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Without further ado, I’m going to begin now. Typically what we would have done historically is a go through some presentation slides and kind of give you a basic background as to the responsibilities from an international perspective or US international task perspective. But I found that people didn’t really enjoy that too much. What you guys have come to this, to this live stream, you have questions. You have certain questions that you want answered now because I’m licensed now, you know, we can’t really just give advice to people with whom we don’t have any sort of legal relationships.
So, this whole live stream, anything on any social media platform really cannot be construed as advice. If you want, you can consider it entertainment. You consider it maybe a bit of education, but certainly it’s not any tax or legal advice. What we’re going to do is have a general conversation around general principles. And some of these topics you have, you’ve emailed us and times to sending those in. So you emailed them to us and we will approach them in the order in which they were received. But again, just to want to drive that point home, this is not legal advice. If it is that you have specific points that you want to explore, then you need to engage a tax team that’s that’s qualified and prepared to do so.
All right, so let’s go. So the first question, this was a, this was an interesting first question. It kind of like came from left field. I didn’t really expect this one. So this person, I I’m assuming you are based in the Gulf area, but you asked and I, I know that you knew it was a bit of an unusual question, but anyway, so if I moved to Mexico as a US citizen, so I’m assuming that you’re in the Gulf area and you’re thinking about Mexico for whatever reason. Okay. So that’s a bit different geographically. So you want to move to Mexico with either temporary or permanent visa and keep remotely working for my current employer, which is US-based.
Do I have pay taxes in Mexico? I know I can have a tax exclusion up to 108,000. However, I’ve also heard that I wouldn’t have to pay tax in Mexico item because I worked for us come to me because I’m not, I’m not a Mexican citizen, so, okay. So in terms of the, the point that you raise about 108,000, I think it’s 112,000 going into the new year. That’s the foreign earned income exclusion. So for those and I, this w this bit will apply to U S exposed person, whether you have a us passport or green card, regardless of where you reside, okay, this is probably the best benefits you have or any US exposed person has when working abroad.
That’s a section nine 11 foreign earned income exclusion. It can be enjoyed in one of two ways. Firstly, you can qualify under the physical presence test. So all the bonafide resident staff that’s that’s the second one, the first one is easier to understand in that it is objective and it’s quantitative. The second one is less easily understood because it’s subjective and qualitative. What do I mean by that? So the physical presence test it simply says, hey, stay out of the US don’t spend more than, let’s say, 30 days on US soil or USA space. And you call it, you can quantify for the physical presence task.
The second one. So you have an actual amount of count, right? The second one is more like a statement of intent. So it says, well, there’s no exact number of days is like a gray area, but once your intent remains to be a bonafide resident of another jurisdiction, so you have a, a place of a board there, you have a job you’re paying taxes there, you know, so and so forth. Well, yeah. Okay. So you, you qualify under one of those, one of those two tests. Good. So you can either the first, let’s say 112,000 of your, of your income, your earned income.
So I’m not talking about investment income, anything your earned income will be sheltered. You still need to report it, but it will not be subject to us taxes. Okay. So that’s the new us tax side to, to the other question that you kind of were exploring in terms of Mexico, Mexico, like most of the jurisdictions they have, they have the laws around immigration and tax. So I know you mentioned that you’ll be there on a temporary or permanent visa. That’s an immigration perspective.
And just like in the US immigration laws are separate from tax laws. So in Mexico, there is there something equivalent to like a center of light test? So for example, if you have a home or whatever, but the more important one is the 180 3 day tasks. So if it is that you spend more than less say, six months in the year in Mexico, then chances are, you would be considered Mexican tax resident, and you will be subject to tax any rule income. So even though this income that you’re earning is from a us company, may even be paid into U account. You’re earning it while being based in Mexico, after having triggered presumably a Mexico tax residents by virtue of being there for a certain period of time.
And so therefore I set a lot up, I set up a lot of things, but they, the bottom line is you will be subject to tax by the Mexican tax authorities and that income. Okay. I hope that answers your question. So let’s move away from Mexico now. So, okay. This is someone who is in the Gulf area. So if I live outside the us, do I still need to file and pay taxes back in the US I kind of answered that in, at responding to the previous question. So the, the us is perhaps one of only two jurisdictions in the world where severing your residency, your physical residency in the U S doesn’t.
It doesn’t mean that you can set a tax residency. So regardless, I’ll put it in a different way, regardless of where you go on planet earth, you will be subject to US taxes as long as you are a US citizen. According to section 7701 green card holder, or someone who has triggered substantial, substantial residence, substantial presence, sorry, in the US and if you want, I can get into how a substantial presence is calculated, but basically it’s based on the number of days you’ve spent on US soil over a given period of time.
So if it is that you are citizen green card holder, no matter how long are you going to spend in the Gulf, you will have to declare your worldwide income and pay taxes on it, back to the US so hope that’s clear. The next question, and for those who are just joining, feel free to type your questions in the box below I’ll come to it in the order in which they received. But first, I’m going to go through the questions that were previously submitted via email. Okay. The next question, if I’m a YouTuber on my earnings taxable in the US, well, if it is that you are, you didn’t see whether a US person or not, whether you are a us person for tax purposes.
