Pootie Tang

If I take a contract in Asia, any preferred off shore tax havens to avoid cutting Uncle Sam an deserved check each year? I believe if you're away for more than 330 days / year, you're not liable for federal tax, but I plan on coming back for more than 35 days per year.

slyguy

I would say it's undeserved tax cut for Uncle Sam. IIRC, any money you make out of country as an American citizen is taxable.

Income from Abroad is Taxable

If I make my money from a foreign country with a foreign company, there is no reason that the IRS should get any of it just because I am an American citizen.

Controlled Rest

I wish you luck convincing the government of that. The US is, I believe, the only country that charges it's non-resident citizens tax on income earned overseas.

You do get an exemption on the first $84,000 of income though.

Pootie Tang

ok, so let me muddy the waters a bit. I have dual citizenship - US and EU. You mean to tell me if my check goes to a swiss bank account ( or fill in the blank ), the US still gets taxes after the first 84k?

TonyWilliams

It pains to think how many pilots are using "jailhouse" lawyers to help them with an very important issue. To screw it up could be VERY expensive.

First, whether you like it or not, if you wish to remain a US citizen (i.e., return to the USA before you die), the IRS will tax you for all income over $91,500 for tax year 2010. Please start by reading the actual form and instructions:

IRS Form 2555

Instructions for Form 2555 (2010)

TonyWilliams

Physical Presence Test

To meet this test, you must be a U.S. citizen or resident alien who is physically present in a foreign country, or countries, for at least 330 full days during any period of 12 months in a row. A full day means the 24-hour period that starts at midnight.

To figure 330 full days, add all separate periods you were present in a foreign country during the 12-month period shown on line 16. The 330 full days can be interrupted by periods when you are traveling over international waters or are otherwise not in a foreign country. See Pub. 54 for more information and examples. [my notes... this means you fly a leg from Bumfrack, Foreign country, over the pond to another foreign country.... that day will not count for your 330 days, since you were not in a foreign country, but instead over international waters.]

Note. A nonresident alien who, with a U.S. citizen or U.S. resident alien spouse, chooses to be taxed as a resident of the United States can qualify under this test if the time requirements are met. See Pub. 54 for details on how to make this choice.


Bona Fide Residence Test

To meet this test, you must be one of the following:

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 (January 1–December 31, if you file a calendar year return), or

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 (January 1–December 31, if you file a calendar year return). See Pub. 901, U.S. Tax Treaties, for a list of countries with which the United States has an income tax treaty in effect.

Whether you are a bona fide resident of a foreign country depends on your intention about the length and nature of your stay. Evidence of your intention may be your words and acts. If these conflict, your acts carry more weight than your words. Generally, if you go to a foreign country for a definite, temporary purpose and return to the United States after you accomplish it, you are not a bona fide resident of the foreign country. If accomplishing the purpose requires an extended, indefinite stay, and you make your home in the foreign country, you may be a bona fide resident. See Pub. 54 for more information and examples.

Line 10. Enter the dates your bona fide residence began and ended. If you are still a bona fide resident, enter “Continues” in the space for the date your bona fide residence ended.
Lines 13a and 13b. If you submitted a statement of nonresidence to the authorities of a foreign country in which you earned income and the authorities hold that you are not subject to their income tax laws by reason of nonresidency in the foreign country, you are not considered a bona fide resident of that country.
If you submitted such a statement and the authorities have not made an adverse determination of your nonresident status, you are not considered a bona fide resident of that country.

TonyWilliams

I have the same status. The answer to your question is yes (with a caveat of $91,500 threshold for 2010). You don't have to like it for it to be true.

PLEASE, PLEASE read the actual IRS pubs, and see what the IRS is looking for in their audits:

IRS Audits of Foreign Income

TonyWilliams

Congratulations. You will be liable for taxes on the entire amount.

Thedude

Not necessarily.
I suggest you speak to a tax lawyer (I have) and you will find a huge difference between the physical presence test and bona fide residence test.
You can come back more than 35 days per year and not have a tax liability.

Shrek

Yep.............