USA freelancing from abroad?
March 13, 2007 7:38 PM Subscribe
Are there any US citizens here who have lived abroad but did freelance or contract work for clients in the States who can share their experiences?
I am a US citizen living in Australia as a Permanent Resident since 2001. I have just gotten some freelance work from the States and need to figure out who I need to talk to on which shores to figure out the details.
My obvious main concern is how I can invoice and get paid. All my US bank accounts were closed for inactivity around 2002-3. Factors that may make a difference:
-I still have immediate family in the states.
-The businesses that I will be invoicing will be fairly large companies, so in the hopes of getting future work, the process would have to be as straightforward as possible. IE, no money wiring, paypal transfers, etc.
My secondary concern is how this affects my taxes. A previous post turned up a great link on the Australian Tax Office site with regards to foreign income, but alot of it is really greek to me. I am estimating the total income would be no more than 10-15k per annum, and I have no other source of income in the states (investments, etc) Should I be speaking to an American or Australian accountant?
Help me hive mind! Thankyou!
My obvious main concern is how I can invoice and get paid. All my US bank accounts were closed for inactivity around 2002-3. Factors that may make a difference:
-I still have immediate family in the states.
-The businesses that I will be invoicing will be fairly large companies, so in the hopes of getting future work, the process would have to be as straightforward as possible. IE, no money wiring, paypal transfers, etc.
My secondary concern is how this affects my taxes. A previous post turned up a great link on the Australian Tax Office site with regards to foreign income, but alot of it is really greek to me. I am estimating the total income would be no more than 10-15k per annum, and I have no other source of income in the states (investments, etc) Should I be speaking to an American or Australian accountant?
Help me hive mind! Thankyou!
Supposedly as an American citizen living abroad, you are still responsible for paying taxes in the US based on icome received here and abroad. You will probably need a US tax adviser.
posted by JJ86 at 8:28 PM on March 13, 2007
posted by JJ86 at 8:28 PM on March 13, 2007
There is a foreign tax credit, and if Australia's taxes are higher, you wouldn't owe the IRS anything, I believe. (I could be wrong.)
Do you have any relatives living in the U.S.? You could probably open a bank account using their address and your Social Security number.
posted by oaf at 9:10 PM on March 13, 2007
Do you have any relatives living in the U.S.? You could probably open a bank account using their address and your Social Security number.
posted by oaf at 9:10 PM on March 13, 2007
And I should really not forget parts of the question while I'm typing an answer. You do have relatives—as long as they and you are fine with them sending mail your way, you should be able to do that.
posted by oaf at 9:14 PM on March 13, 2007
posted by oaf at 9:14 PM on March 13, 2007
IANAA but if you are a US citizen, resident in a foreign country for more than a set period of time (need to check with myaccountant), you are exempt from taxes up to a certain amount. Sorry I'm so vague, but it's all taken care of for me.
I am a resident of the UK but have clients back home in the US. However, I also still have a US bank account that I keep open. This means that the money is going in under my SS#, not under a company Tax ID. Since it is personal income, the exemption applies.
I am not sure, but you may have difficulty setting up a DBA in the States without a physical address. Perhaps if you form a Partnership with immediate family in the states, you can have payments made to that. Tax exemptions will not apply, however, and you will need to consult a US-based accountant. I cannot comment on the tax implications for you in Oz.
(on Preview)What oaf said.
posted by medium format at 2:10 AM on March 14, 2007
I am a resident of the UK but have clients back home in the US. However, I also still have a US bank account that I keep open. This means that the money is going in under my SS#, not under a company Tax ID. Since it is personal income, the exemption applies.
I am not sure, but you may have difficulty setting up a DBA in the States without a physical address. Perhaps if you form a Partnership with immediate family in the states, you can have payments made to that. Tax exemptions will not apply, however, and you will need to consult a US-based accountant. I cannot comment on the tax implications for you in Oz.
(on Preview)What oaf said.
posted by medium format at 2:10 AM on March 14, 2007
"...you are exempt from taxes up to a certain amount."
The first $80K you earn while working abroad is tax free. They keep changing this amount, and I know believe it's $82,500. Additionally, there are various deductions available to US citizens working abroad that aren't permitted if one resides in the US; you can deduct all costs associated with maintaining a residence abroad for the purposes of employment, for example.
Your situation sounds a little more complicated than most ex-pats, who typically have a single employer.
I agree with others upthread - get professional advise. I use KPMG myself, and pay about three grand Sterling for a set of US and UK returns, structured to minimise my tax obligations across the two countries.
"Supposedly as an American citizen living abroad, you are still responsible for paying taxes in the US..."
There is nothing supposed about this. The United States is one of a handful of countries that tax on the basis of citizenship rather than residency.
posted by Mutant at 3:28 AM on March 14, 2007
The first $80K you earn while working abroad is tax free. They keep changing this amount, and I know believe it's $82,500. Additionally, there are various deductions available to US citizens working abroad that aren't permitted if one resides in the US; you can deduct all costs associated with maintaining a residence abroad for the purposes of employment, for example.
