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Apologies for the ignorance.....As a barbaric American, Don't you still have to pay taxes if you are a US citizen unless you renounce it? Or does incorporatio

Apologies for the ignorance.....As a barbaric American, Don't you still have to pay taxes if you are a US citizen unless you renounce it? Or does incorporation create a shelter (much like most US companies are doing)? Some relatives of mine took contracts in Canada and ended up having to pay triple taxes (two in Canada, one in USA)

ska 11y ago
As a US citizen you should be filing US taxes regardless; Whether or not you owe anything to the IRS depends on a lot of factors, talk to a specialist if you have anything complicated going on. Short story is you have a foreign income exclusion of about $100k. Incorporation wont shelter you from income, and as far as I can see most of the legal "sheltering" approaches don't really work unless you're talking quite a bit of money. To your other paragraph: your relatives shouldn't have paid any extra tax multiply. You can end up filing 4 forms, US federal, US state, Canadian federal, Canadian province, but there is a pretty comprehensive tax treaty so you end up paying in one place and claiming a credit in the other. Overall it's often nearly a wash, and whether or not you pay a bit more or less will depend on where your tax residency is and where your income is generated.
Maultasche 11y ago
Yes, that's true. Americans can be taxed for income earned outside the country. I'm not an expert on this subject, but I don't think that income earned by an incorporation would be taxed if it's incorporated outside the United States. However, the incorporation would have to pay its employee, and that employee's income would be subject to taxation if the employee is a US citizen. It's not quite as bad as it sounds though. The first $93000 of income earned abroad is not subject to taxation. Many countries (such as Canada and Germany) have reciprocal income tax treaties with the United States that keep citizens from being double-taxed. A US citizen in Germany, for example, wouldn't have to pay any US income tax on income earned in Germany as long as that income was subjected to German income taxes. Other income such as stock dividends and capital gains is another matter. I'm not entirely certain if that is double taxed or not. The IRS has a web page listing income tax treaties with various countries: http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z http://www.irs.gov/Businesses/International-Businesses/Unite...

ska 11y ago

As a US citizen you should be filing US taxes regardless; Whether or not you owe anything to the IRS depends on a lot of factors, talk to a specialist if you have anything complicated going on. Short story is you have a foreign income exclusion of about $100k. Incorporation wont shelter you from income, and as far as I can see most of the legal "sheltering" approaches don't really work unless you're talking quite a bit of money. To your other paragraph: your relatives shouldn't have paid any extra tax multiply. You can end up filing 4 forms, US federal, US state, Canadian federal, Canadian province, but there is a pretty comprehensive tax treaty so you end up paying in one place and claiming a credit in the other. Overall it's often nearly a wash, and whether or not you pay a bit more or less will depend on where your tax residency is and where your income is generated.

Maultasche 11y ago

Yes, that's true. Americans can be taxed for income earned outside the country. I'm not an expert on this subject, but I don't think that income earned by an incorporation would be taxed if it's incorporated outside the United States. However, the incorporation would have to pay its employee, and that employee's income would be subject to taxation if the employee is a US citizen. It's not quite as bad as it sounds though. The first $93000 of income earned abroad is not subject to taxation. Many countries (such as Canada and Germany) have reciprocal income tax treaties with the United States that keep citizens from being double-taxed. A US citizen in Germany, for example, wouldn't have to pay any US income tax on income earned in Germany as long as that income was subjected to German income taxes. Other income such as stock dividends and capital gains is another matter. I'm not entirely certain if that is double taxed or not. The IRS has a web page listing income tax treaties with various countries: http://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z http://www.irs.gov/Businesses/International-Businesses/Unite...