So whether you’re green card holders, citizen or not. So let’s assume that you are a us person then. Yeah. The answer is yes, right? Because you’re going to be subject to taxes when you worldwide income, you know, so that is, but if you’re not a US citizen, you know, the us green card holder, you didn’t trigger substantial presence. So ordinarily you have no tax connection to the US if it is that you’ll Youtuber yes, under certain circumstances, your YouTube income would be subject to US taxes. And then YouTube send out a message to all YouTube wares, sometime in summer, last year, summer 2021, letting you know that what they’re doing is they’re going to segregate your YouTube audience.
And they’re going to identify the non U S audience from the US audience and the US audience, whatever income that, that arises as a result of your us viewership, there’ll be subject to royalty withholding. So they’ll be subject to typically 30% of the world he will holding. So that would be the default. I there’s no. Okay. If it is that you live in a country with a double tax treaty with the US (we cover it in US taxation Spain guide article) that’s royalty, 30% may be subject to a reduced retooling. So you can get a partial refund maybe, but otherwise, no, it’s just 30%.
It is what it is. So I hope that answers your YouTube or question. Also note that if it is that you are actively involved in a social media influence. So whatever, obviously, if you live in the MRX itself, there is no tax, right. But if it is that you live in someone to be the neighboring jurisdictions, where there may be attacks, then understand that if you, even though your business’s online on an American social media platform, the fact is that you’ll running that business. You’re conducting business activity from that jurisdiction in which there may be a tax.
And therefore you need to check with your local tax advisor, whether it will be your income in general, not just the U S component, but in general, your income will be subject to some sort of local taxation. Obviously it’s not a concern in the UAE, but in some of the neighboring jurisdictions, it may be a concern. Okay. Or right. She, yes, I see. I’ll get to those questions. Let me just go through the ones that were previously submitted, but please do continue to type in the boxes below. All right. Okay. This is an interesting one. Someone else who wants to lead the Gulf for whatever reason.
So I’m based in Dubai, but I want to move to Portugal. Would my crypto earnings still be tax-free? Okay. Obviously we’ll we have a lot of clients in the Gulf area who into crypto. I mean, it is fantastic investment asset class. So it makes sense that a lot of people see great opportunity in that. And Portugal does come up as a jurisdiction, which is crypto friendly. Obviously not as crypto friendly as Dubai, probably no jurisdiction in the world is as crypto friendly as Dubai, but Portugal’s tax regime.
It’s, it’s often misrepresented on when you, when you look around online, if you go to a website htg.tax, we have thousands of articles and international tax all freely available. And we did a few as well as videos on crypto and Portugal. So you can have a look on in terms of the details, but just speaking very generally, it is really tricky. So in principle, if it is that you invest as an individual into crypto, and you are probably not going to be classified as a trader.
So you are an investor and know the distinction between an invest in a trader. That’s really, really great, but less see, generally speaking, you, you buy and you hold, and it’s probably more of a long-term thing. And it’s not something that you engage with on a daily basis. Then you could probably more easily be classified as an investor, and you’re not investing using a company, right? You’re doing it in your name. So if that is the case, and I don’t know your situation, cause you didn’t give me that much info. But if that is your situation, then you’ll be fine in Portugal, fine.
To the extent that they, you know, whatever capital gains that you enjoy as a result of your crypto portfolio, it should not be subject to taxes and Portugal. However, if it is that you’ve invested using a structure, including a company is, especially if you’ve done it using a UAE (American tax Dubai covered here) entity, or you are what can be qualified as a trader. I said, it’s a great space, but let’s say you do it with frequency and regularity that you can potentially be classified as a trader.
Then Portugal will tax you. And as you know, in Europe, in Western Europe, the tax rates tend to be quite quite high. And especially when you compare it to where you are right now in Dubai, where your taxes are zero. So I don’t know what your situation is, but that will be what you’d want to keep in mind and consider before, before you make that move, I’m not telling you don’t make the move or do make the move. But what I’m saying is that tax planning is probably necessary. And I’m sure as a prudent investor, maybe you have other asset classes in your portfolio.
You may want to speak with an advisor and get some tax planning done. We, of course, we, we offer that we can help you mathematically simulate Portugal tax returns, because we have colleagues who are Portugal task qualified and use that as a basis for tax planning. Once we see the, what your present portfolio is across all asset classes, all your income streams. And we can say, okay, this is what it looks like. If you did nothing, and this is what we recommend is the best, and this. And we can help you potentially mitigate some. But unfortunately it’s probably depending on, especially if you have like securities income and stuff like that, it’s probably not possible to eliminate everything, but we can probably help you mitigate or reduce it to some extent.
So hope that helps moving on. Let’s see, I create a company in the UAE. I’m a US citizen and the company never has any profits and never distributes any income. Okay. That’s an interesting company. So Madam, what do I have to report in my US taxes? Any forms that require completion, if it does not have profit and isn’t as a, an entity separate from myself as a person, do I have to pay us corporate taxes on it?
