quote:

Originally posted by Callilucy:
Although I doubt I will be an expat anytime soon I find this topic pretty interesting and its reassuring that should I need help on such a topic there is a place to go where the advice makes more sense than an IRS webpage.

Money, cash, hoes, as the kids say. That's how expats roll.

I don't really know much about this S corp stuff. But can't you just pay yourself a salary? Or maybe reorganize your company so that it works out that way?

quote:

Originally posted by Not the first Travis:
Yeah. One more note on the (daunting) "to do" list is a call to the guy who does my taxes. I hope he has some expat clients.

If he is not well versed, then find someone else. I've been shocked about how little generalists know about this area. Coop, Sophie and I are just individual tales with one moral: get someone who knows there shit!

quote:

And thanks for the link and all the rest of the info. I *think* I will probably qualify....but still sorting out the Visa and residency issues. Ironically, I think I'm going to need a "retirement visa", so I can establish residence, so I can work from another country for US-clients. But I may not be old enough to qualify for a "retirement visa".

That was part of my point: For the 2555, you don't really need a "resident" visa. While I had a non-rez visa in the UK, I did not have to document any of this with the IRS. Nothing. There are anecdotal experiences out there about host country illegal people qualifying.

Best if you discuss this before you leave! E.g.: With the 2555, it is very calandar year oriented. If you spend a 20 months, March 2000 to Sept 2001, as a resident elsewhere, you do not qualify for either 2000 or 2001! But if spend just under 12 months outside the US correctly (Jan 01, 2000 to Dec 02, 2000) you do qualify. Silly, but the rules.

Can we ask what country you are looking at?

Oh, did I mention, seeks professional advice?

quote:

Originally posted by Stoo:
I don't really know much about this S corp stuff. But can't you just pay yourself a salary? Or maybe reorganize your company so that it works out that way?

Nah. As the salaried employee of your own S corp, it is pretty much impossible to meet the foreign tax home qualification. The business, by its very nature, will be U.S. state-based rather than foreign-based. The best you could do is try and pay yourself like a contractor working for your own S Corp on a project-by-project basis. But as you're also a shareholder, those contractual payments can easily look like dividends to the IRS, and thus twice taxable.

quote:

Can we ask what country you are looking at?

I think Travis has mentioned it in other threads, but if not I'll blurt it out anyway: Mexico. And if I'm not mistaken he currently works on consulting projects for right wing conservative militia groups looking for media exposure. Or was it the beef industry? I can't recall. One or the other.

quote:

Originally posted by Continental Op:
The business, by its very nature, will be U.S. state-based rather than foreign-based.

But that does not matter, as I understand it. As I was myself paid by a US company. Sophie too. I don't understand the difference you are implying.

Holy shitstorm of info. You guys are being waaaay generous. I think I just hijacked this thread and it should be re-named "How to finally stop funding US invasions into other countries by moving to another country".

THANK YOU!

Seriously, as I understand it so far, my situation will be super-simple (relatively) as far as this part of it goes. I've always been too lazy to create an S-Corp, am a sole proprietor, and I ....ummm.... clearing the few other hurdles that remain will prove easily doable, I think. Thanks again!

quote:

Originally posted by Stoo:
I don't understand the difference you are implying.

I'm not applying it to your situation. You two are working for companies owned by third parties. It was more aimed at Travis, who I thought might be running his consultation business as an S Corp. So I was speaking rather of the problems established S corps can cause for sole proprietors who own them when they try and move their businesses abroad.

For instance, John Doe lives in Oakland and makes paper mache ducks for lonely housewives. One day, after a particularly angry phone call from a housewife who poked herself in the eye with said paper mache duck, John Doe goes to see his lawyer. The lawyer suggests to John that he limit his liability by incorporating his paper mache business. John then goes to an accountant who recommends an S Corp. Since John is just one guy and there's no property involved, the accountant says, it makes a lot more sense than creating a C Corp or LLC.

