report your income on Schedule C, rather than W-2 wages.  You would have flexibility to work for multiple companies.  You will be entitled to a foreign income exclusion on your 1040 ($92,900 in 2012) provided you are out of the US for at least 330 days.  Any foreign earnings above the annual limit may allow eligibilty for a foreign income tax credit on your US federal tax return, provided you pay income tax in the jurisdiction you are paying tax in depending on the country the income is earned and the tax is paid.  However, NJ does not allow the foreign tax exclusion or credit, so you may want to consider relocating to a state without a state income tax and residing there prior to relocating abroad.

Once you decide where you will be living and/or traveling, consult a tax expert with specific knowledge in that country‚Äôs income tax laws and also a CPA that specializes in tax rules for US expatriates.  Visit www.findacpapfs.com to find a CPA/PFS in your area.


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