6 ms·

Any other Americans avoid things that they might otherwise do due to real or perceived tax complications? I was hesitant to hire a nanny as that would make me

Any other Americans avoid things that they might otherwise do due to real or perceived tax complications? I was hesitant to hire a nanny as that would make me an employer, and add various tax responsibilities. I did a little bit of Robinhood "investing" with a small amount of money during the pandemic just for grins, thinking everything would be neatly wrapped up on a 1099 form, but I accidentally found myself with an unexpected, incomprehensible (to me) "contracts or straddles" 6781 tax form to fill out, all because I made $25 in a specific type of fund. I haven't seriously considered doing digital nomading like the folks in the article but it is something that I might like to try at some point...although the tax issues do scare me. It's not that I don't want to pay the appropriate taxes, I just don't want to accidentally do the wrong thing and then kick off a painful audit.

hayksaakian 5y ago
most people with complex tax situations pay a accountant $500-2000 per year to do their taxes and move on with their life.
- opportune 5y ago
  It’s not just about paying an accountant but also not accidentally doing something that ends up highly taxable. Example: moving to a country without a tax treaty with the US and getting double taxed, at least temporarily.
  - NovemberWhiskey 5y ago
    I had a US citizen colleague who moved from Singapore to the UK and just got absolutely killed on tax - I can't remember the exact details but there was some kind of annual (or less frequent) election he had to make that was correct for Singapore but meant he ended up paying full US and UK taxes on his income with very little relief.
  - doopy1 5y ago
    I thought that in tax treaty situations you only pay the maximum tax rate? So the place you lived/ worked gets their tax cut or the US gets the difference (or something along those lines). Hard to imagine someone paying 70% of their income in taxes just for living somewhere else for a little while.
    - jandrewrogers 5y ago
      It isn't that simple in practice unless your finances are trivial. Even under a tax treaty there are a several circumstances where you'll pay more total taxes than if you solely paid taxes in either country. Tax incidence is determined per income type, it is not based on your total tax return; you can pay more taxes locally than you would in the US and still owe a lot of taxes to the US. Similarly, differences in definitions, recognition, taxation across types of income can differ between countries such that you end up paying taxes that are not recognized by the US and therefore are not credited as taxes paid. It is pretty complicated. The US tax code places an indefensible burden on expats. Also, some States (looking at you California) can require you to pay income taxes even if you live overseas for the entire year.
    - ska 5y ago
      While that's probably right in spirit most of the time for simple taxes, this entirely depends on the tax treaty. Other factors to think about: - not all countries have tax treaties, the default is you owe in both places - tax deferment schemes complicate things (e.g. 401(k)), the countries won't look at this income the same way - some tax treaties require specific actions, missing these may leave you owing - not all income types will be treated the same way in both jurisdiction (e.g. cap gains, rental properties,etc.) - etc.
  - ghaff 5y ago
    Which is the other reason to pay way too much money to an accountant. So you can ask them questions about this sort of thing. (Though you get to obscure edge cases and accountants may not know all the ins and outs of international tax consequences.)
    - opportune 5y ago
      In my limited experience accountants can get even relatively trivial things (like state tax credits for cases of partial residency) wrong. I’m sure there are different levels of quality/attention you can get the more you pay, including talking to pedigreed tax attorneys, but it’s expensive. Personally I think there is a high dollar value in just not having to worry about these kinds of things. If I were entering a complex working situation or moving to another country, I would probably take steps to make things as simple as possible such as ending work in December and starting something new in January, not realizing investment income, putting assets in corporations or trusts to defer any income, etc.
      - ghaff 5y ago
        Absolutely. As far as I know, I've never had issues with my accountant although my filings are such a thick sheaf at this point that, who knows? (And my income sources aren't even that complicated.) I do fear state tax filings are about to get more complicated with some states apparently looking to collect money for even one day business trips. I wish Congress would get off the blocks and pass the minimum 30 day exclusion that's been brought up a couple times.
  - ageitgey 5y ago
    You can also get caught up if you move between countries that have tax treaties but where the tax years don't align on the calendar and where the schedule for paying estimated taxes are different, like the US and the UK. The US tax year runs from Jan - Dec, with a quarterly estimated tax payment schedule for self-employed people. In the UK, it runs from Apr - Mar, with bi-annual tax bills. So there's a point at the end of the calendar year where you owe US taxes (that you should be able to fully wipe out with tax paid to the UK), but the UK hasn't calculated the tax amount yet nor asked for the money yet, so you can't show the US that you already paid those taxes under the tax treaty. So you end up owing two countries taxes on the same money, at least temporarily. tl;dr - everything sucks, hire an accountant