The accountant fills out all the necessary paperwork for John, names John as the registered agent for the S corp in the state of Cali, as well as the sole stockholder, and registers the corporation with both the state and the IRS. John gets an EIN number, goes and opens a bank account and merchant account in the S Corp's name, and goes back to making paper mache ducks as "Paperducklings, Inc." John has monthly corporate meetings with himself and pays himself a handsome salary. He is named "Employee of the Month" by his S Corp 18 months in a row.

Then, one day, John starts flipping through picture books of Crete. He thinks to himself, "You know, they have a postal service in Crete. Why the hell am I living here in Oakland when I can make the ducks in Crete and sell them over the internet to housewives in the U.S.? And look at this! Expatica.com says my first $80k in sales won't be taxable!"

The problem is, John must first dissolve his S Corp. If John continues to do business as Paperducklings, Inc (an S corp filed in the State of California), and goes to live in Crete, continuing to work as an employee of Paperducklings, Inc, then his first $80k will remain taxable. Why? Because his "tax home" will remain Oakland regardless of the fact that he lives on Crete.

In order to move his tax home to Crete, John must dissolve the the S Corp (or have his accountant do it for him), move to Crete, change the business address on his web site, alert his customers, and leave the Oakland-based Paperducklings, Inc behind. Once he's done that, and he's just John Doe working for John Doe again, without any corporate meetings or employee of the month stickers, the first $80k in profits made through the sale of his paper ducks will be non-taxable. Doesn't matter if the ducks are bought by housewives in Oakland or Knossos.

In other words, a lot of sole proprietors have themselves set up as LLCs or S Corps in the States. But they'll need to dump those businesses and become regular old self-employed bums again in order to met the IRS's "tax home" criteria for the foreign-earned income exemption.

Again, I just brought it up because I figured Travis might be currently running his business as an S Corp. Looks like that isn't the case, however, so his transition process should be pretty easy.

Right wing militias, paper mache' ducks, and beef! It's what's for dinner!

In fairness, Co-Op did know some of my specific crap/tawdy background, so he had some insight into how best to answer my naive, uninformed question. Even so! The conversation was hugely illuminating and I learned a lot, so thanks to you both as well Sophie and Stoo. (And yes, Stoo, I'll get a professional with experience to sort things out. )

Hopefully the dailogue/tangent I created here will help somebody else out!

quote:

Originally posted by CoOp:
Travis, your biggest problem in the beginning will be claiming foreign earned income. Your consultation will still be exclusively with U.S clients, so you'll either have to a.) get that B&B Flophouse up and running so that some of your income is foreign earned, or b.) find some Mexican clients. It isn't too hard, of course, as the IRS doesn't specify how much income must be foreign-earned. They only mandate that some be foreign-earned.

I doubt either of those will be difficult to establish.

Sorry for the thread hijack! Back to just old regular "How to become an expat" questions.

P.S. Wait! I was insulted earlier! For your information, Callilucy cheated others recently by posing as an adolescent so she could get transferred from the E.R. to a private room more quickly. Take that, bitch!

quote:

Originally posted by Not the first Travis:
P.S. Wait! I was insulted earlier! For your information, Callilucy cheated others recently by posing as an adolescent so she could get transferred from the E.R. to a private room more quickly. Take that, bitch!

I was bleeding profusely at the time and I gave my correct age when eventually asked. I just allowed others to go forward on an incorrect assumption. It's the karmic payout for having to endure 'pipsqueak' jokes for 25 years.

As for becoming an expat.... I was reading an article today about selling crafts over the internet and am now thinking I need to find my equivalent to paper mache ducks, follow all of your fabulous advice and live somewhere different (such a place will have to allow my cat and dog entry, or I could dress them up as my furry, ugly children and sneak them in).

