You’re considering an international lifestyle. You have a shortlist of overseas havens and you’ve set the date next year when you’re going to make the move. Along with your other research, thorough tax planning can help you save money and avoid hassle. Here are the three things I always talk through with prospective expats…
1. What you need to disclose:
There are as many as six additional federal tax disclosure forms when you move abroad. While these forms usually don’t change your U.S. income tax amount, each form carries a minimum $10,000 per year penalty if not correctly filed. If it takes a few years for you to find out which forms you should have been filing, these penalties can quickly add up.
So better to know before you go. If you are involved in any of the activities I mention in the current issue of International Living magazine while living or working abroad, you will likely have additional disclosure reporting requirements and should consult a tax professional skilled in international tax.
2. Keep important documents safe and accessible:
Most of us keep our important documents in a safe deposit box or filing cabinet. Things like birth certificates, insurance policies, wills, deeds, tax returns and health records. But what do you do when you need those documents while abroad?
One solution is to scan and save your files to a USB or thumb-drive. And that’s certainly a great idea. But to avoid the hassle that goes with losing or damaging that device you can look to an online vault.
These days there are several outfits offering secure, online storage for your important documents and data, which you can then access from anywhere in the world. Simply scan and upload your documents. This also means that your tax advisor or attorney can access these as well.
3. Leave from the “right” state: You could save a bundle on state income tax and avoid future harassment from state authorities by making your overseas move from a “no income tax” state. But you have to establish residence there before you leave the U.S.
When you move abroad from an income tax state, that state assumes that you are only temporarily away and you are still a resident of the state for tax purposes.
But there are nine “no income tax” states you can consider. Move to one of these before you head overseas and you can save significantly.
As part of the proof that you have permanently left a state, you must do two things…
Editor’s note: In the current issue of International Living magazine, Nick reveals much more about this important subject, including the two things you must do in order to benefit from a “no income tax” state…and gives you his pick of the best “document vaults” available on the market. You get instant access to that article now when you subscribe. Find out more here.