- ska 5y ago
  Depending on the mix of countries, it can be really hard to find an accountant who actually knows how to do it properly. It's also entirely possible that the answer you get is "well, this is how we interpret the updated tax treaty, but nobody has tried it in court so we aren't sure." Usually this stuff is in the details rather than the basic question, but it can be fiddly.
  - ageitgey 5y ago
    So true. I have the simplest mix of countries possible (US citizen / UK resident) and getting clear answers from an accountant on various questions is harder than one might expect because cross-border scenarios aren't always clearly defined in the law. A lot of it comes down to the accountant saying "our firm recommends X as more defensible based on recent changes in legislation, but if you want to do Y, here is why that might also be possible."
- organsnyder 5y ago
  Yep. We have a complex tax situation this year (a first for us), and our accountant has saved us an amount equal to 10x what we're paying him.
- cultofmetatron 5y ago
  checks out. I am a digital nomad. I pay about $300/month to bench to take care of it all for me. They handle day by day accounting and file at the end of the year for me. 100% worth the money.
bogota 5y ago
I really do want to do the right thing but its hard when I am unable to find any clear guidelines. I have been traveling and working outside of the country for over a year now. Ultimately I just set where i live as my parents house and called it a day. The company didn’t want to work with me on doing it properly so im not sure how i would be able to. Additionally they aren’t even paying my state taxes properly because they “don't have it setup” so im being forced to pay tax to a state I have no presence in. This is a company with several thousand people and my situation is not uncommon across the company.
- devoutsalsa 5y ago
  What I did for 2020: - spend 330+ days per year outside the USA - specify that I had foreign earned income (based on the physical presence test) - specified the foreign address at which I stayed the longest - claimed foreign earned income exclusion Before I did any of the above, I paid an expat tax specialist $250 and asked a bunch of questions about how the FEIE works. Worth every penny.
gred 5y ago
You'd probably do it under the table. I once spent a few months working from Spain. Prior to departure, I also wanted to do things by the book, but my tax and visa questions to the Spanish consulate kept getting deflected in that "I'm going to misunderstand your question in a way that makes it clear you should simply use a standard tourist visa instead of making your life harder, but I'm not going to come right out and say that" kind of way. IMO, it becomes a real issue when your travel pattern becomes more "expat" than "digital nomad" (stay abroad much longer, don't move around as much).
- opportune 5y ago
  Glad you brought this up, it really shows that working/visas need to be rethought. Most countries should have no problem if I show up on a tourist visa to stay for a few months but continue to work for a foreign company remotely - and defacto, they don't, as your experience demonstrates - but it's technically not allowed (or even legal?). I'm not entirely sure what kind of loopholes allowing remote work on what would normally be a tourist visa/stay open up, but surely it's preferable for all parties in the "average" case for it to be allowed.
  - deleted 5y ago
    [deleted]
  - prewett 5y ago
    I think the thing with tourist visas is that you can’t work for a local company. (Also you might need to get paid in a non-local bank account.) To work for a local company you need a work visa. In some ways, a standard tourist is still working for their foreign company, they just are using their allotment of get-paid-for-doing-nothing days. Likewise, a guy who wants to workation for a week still is effectively a tourist. At some point you seem less touristy, which is probably why tourist visas are typically around 90 days.
    - ghaff 5y ago
      Some countries (like China as I recall) are strict about getting business visas with a letter of introduction, etc. if you're doing something like attending a conference. But, yes, in general Western countries are mostly fine at least with other Western countries so long as you don't work for a local company.
tshaddox 5y ago
I remember many years ago I bought a small amount of Apple stock for fun, and come tax time, I realized I would need to pay TurboTax like $80 to do my taxes because I had make like $8 of dividends from that Apple stock.
- ghaff 5y ago
  I suspect that there have been some years where I've ended up paying my accountant more to handle some complexity that involved phone conversations and additional forms than the dollar amount of the complexity in question.
kempbellt 5y ago
