Starting a new life overseas?
Excitement is in order, but we all know how stressful a new environment can be… particularly if you’re just getting used to the place.
Neighborhood groceries aside, paperwork can be a real hassle, so let’s see how to join the dots while getting used to working overseas.
Ensure Your Paperwork Is in Order
The importance of understanding tax credits for expats is essential. Understanding how to avoid double taxation comes close second.
In a nutshell, let’s see who needs to pay state taxes.
All U.S. citizens who are considered residents of the state for tax purposes need to pay U.S. state taxes.
A resident is a person who:
- Has lived in the state for any duration during the tax year
- Has a permanent place of residence in the state
- Has immediate family living in the state
- Keeps their voting rights, ID card, or driver’s license in the state
Alaska, Florida, Nevada, South Dakota, Texas, Washington State and Wyoming don’t levy state income taxes. New Hampshire and Tennessee apply income tax on dividend income and interest.
California, South Carolina, New Mexico, and Virginia are the so-called sticky states that require every citizen to pay the taxes, even if they didn’t live in the state during the year.
Exceptions are people who don’t own a property, a bank- or investments account, a card, a driving license, and/or a voter registration, and who don’t have dependents in the state and a mailing address in the state (relatives included).
Streamlined Filing Procedures
Next on, expats should know that they may qualify for the Streamlined Filing Procedures (SFP), that grant certain tax returns.
To qualify for the program an expat needs to:
- Demonstrate that the reason for not filing taxes in the past was because they didn’t know they were required to
- Prove that they have lived outside of the US for at least 330 full days during one or more of the three most recent tax years
- Prove that they haven’t had an abode in the US for one or more of the three most recent tax years
- Mail off a signed statement (Form 14653)
Preventing Double Taxation
Finally, expats can prevent being double taxed on foreign-earned income by applying for one of the following:
- The Foreign Tax Credit (FTC)
Claim a dollar-for-dollar credit on foreign income taxes. You’ll need a foreign tax liability to qualify for this program.
- The Foreign Earned Income Exclusion (FEIE)
If you can pass the Bona Fide Residency test or the Physical Presence Test, you qualify for FEIE. The program excludes a certain sum of foreign-earned income.
- Tax Treaties
The US has tax treaties with some 70 countries. This may be a good solution if you’re planning to find a business abroad.
For expats who’d rather give up their U.S. citizenship, there’s an exit tax to pay, so comparing all options is recommended.
Becoming a Sole Proprietor
If you’re freelancing overseas, founding a sole proprietorship may be a better option. For one thing, some countries treat sole proprietors as entrepreneurs and grand various benefits in an attempt to attract profits.
Local businesses adhere to local tax rules. This means that you need to study all options thoroughly to see which combination may suit you better.
Get Used to Your Schedule
Getting used to your schedule may be difficult at first, especially if there’s a significant time difference (metabolism is not a joke!).
Thankfully, new tech has made the non-biological part less complicated. Therefore, it’s crucial to understand scheduling software for field service work and other types of roles.
Scheduling software automates all scheduling stages, so sometimes it takes a while to learn the ropes.
Ask for Help During Training
As regards onboarding and training, ask for assistance from higher-ups. Nowadays, video learning options have made it possible for everyone everywhere to get up to speed.
eLearning, mLearning, and hybrid eLearning models are quite popular, meaning that all businesses offer at least one of these opportunities.
Understands Your Tasks and Projects
The same applies to tasks and projects. You’ll have a difficult time finding a business still using spreadsheets.
New tech has both simplified and complicated task management and follow-up, so if you’re unfamiliar with the apps your company uses, make sure to train yourself.
Typically, businesses offer various training options. If they don’t, ask for help, as mentioned above. However, some apps are simply considered a standard, so, at the very least, you should make an effort to learn their functionalities.
As for software for managing projects (especially if you’re engaged with frontline work), it’s fine to ask for assistance.
After all, management is a complex process and approaches may vary depending on separate tasks. To avoid being left in the unknown, ask for assistance.
Explore Health Insurance Options
Last but not least, absolutely look up health insurance options. Jointly with taxes, this element is the most complex one and there isn’t a universal tip for every person out there.
To top it off, different countries have different rules in this regard. With digital nomadism gaining momentum, some countries are offering appropriate visas. Some of the typical requirements are a minimum monthly income sum and health insurance, which can be rather expensive.
On the bright side, health insurance companies are coming up with new solutions to uphold the trend, so take your time comparing offers and don’t settle for just any option. After all, health insurance policies don’t come cheap.
Getting By Abroad
This may seem like a lot, but it can’t be helped. Living abroad doesn’t equal being on a holiday: there are obligations and concerns no matter where you’re located.
It is a good idea to connect with the local expat community as these people used to wonder about the same topics when they first moved abroad.
As for the rest, observe and learn. That much, at least, doesn’t change with the location.