5 Tax Tips For Expats With Small Businesses

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(Newswire.net — May 29, 2020) — Running a small business abroad is not unheard of, it is actually a large trend with Entrepreneurs. Sometimes this helps with lengthy visa processes, or visa requirements, or even just enjoying the lifestyle of an expat. Well, abroad or not, the IRS still needs paid. There are tax saving notions associated with running a business from abroad. 


Certain precautions will decrease tax liability, but they are specific to being an expat, and knowing what to do with that information. Legal proceedings always need care, especially official documents like taxes. To avoid a mistake, come into the situation with a focused knowledgeable mind. 

1. Take advantage of expat tax exclusions. 

If you file your tax return in a country different than that of your citizenship, then you are living abroad. Having lived in this location for 330 days out of the last year is also a way to decide your status. 


The IRS has many exclusions that apply to expats. These make doing taxes a little less daunting. A popular exclusion is the FEIE, or Foreign Earned Income Exclusion. This form #2555 will help expats who are abroad to not include up to $100,000 of profits. 


Another exception to consider is the Foreign Tax Credit. This form #1116 helps those living in a country that has a higher income tax rate than the U.S. Using this tax cut, you can claim every dollar you pay to foreign taxes and gain a tax credit on your U.S tax bill. The credits even roll over to future years.

2. Keep single-member LLC’s in mind. 

When a corporation has a one owner and are LLC’s, their location of registration is important. By filing as a single-member llc with a business registered in the U.S., they will consider you a ‘disregarded entity.’ You must become an entity by applying with form #8832.


This takes away the need to separate company reports and revenues from personal tax forms and other personal tax advantages to having an llc for expats, even if its just for a business that provides Botox services.

4. The IRS can see bank balances. 

When holding a foreign account and being a U.S. citizen, it is required to report the account. Of course, there must be a substantial amount in these accounts, $10,000, and any bank account you have control over qualifies. This means that id you sign for the account, but the account isn’t in your name, you are still liable to report it. 


This goes to say that you should not try to escape taxes. That is one of the best tips anyone can give an expat with a small business. 

4. The IRS expects business success to be reported. 

When a business or a persona’s assets which includes companies reaches $200,000 of worth, it needs to be reported to the IRS. This rule is laid out in the Foreign Account Tax Compliance Act. Savings are included in a person’s assets, as well as investments, so keep a valid log of your asset worth in total. 

5. Social security taxes still need paid.

All sole proprietors who own a single LLC in the U.S. still are required by law to pay Social Security taxes. This is only the case if the business is registered in the States. If the company is registered abroad, there is no legal requirement to pay Social Security taxes.


Many countries have a Totalization agreement in place which means you do not have to pay two social security taxes for separate countries. 

Final Thoughts

It is a bit complex to begin filing taxes as a small business owner, let alone an expat. The IRS has a plethora of information on the process and professionals can always be contacted for further support. Do not rush through this process, a mistake with tax forms can certainly become costly.