Definitely. I don't mind paying taxes (for the most part) because their purpose makes sense in a lot of cases, but I hate doing taxes. A single W2 salary is so much simpler. Taxes are automatically deducted and I don't have to think about much. Luckily, I do have a stable residential address that any mail can be sent to, and it is in the same state as my employer, but I am essentially a digital nomad. Able to work anywhere with an internet connection - even from my phone's hotspot if I want. Occasionally I camp out for a week and work in the woods. Or pick up and drive to another town for a while. It's not a bad setup. Feels like I have the best of both worlds. If the logistics were more complicated I probably wouldn't bother with being as nomadic.
- seniorThrowaway 5y ago
  > but I hate doing taxes Same here. I find it especially ridiculous because the IRS generally has all the information already for the majority of US taxpayers, W2's and 1099's from employers, financial institutions, casinos, etc. They should be able to send people a proposed return with a refund or amount owed and if you review and agree you simply sign and collect or pay. All this redundant data entry is a huge waste of time. I've heard people say the tax preparation industry lobbies against this but don't know if that is true or not.
  - nemosaltat 5y ago
    >they should be able to send people a proposed refund or amount owed It is my understanding that in most European counties, this is exactly how it works.
    - tharkun__ 5y ago
      At least in Germany there are so many ways to get deductions that you really want "do your taxes". Even as a regular employee. Especially while I was employed at a consulting company. Even as a regular employee you can claim part of your commute (IIRC you could claim the distance from your home to work). Then as a contractor (though I was not self employed but a regular employee of the consulting company) I could claim the entire thing IIRC meaning both traveling to and from work and even better, if going between clients in a single day that can be claimed. You could only claim the 'shortest path' unless you could prove 'significant time savings' by taking a longer route. The deduction was based on the distance driven. Also a daily amount for food was claimable for example but even as a contractor only for IIRC up to 3 months. And there's more like this and probably stuff I wasn't even aware of and left on the table.
PragmaticPulp 5y ago
> I did a little bit of Robinhood "investing" with a small amount of money during the pandemic just for grins, thinking everything would be neatly wrapped up on a 1099 form, but I accidentally found myself with an unexpected, incomprehensible (to me) "contracts or straddles" 6781 tax form to fill out, all because I made $25 in a specific type of fund. I don't use Robinhood for serious trading, but any major brokerage should be compatible with major tax software. With TurboTax I just import the data from my brokerage and it's mostly finished. There are a few unique situations where you might need to confirm some options, but it's largely automated.
- NationalPark 5y ago
  Robinhood provides the same thing, but it is annoying to see an unusual tax form if you're used to W2 and 1099. I wonder what kind of fund he was buying though. He couldn't have been actually trading straddles, because Robinhood would have had to approve him, which involves acknowledging you understand the tax implications...
  - lastofthemojito 5y ago
    I don't think I did anything too out of the ordinary. Using the typical Robinhood UI, I bought and sold Invesco DB US Dollar Index Bearish Fund (UDN), which didn't require any extra work on my part compared to trading $SPY or $TSLA or whatever. Then I got a Schedule K-1 from Invesco and instructions to file a Form 6781. It was a separate form from the 1099 that Robinhood sent me and not auto-imported from Robinhood to TurboTax.
    - ghaff 5y ago
      A K-1 is what I get from a Charitable Remainder Unitary Trust. (Basically an annuity from donating appreciated assets.) Never looked into the details of the form--that's why I have an accountant--but seems to relate to some sort of partnership interest.
      - lastofthemojito 5y ago
deckard1 5y ago
> do due to real or perceived tax complications? You can go back to Adam Smith complaining about this in The Wealth of Nations. The tax burdens and complexity have only increased since then. The trouble today is that the tax/legal world has not yet moved into the 21st century. Try selling something online and figuring out taxes. Am I selling a service or a product? Do I have an economic nexus in certain states? If I'm an American running an online business in America, what are the implications of someone in Germany clicking the "buy" button? What the hell is a VAT anyway? Etc. etc. GDPR and privacy/data regulations are another legal quagmire.
vineyardmike 5y ago
> I did a little bit of Robinhood "investing" with a small amount of money during the pandemic just for grins, thinking everything would be neatly wrapped up on a 1099 form, but I accidentally found myself with an unexpected, incomprehensible (to me) "contracts or straddles" 6781 tax form to fill out, all because I made $25 in a specific type of fund I've had the exact same experience, but with a K-1 (?) document. It basically meant i was a partner of an LLC i think, and it ended up being a TON more work, and i got charged more from turbo-tax... so i ended up losing money on that investment. Worst part is that the company mailed me a paper document instead of from robinhood over digital medium, so i had to transcribe like 10 docs.