Your situation sounds a little more complicated than most ex-pats, who typically have a single employer.
I agree with others upthread - get professional advise. I use KPMG myself, and pay about three grand Sterling for a set of US and UK returns, structured to minimise my tax obligations across the two countries.
"Supposedly as an American citizen living abroad, you are still responsible for paying taxes in the US..."
There is nothing supposed about this. The United States is one of a handful of countries that tax on the basis of citizenship rather than residency.
posted by Mutant at 3:28 AM on March 14, 2007
Mutant mentioned: There is nothing supposed about this. The United States is one of a handful of countries that tax on the basis of citizenship rather than residency.
It isn't just citizens that enjoy the benefits of taxation abroad either. Ask any resident alien who happens to spend the better part of a year working overseas.
posted by JJ86 at 5:47 AM on March 14, 2007
It isn't just citizens that enjoy the benefits of taxation abroad either. Ask any resident alien who happens to spend the better part of a year working overseas.
posted by JJ86 at 5:47 AM on March 14, 2007
Best answer: I've done this. There's lots of ways to manage it, and all of them are no fun.
For the billing, you want to try to get your clients to do a wire transfer to an Australian bank account. It's easiest for you and there's no ambiguity about state and local taxes. It can't hurt to ask.
If your account is in AUD, the bank might kill you on currency conversion fees. Look into opening a US dollar account at an Australian bank, so that you can manage the conversion yourself.
If you can't do that, option 2 is to get your clients to mail checks to Australia. Banks will almost definitely charge you huge fees to clear overseas checks.
If those options don't work for you, you´ll have to go to the US to open a bank account using your parents' address. Call the banks in the area and find out if you can open an account with a foreign address. Also ask at your Australian bank; some international banks like HSBC and Citibank try to make it easier for clients to open accounts in multiple countries.
If they can't do that, you can try to use your family's address. Call before you go to the US and ask them what you need to do to provide proof of address. It's hard to come up with the right papers, but there are ways.
Then set up Internet and phone banking so that you can manage everything from Australia. Ask about whether you can authorize wire transfers to foreign bank accounts when you're abroad. If you need to open diffferent types of accounts (checking, savings, money market), do it all at the beginning even if you only put a few dollars in each account, since you almost certainly can't open new accounts while you're abroad. If you can, get an ATM/Visa card; it'll make it easier to access the account and manage your expense declarations. Get change of address forms, and ask if they work for foreign addresses, or if you need to do something special. Once the account is open and working, send in a change of address to your Australian address.
The tax situation can get really complicated. On the US side, you'll have to declare your income from US sources differently from your income from foreign sources, and allocate expenses for each type of work. You may have to file quarterly estimated tax payments. On the Australian side, you'll have to figure out whether you need to pay Australian taxes on the US part of your income or not. And then you'll have to figure out how to deduct your US taxes on your Australian declaration and your Australian taxes on your US declaration.
Don't even think about doing this without finding two good accountants or tax lawyers, one in each country. Don't expect to find someone who can tell you what the right thing is for your overall situation. You will almost certainly have to explain to each one what you learn from the other about the laws on the other side. If they can research the provisions of the US-Australia tax treaty (if one even exists), that's a big plus. Look into whether you want to set up a company or continue filing as self-employed.
I've always used a US lawyer who's very conservative, out of fear of an audit. All IRS correspondence goes to them, so they can take care of things quickly. I never got audited by following their advice, but once the IRS came after me for a huge late payment penalty, that I disputed. My lawyers took care of the appeals process, and I didn't have to travel to the US with all my records and babysit the process. It cost me money, even though I won the case, but it would have cost me a lot more if I had been trying to deal with the IRS myself.
posted by fuzz at 11:29 AM on March 14, 2007
For the billing, you want to try to get your clients to do a wire transfer to an Australian bank account. It's easiest for you and there's no ambiguity about state and local taxes. It can't hurt to ask.
If your account is in AUD, the bank might kill you on currency conversion fees. Look into opening a US dollar account at an Australian bank, so that you can manage the conversion yourself.
If you can't do that, option 2 is to get your clients to mail checks to Australia. Banks will almost definitely charge you huge fees to clear overseas checks.
If those options don't work for you, you´ll have to go to the US to open a bank account using your parents' address. Call the banks in the area and find out if you can open an account with a foreign address. Also ask at your Australian bank; some international banks like HSBC and Citibank try to make it easier for clients to open accounts in multiple countries.
If they can't do that, you can try to use your family's address. Call before you go to the US and ask them what you need to do to provide proof of address. It's hard to come up with the right papers, but there are ways.
