Posted: Mon Jan 15, 2007 8:55 am Post subject: TOTALLY tax-free up to $85,700?
I'm a US citizen hoping to set up a business which I can run from a laptop from anywhere in the world. I want to do this because I love travel and living in different countries. I would also like to minimize my taxes at least until I have some measure of financial security.
I understand the gist of the Foreign Earned Income Exclusion, which would allow me to earn up to $85,700 in 2007 free of US federal income tax. Additionally, I know that if I was a resident of a state with no state income tax before leaving the US, I would also be free of state income tax obligations.
Next, my thinking is that if I form a corporation in a tax haven country, set up my corporation properly (probably in a tax haven country), have my employer(s) and/or client(s) pay that company, and then pay myself as an employee of that (non-US) company, I can also legally avoid paying FICA & Medicare or Self-Employment Tax. Finally, by taking care not to become "resident for tax purposes" in any other country (by never staying in any country long enough in any given year), I hope to also be free of any tax liability to any foreign country.
Essentially, I envision dividing my time every year between 2 or more countries - some countries allow you to stay up to 182 days/year without becoming resident for tax purposes, others allow only 90 days/year, or some other number. In this way I hope to be able to pay myself up to $85,700 this year totally free of income tax.
Questions:
1) Is the above scenario possible to do 100% LEGALLY? I don't even want to be in a "gray area" - I really value my sleep. If not, why not? If so, how should I arrange my affairs in order to be 100% in compliance with all applicable laws?
2) How much money should I expect to pay every year to retain the services of a US tax attorney, maintain full compliance with the IRS, and maintain my corporation in the proper manner? If the answer is 'it depends', please outline what it depends on and provide a ballpark figure for each scenario.
3) How should I go about finding a top-notch tax attorney who has a lot of experience in the area of US expat taxation and can keep me out of trouble with the IRS? How can I be sure I'm getting someone good?
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