hayksaakian 5y ago

most people with complex tax situations pay a accountant $500-2000 per year to do their taxes and move on with their life.

opportune 5y ago
It’s not just about paying an accountant but also not accidentally doing something that ends up highly taxable. Example: moving to a country without a tax treaty with the US and getting double taxed, at least temporarily.
- NovemberWhiskey 5y ago
  I had a US citizen colleague who moved from Singapore to the UK and just got absolutely killed on tax - I can't remember the exact details but there was some kind of annual (or less frequent) election he had to make that was correct for Singapore but meant he ended up paying full US and UK taxes on his income with very little relief.
- doopy1 5y ago
  I thought that in tax treaty situations you only pay the maximum tax rate? So the place you lived/ worked gets their tax cut or the US gets the difference (or something along those lines). Hard to imagine someone paying 70% of their income in taxes just for living somewhere else for a little while.
  - jandrewrogers 5y ago
    It isn't that simple in practice unless your finances are trivial. Even under a tax treaty there are a several circumstances where you'll pay more total taxes than if you solely paid taxes in either country. Tax incidence is determined per income type, it is not based on your total tax return; you can pay more taxes locally than you would in the US and still owe a lot of taxes to the US. Similarly, differences in definitions, recognition, taxation across types of income can differ between countries such that you end up paying taxes that are not recognized by the US and therefore are not credited as taxes paid. It is pretty complicated. The US tax code places an indefensible burden on expats. Also, some States (looking at you California) can require you to pay income taxes even if you live overseas for the entire year.
  - ska 5y ago
    While that's probably right in spirit most of the time for simple taxes, this entirely depends on the tax treaty. Other factors to think about: - not all countries have tax treaties, the default is you owe in both places - tax deferment schemes complicate things (e.g. 401(k)), the countries won't look at this income the same way - some tax treaties require specific actions, missing these may leave you owing - not all income types will be treated the same way in both jurisdiction (e.g. cap gains, rental properties,etc.) - etc.
- ghaff 5y ago
  Which is the other reason to pay way too much money to an accountant. So you can ask them questions about this sort of thing. (Though you get to obscure edge cases and accountants may not know all the ins and outs of international tax consequences.)
  - opportune 5y ago
    In my limited experience accountants can get even relatively trivial things (like state tax credits for cases of partial residency) wrong. I’m sure there are different levels of quality/attention you can get the more you pay, including talking to pedigreed tax attorneys, but it’s expensive. Personally I think there is a high dollar value in just not having to worry about these kinds of things. If I were entering a complex working situation or moving to another country, I would probably take steps to make things as simple as possible such as ending work in December and starting something new in January, not realizing investment income, putting assets in corporations or trusts to defer any income, etc.
    - ghaff 5y ago
      Absolutely. As far as I know, I've never had issues with my accountant although my filings are such a thick sheaf at this point that, who knows? (And my income sources aren't even that complicated.) I do fear state tax filings are about to get more complicated with some states apparently looking to collect money for even one day business trips. I wish Congress would get off the blocks and pass the minimum 30 day exclusion that's been brought up a couple times.
- ageitgey 5y ago
  You can also get caught up if you move between countries that have tax treaties but where the tax years don't align on the calendar and where the schedule for paying estimated taxes are different, like the US and the UK. The US tax year runs from Jan - Dec, with a quarterly estimated tax payment schedule for self-employed people. In the UK, it runs from Apr - Mar, with bi-annual tax bills. So there's a point at the end of the calendar year where you owe US taxes (that you should be able to fully wipe out with tax paid to the UK), but the UK hasn't calculated the tax amount yet nor asked for the money yet, so you can't show the US that you already paid those taxes under the tax treaty. So you end up owing two countries taxes on the same money, at least temporarily. tl;dr - everything sucks, hire an accountant
ska 5y ago
Depending on the mix of countries, it can be really hard to find an accountant who actually knows how to do it properly. It's also entirely possible that the answer you get is "well, this is how we interpret the updated tax treaty, but nobody has tried it in court so we aren't sure." Usually this stuff is in the details rather than the basic question, but it can be fiddly.
- ageitgey 5y ago
  So true. I have the simplest mix of countries possible (US citizen / UK resident) and getting clear answers from an accountant on various questions is harder than one might expect because cross-border scenarios aren't always clearly defined in the law. A lot of it comes down to the accountant saying "our firm recommends X as more defensible based on recent changes in legislation, but if you want to do Y, here is why that might also be possible."
organsnyder 5y ago
Yep. We have a complex tax situation this year (a first for us), and our accountant has saved us an amount equal to 10x what we're paying him.
cultofmetatron 5y ago
checks out. I am a digital nomad. I pay about $300/month to bench to take care of it all for me. They handle day by day accounting and file at the end of the year for me. 100% worth the money.