My respect for Callilucy's secret agent BOOTCOM ninja skills never ceases to amaze me. I bet she talked them into shipping Whalewatcher a case of valium, too.

quote:

Originally posted by Not the first Travis:

In fairness, Co-Op did know some of my specific crap/tawdy background

This is true. I've been stalking Travis and his circle for quite some time and have thus been able to gather a larger amount of intel. Nothing too tawdry. They all have interesting gang names, but mostly they just hang out at Denny's a lot.

quote:

As for becoming an expat.... I was reading an article today about selling crafts over the internet and am now thinking I need to find my equivalent to paper mache ducks, follow all of your fabulous advice and live somewhere different

In all seriousness, this little aside into the Foreign Earned Income Exemption is probably one of the most frequent topics for most would-be U.S. expats. "But how do you make money?" is probably the question I get asked most often, and it is closely followed by "So do you still have to pay taxes?"

It's a good aside. The only problem is, as Stoo and Sophie point out, my advice only really pertains to the self-employed. If you're working for a U.S. or foreign company, your experience will differ vastly. If, however, you're into making paper mache ducks on a project-to-project basis...

quote:

Originally posted by Stoo:
My respect for Callilucy's secret agent BOOTCOM ninja skills never ceases to amaze me. I bet she talked them into shipping Whalewatcher a case of valium, too.

Actually Stoo, I'm currently dealing in vicodin. If you need a reference for how good the stuff is, ask crackerjillian.

I am currently open to any and all ideas for Callilucy's International Crafts Emporium. Please help a ninja out.

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In order to move his tax home to Crete, John must dissolve the the S Corp (or have his accountant do it for him), move to Crete, change the business address on his web site, alert his customers, and leave the Oakland-based Paperducklings, Inc behind. Once he's done that, and he's just John Doe working for John Doe again, without any corporate meetings or employee of the month stickers, the first $80k in profits made through the sale of his paper ducks will be non-taxable. Doesn't matter if the ducks are bought by housewives in Oakland or Knossos.

This is my understanding as well.

quote:

The only problem is, as Stoo and Sophie point out, my advice only really pertains to the self-employed. If you're working for a U.S. or foreign company, your experience will differ vastly.

Also in agreement here as well. One may not qualify depending on how the arrangement works with your employer.

Take particular care with the 2555. If you spend any significant time back in the US it could have the potential to haunt you as well. Stoo has detailed it out pretty good here once or twice.

And, don't forget that just because you may get an exemption from US taxes, you could still be looking at foreign taxes which in many cases (freakin Australia) could be worse.

Oh, yeah. One more very important thing Travis. If you're selling paper ducks over the web nobody probably really cares if its a Mexican business. But, in my line of work, and possibly yours, there are clients who don't want to deal with the legal issues associated with dealing with a foreign business.

So, you may end up with two entities. A corporation in the States for some clients (and no tax breaks) and a Mexico based business for the others.

quote:

Originally posted by halfnine:
Oh, yeah. One more very important thing Travis. If you're selling paper ducks over the web ....

Thanks for chiming in, halfnine! I was hoping you'd show up.

(Just to clear up the rampant confusion about what I do and how it's de-railed this thread....)

I make paper ducks. In my mind.

I'm an "idea guy" in the advertising game. I send shitty-ass paper-duck ideas to clients wherever they happen to be. Those magnificent ducky creations get put up on conference room walls in lovely locales like NYC/SF/LA/CHICAGO and then get shot out of the sky by REALLY, REALLY, REALLY SMART people who want to see more ideas.

More ideas? You pay my day rate? You betcha!

It's a brilliant game if you can stomach it. Especially if you can do it without ever being in that room.

That's right. I do God's work.

quote:

Originally posted by Not the first Travis:
I'm an "idea guy" in the advertising game.

Halfnine brings up a good point, but in your situation I don't think anyone will mind that you're located in Mexico so long as you bring a U.S. telephone (and possibly fax) number along with you (cell phone, Vonage, Skype, or otherwise.) You'd know better than we would what your clients are willing to put up with. Worst case scenario, set yourself up a U.S.-based mail forwarding address before you leave.