Considering the implication of losing jobs and heavy living expenses, many people resorted to relocating, especially in their hometowns, to maximize the reduced travel charges by many countries. As you look for a suitable country to stay in during these challenging times, an expat accountant is what you need to help with your decision’s logistics and impacts.

An accountant that specializes in expatriate taxes can guide you in matters of tax and cost of living and all the requirements to ensure the remote working is flourishing and you’re still able to abide by the laws of the US.

Before relocating to your country of choice, there are a few things you will have to consider to enable your remote working successfully. Consider the following as you plan on moving:

1. The option to move to your chosen country

Most countries do not accept citizens from the USA, mainly when the visit is based on non-essential travels. The restriction is primarily experienced in European countries. Due diligence on the countries and polices of living in your chosen country will enable you to settle in quickly. A perfect example is working in the Caribbean for at least two years if you have a salary of fifty thousand dollars and pay the $1500 fees for Nomad Digital Residence.

2. Continuous tax payment

Having an accountant is vital if you are an expat. The reason for having an accountant is to help out with the requirements of the US government concerning the tax. The tax issues when you are an expat tend to be complicated, and this is where the accountant will guide you on the necessary steps to exempt you from having to be double taxed.

3. Have a valid Visa

Unless your company is relocating you to another country, you have to ensure that the visa you are holding is for the right reason. The best way to ensure you follow the requirements needed for the visa is to contact the US embassy of the country of choice to provide the guidelines needed for your stay.

Some countries have a temporary work visa that you can renew if it expires, while others offer work visas to enable you to be in the country. Some countries can give free entry for at least ninety days, like Croatia, to an easy transition.

Although the migration sector keeps changing and different things are being introduced, as an expat, you are encouraged to be flexible to changes stipulated by the country as it will be communicated. The US government is working extra hard to make the transition easier, especially with the pandemic. 

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The foreign tax credit allows you to pay a lower income tax. You get this tax credit exemption if you’re currently living abroad (but have citizenship in the US) or have investment income abroad. It helps prevent you from double income taxation by your country and the foreign country you work in. So if you’ve moved from Washington State to Amsterdam, you’re likely eligible to claim this foreign tax credit. Through this measure, you’ll pay a lower income tax than the one you could have paid to both countries.

How It Works

The foreign tax credit is an exemption that can reduce your tax burden. Suppose you did pay income tax as a foreigner; you’re eligible to claim it back. For example, if you have an investment in a foreign country and you currently work there, you should pay both income and property taxes. But if you’re a foreigner, you shouldn’t pay both because of the foreign credit card.

The Foreign Earned Income Exemption

If you did earn income from a foreign country, the IRS would exempt you from paying tax of up to $107,600 in 2020. As an expat, your tax burden during the COVID pandemic period should be lower because of the tax exclusion.

Normally if you’re self-employed but live in a foreign country, or earn wages in a foreign country, then you should pay income tax to the foreign government. But you can exclude part or all of your income from a foreign country from the US federal income tax. However, you can only claim one per year. If you claim the foreign tax credit this year, don’t ask for foreign earned income exclusion.

What are the Requirements?

It’s best to understand that not all the taxes you pay to a foreign country qualify to earn a foreign tax credit. To know if you are eligible for the foreign tax credit, ask yourself if you’ve been paying taxes, currently owe the government any tax, or if the tax is part of your income.

If you didn’t claim the refundable tax credit in 2020, reduce your financial burden during this pandemic. The non-refundable is also a good cushion during the pandemic as it will reduce the tax you owe to the government. It will allow you to get enough earnings during this challenging time. If you qualify for these taxes, use Form 1116 to make your claim.

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Hiding Assets

The United States government requires that all assets and income be reported for tax purposes. Hiding assets or money in offshore accounts can lead to hefty tax penalties, some being $10,000 per year rather than a percentage of the hidden funds.

Revoked Passports

Hiding money in offshore accounts is not a good idea. If the US Government finds out, you can actually lose your passport! This would prevent you from traveling outside of the United States, and if you are residing in a foreign country, you may end up stuck there until your tax issues are settled.

Fines and Penalties

Fines and penalties for hiding assets or money in offshore accounts can be up to $10,000 per year. This is a rather hefty fine and is really not worth the cost of trying to be sneaky. Eventually, the IRS and federal government are going to catch up to you, and you can be penalized for previous years as well.

Final Thoughts

It makes no sense to try and hide your assets in offshore bank accounts. The penalties and consequences when the government does find out are far worse than having to pay a little extra in tax in the short term. If you really need the help of lowering your tax liability, purposely sell an asset for a loss.

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