bogota 5y ago

I really do want to do the right thing but its hard when I am unable to find any clear guidelines. I have been traveling and working outside of the country for over a year now. Ultimately I just set where i live as my parents house and called it a day. The company didn’t want to work with me on doing it properly so im not sure how i would be able to. Additionally they aren’t even paying my state taxes properly because they “don't have it setup” so im being forced to pay tax to a state I have no presence in. This is a company with several thousand people and my situation is not uncommon across the company.

devoutsalsa 5y ago
What I did for 2020: - spend 330+ days per year outside the USA - specify that I had foreign earned income (based on the physical presence test) - specified the foreign address at which I stayed the longest - claimed foreign earned income exclusion Before I did any of the above, I paid an expat tax specialist $250 and asked a bunch of questions about how the FEIE works. Worth every penny.

gred 5y ago

You'd probably do it under the table. I once spent a few months working from Spain. Prior to departure, I also wanted to do things by the book, but my tax and visa questions to the Spanish consulate kept getting deflected in that "I'm going to misunderstand your question in a way that makes it clear you should simply use a standard tourist visa instead of making your life harder, but I'm not going to come right out and say that" kind of way. IMO, it becomes a real issue when your travel pattern becomes more "expat" than "digital nomad" (stay abroad much longer, don't move around as much).

opportune 5y ago
Glad you brought this up, it really shows that working/visas need to be rethought. Most countries should have no problem if I show up on a tourist visa to stay for a few months but continue to work for a foreign company remotely - and defacto, they don't, as your experience demonstrates - but it's technically not allowed (or even legal?). I'm not entirely sure what kind of loopholes allowing remote work on what would normally be a tourist visa/stay open up, but surely it's preferable for all parties in the "average" case for it to be allowed.
- deleted 5y ago
  [deleted]
- prewett 5y ago
  I think the thing with tourist visas is that you can’t work for a local company. (Also you might need to get paid in a non-local bank account.) To work for a local company you need a work visa. In some ways, a standard tourist is still working for their foreign company, they just are using their allotment of get-paid-for-doing-nothing days. Likewise, a guy who wants to workation for a week still is effectively a tourist. At some point you seem less touristy, which is probably why tourist visas are typically around 90 days.
  - ghaff 5y ago
    Some countries (like China as I recall) are strict about getting business visas with a letter of introduction, etc. if you're doing something like attending a conference. But, yes, in general Western countries are mostly fine at least with other Western countries so long as you don't work for a local company.

tshaddox 5y ago

I remember many years ago I bought a small amount of Apple stock for fun, and come tax time, I realized I would need to pay TurboTax like $80 to do my taxes because I had make like $8 of dividends from that Apple stock.

ghaff 5y ago
I suspect that there have been some years where I've ended up paying my accountant more to handle some complexity that involved phone conversations and additional forms than the dollar amount of the complexity in question.

kempbellt 5y ago

Definitely. I don't mind paying taxes (for the most part) because their purpose makes sense in a lot of cases, but I hate doing taxes. A single W2 salary is so much simpler. Taxes are automatically deducted and I don't have to think about much. Luckily, I do have a stable residential address that any mail can be sent to, and it is in the same state as my employer, but I am essentially a digital nomad. Able to work anywhere with an internet connection - even from my phone's hotspot if I want. Occasionally I camp out for a week and work in the woods. Or pick up and drive to another town for a while. It's not a bad setup. Feels like I have the best of both worlds. If the logistics were more complicated I probably wouldn't bother with being as nomadic.