Then set up Internet and phone banking so that you can manage everything from Australia. Ask about whether you can authorize wire transfers to foreign bank accounts when you're abroad. If you need to open diffferent types of accounts (checking, savings, money market), do it all at the beginning even if you only put a few dollars in each account, since you almost certainly can't open new accounts while you're abroad. If you can, get an ATM/Visa card; it'll make it easier to access the account and manage your expense declarations. Get change of address forms, and ask if they work for foreign addresses, or if you need to do something special. Once the account is open and working, send in a change of address to your Australian address.
The tax situation can get really complicated. On the US side, you'll have to declare your income from US sources differently from your income from foreign sources, and allocate expenses for each type of work. You may have to file quarterly estimated tax payments. On the Australian side, you'll have to figure out whether you need to pay Australian taxes on the US part of your income or not. And then you'll have to figure out how to deduct your US taxes on your Australian declaration and your Australian taxes on your US declaration.
Don't even think about doing this without finding two good accountants or tax lawyers, one in each country. Don't expect to find someone who can tell you what the right thing is for your overall situation. You will almost certainly have to explain to each one what you learn from the other about the laws on the other side. If they can research the provisions of the US-Australia tax treaty (if one even exists), that's a big plus. Look into whether you want to set up a company or continue filing as self-employed.
I've always used a US lawyer who's very conservative, out of fear of an audit. All IRS correspondence goes to them, so they can take care of things quickly. I never got audited by following their advice, but once the IRS came after me for a huge late payment penalty, that I disputed. My lawyers took care of the appeals process, and I didn't have to travel to the US with all my records and babysit the process. It cost me money, even though I won the case, but it would have cost me a lot more if I had been trying to deal with the IRS myself.
posted by fuzz at 11:29 AM on March 14, 2007
Oops, instead of "If those options don't work for you, you´ll have to go to the US to open a bank account using your parents' address", that should read "If those options don't work for you, you'll have to go to the US to open a bank account. Try first using your foreign address." Sorry if that was confusing.
posted by fuzz at 11:36 AM on March 14, 2007
posted by fuzz at 11:36 AM on March 14, 2007
I can't help with any other aspect of your query, sorry, but I do disagree with one point in fuzz's comment:
If your account is in AUD, the bank might kill you on currency conversion fees. Look into opening a US dollar account at an Australian bank, so that you can manage the conversion yourself
I only do transfers the other way (Australia --> overseas), but a bit of research showed me that this was actually the cheapest and easiest way to send money. International transfers done like this give excellent rates, in my experience.
Companies can easily pay you to a foreign account using the international banking codes, and honestly I don't know of a good reason why it wouldn't suit them to do so.
I deal with US companies making payments to my (non-US) company on a daily basis, and I can tell you that they all seem to have their own ways of doing things. For some businesses, an international transfer is no problem at all; for others it seems to be all too much - they have 'systems', you know, and they have to send a cheque. You can deposit US cheques in an Australian bank account (as I'm sure you know), but they will kill you on the fees so it's hardly something you want to do on an ongoing basis.
I'm just repeating fuzz's excellent comment now, so I'll stop - but really, go to your local bank in Aust (try a major branch and you may get seen on the spot) and make an appointment to speak to someone. You pay them enough - indirectly - so make them work for you!
posted by different at 1:05 PM on March 14, 2007
If your account is in AUD, the bank might kill you on currency conversion fees. Look into opening a US dollar account at an Australian bank, so that you can manage the conversion yourself
I only do transfers the other way (Australia --> overseas), but a bit of research showed me that this was actually the cheapest and easiest way to send money. International transfers done like this give excellent rates, in my experience.
Companies can easily pay you to a foreign account using the international banking codes, and honestly I don't know of a good reason why it wouldn't suit them to do so.
I deal with US companies making payments to my (non-US) company on a daily basis, and I can tell you that they all seem to have their own ways of doing things. For some businesses, an international transfer is no problem at all; for others it seems to be all too much - they have 'systems', you know, and they have to send a cheque. You can deposit US cheques in an Australian bank account (as I'm sure you know), but they will kill you on the fees so it's hardly something you want to do on an ongoing basis.
I'm just repeating fuzz's excellent comment now, so I'll stop - but really, go to your local bank in Aust (try a major branch and you may get seen on the spot) and make an appointment to speak to someone. You pay them enough - indirectly - so make them work for you!
posted by different at 1:05 PM on March 14, 2007
This thread is closed to new comments.
My clients arranged to buy services from my corporation (treating it more or less as a vendor), and the corporation treated me as an employee (and the payroll service that I used was able to direct-deposit money into banks worldwide). In January, I got a W2 from the corp (and was taxed on that income).
Here in NZ, there are accountants that are familiar with the US tax laws (because the US taxes based on citizenship, not necessarily residence, this is more common that most people realize). I can only assume the same are available in OZ. That's the sort of person who's most likely to give you good, localized, professional advice.
posted by toxic at 8:20 PM on March 13, 2007