seniorThrowaway 5y ago
> but I hate doing taxes Same here. I find it especially ridiculous because the IRS generally has all the information already for the majority of US taxpayers, W2's and 1099's from employers, financial institutions, casinos, etc. They should be able to send people a proposed return with a refund or amount owed and if you review and agree you simply sign and collect or pay. All this redundant data entry is a huge waste of time. I've heard people say the tax preparation industry lobbies against this but don't know if that is true or not.
- nemosaltat 5y ago
  >they should be able to send people a proposed refund or amount owed It is my understanding that in most European counties, this is exactly how it works.
  - tharkun__ 5y ago
    At least in Germany there are so many ways to get deductions that you really want "do your taxes". Even as a regular employee. Especially while I was employed at a consulting company. Even as a regular employee you can claim part of your commute (IIRC you could claim the distance from your home to work). Then as a contractor (though I was not self employed but a regular employee of the consulting company) I could claim the entire thing IIRC meaning both traveling to and from work and even better, if going between clients in a single day that can be claimed. You could only claim the 'shortest path' unless you could prove 'significant time savings' by taking a longer route. The deduction was based on the distance driven. Also a daily amount for food was claimable for example but even as a contractor only for IIRC up to 3 months. And there's more like this and probably stuff I wasn't even aware of and left on the table.

PragmaticPulp 5y ago

> I did a little bit of Robinhood "investing" with a small amount of money during the pandemic just for grins, thinking everything would be neatly wrapped up on a 1099 form, but I accidentally found myself with an unexpected, incomprehensible (to me) "contracts or straddles" 6781 tax form to fill out, all because I made $25 in a specific type of fund. I don't use Robinhood for serious trading, but any major brokerage should be compatible with major tax software. With TurboTax I just import the data from my brokerage and it's mostly finished. There are a few unique situations where you might need to confirm some options, but it's largely automated.

NationalPark 5y ago
Robinhood provides the same thing, but it is annoying to see an unusual tax form if you're used to W2 and 1099. I wonder what kind of fund he was buying though. He couldn't have been actually trading straddles, because Robinhood would have had to approve him, which involves acknowledging you understand the tax implications...
- lastofthemojito 5y ago
  I don't think I did anything too out of the ordinary. Using the typical Robinhood UI, I bought and sold Invesco DB US Dollar Index Bearish Fund (UDN), which didn't require any extra work on my part compared to trading $SPY or $TSLA or whatever. Then I got a Schedule K-1 from Invesco and instructions to file a Form 6781. It was a separate form from the 1099 that Robinhood sent me and not auto-imported from Robinhood to TurboTax.
  - ghaff 5y ago
    A K-1 is what I get from a Charitable Remainder Unitary Trust. (Basically an annuity from donating appreciated assets.) Never looked into the details of the form--that's why I have an accountant--but seems to relate to some sort of partnership interest.
    - lastofthemojito 5y ago

deckard1 5y ago

> do due to real or perceived tax complications? You can go back to Adam Smith complaining about this in The Wealth of Nations. The tax burdens and complexity have only increased since then. The trouble today is that the tax/legal world has not yet moved into the 21st century. Try selling something online and figuring out taxes. Am I selling a service or a product? Do I have an economic nexus in certain states? If I'm an American running an online business in America, what are the implications of someone in Germany clicking the "buy" button? What the hell is a VAT anyway? Etc. etc. GDPR and privacy/data regulations are another legal quagmire.

vineyardmike 5y ago

> I did a little bit of Robinhood "investing" with a small amount of money during the pandemic just for grins, thinking everything would be neatly wrapped up on a 1099 form, but I accidentally found myself with an unexpected, incomprehensible (to me) "contracts or straddles" 6781 tax form to fill out, all because I made $25 in a specific type of fund I've had the exact same experience, but with a K-1 (?) document. It basically meant i was a partner of an LLC i think, and it ended up being a TON more work, and i got charged more from turbo-tax... so i ended up losing money on that investment. Worst part is that the company mailed me a paper document instead of from robinhood over digital medium, so i had to transcribe like 10 docs.