That’s a big question. Okay. So, as I mentioned earlier, when you are a us person, as you are, you’re subject to taxes and your worldwide income, regardless of where you reside, I take your point that a company is a separate legal entity from you. That is absolutely correct. But when it comes to international taxes, the US gets a bit counter-intuitive. What do I mean by that? So when it comes to us domestic taxes, it is that the emphasis is on revenue collection, right? Did you pay this? Did you pay that? Okay, fine.
When it comes to international us taxes it’s really comes into it. And because the emphasis is on reporting. So information collection, so data collection is more important. So data is gold, right? So, and why do I see that for the IRS data collection is more important for international taxpayers has wine, because when you look at the shed, you’ll have penalties, both civil and criminal, they are disproportionately skewed. And in other ways, they become very draconian when it comes to feeling, when you feel to declare a foreign financial asset, a foreign investment of some sort of foreign transfer of funds.
So, okay. I didn’t pay my taxes. Okay. We, in a low interest rate environments, you paid interest and some penalties, right? If you don’t declare the existence of a company that was seized, that’s $10,000 per year, if you don’t declare a bank account that you have overseas, or even the bank account associated with that company that you open in Dubai, that’s up to 50% of the unreported balance of that company bank account per year. Right? So it, it plus plus for unreported bank accounts, that could also be jail time. So it’s not just aggressive civil penalties, but aggressive criminal penalties as well.
So it gets pretty aggressive. So that’s why I say it’s, it seems a bit skewed, but let’s get to your questions specifically. If you’ve invested in a company overseas that may, that may trigger form 926 to indicate to the internal revenue service, hey, I invested in a company overseas, and then you have a company that you formed. So I guess you control it. So there’s a control foreign Corp. That’s a form 5471 that declares existence. And, and, you know, it gives you the, gives the IRS an opportunity to see the, the details of the company, the income statement, the balance sheet, what the company has been up to, what line of work, any of the shareholders.
So the disclosure is pretty, it’s pretty thorough. And I know you mentioned that if the no profits and it doesn’t distribute any income, do you have it? Okay, do you have to pay any taxes on that? So I think it’s clear that you have to report everything as to whether any taxes are due for that company. If that company genuinely has no profits. Well, I mean, you know, obviously the financials have to be done up to international standards. I’m assuming that you’re going to use IFRS international Federation of reporting standards.
So they, when, when it says that it’s not making money, it really is not making money in. It’s not being, you know what I mean? It’s not being engineered in a way that it deliberately shouldn’t a loss when it should not otherwise show loss. So let’s assume that it really is not sure in a loss then. Yeah. There’s no additional payments to be made. However, if there is a profit, then that entity may be subject to some deem distribution rules under something called guilty, which is a global intangible, low tax income tax. So it’s a, a creature created by President Trump’s tax cut and jobs act back in 2017.
So when you have a control foreign Corp, which this would be this, this entity in Dubai, and there are profits, and those profits weren’t fully distributed, you know, to, to the shareholders and basically have stuff sitting on the balance sheet, you know, you have some sort of retained earnings. So then there’s some deemed distributions to you as a US shareholder. And those deemed distributions will be subject to tax and your 1040. So, and that’s not your case, but if it is the case, we’d be happy to have a conversation with you and work with you on that.
But generally speaking, you have a company outside of the U S especially if there’s a control foreign court, you’ve gotta be, you gotta be very cautious when it comes to those rules. You want to declare the existence of the company in a declared existed. If it’s at bank accounts, you may need to declare the existence of subsidiary just in case their subsidiaries and any partnerships or whatever. So there’s a lot of disclosure. So disclosure, disclosure, disclosure, and get advice moving on. Okay. So I’m a first time Fbar. Okay. So first time ex-pat living in the Gulf for stem living outside of the US and you’re asking for general guidance as to what you need to pay attention to.
And that that’s fair enough. Just keep it broad. So for first-time, created this little acronym that I share with, with clients, which is called, do your best to B E S T. So B stands for bank accounts. You need to pay attention to your bank accounts. When you open your bank accounts in, in Dubai, assuming that you in Dubai, you didn’t say which Emirates you’re in. Okay. You need to declare the assistance of your bank accounts. Once it passes a certain threshold, which is a maximum aggregate balance of $10,000 per year. Remember, as I mentioned earlier, the penalties for nondisclosure of bank accounts that are held outside of the US are pretty aggressive, both civil and criminal penalties would apply.
So bank accounts and bank would also have, sometimes can have a broader definition. Maybe you have insurance policies or pension structures, which made some, some of them, some of the insurance policies, especially to have cash surrender values, the unitrust. So basically any investment structure, you want to run that by a US tax professional, and they can tell you whether that needs disclosure, because sometimes it may not even be required for the Fbar, which is a foreign bank account report, which is what I was indicating earlier, but it may even be required for disclosure in a form 8938 on 8621 for passive foreign investment company.
So it may trigger additional disclosure. But the bottom line is if you have a financial asset outside of the U S talk to a tax professional, that’s E estimate to taxes, because when you’re back in the US you know, you got paid on a W2 and you got, you know, money was withheld and paid to the tax authorities, and you’ll be half, the IRS, and paid to, you know, the state franchise tax board. You know, so you, it was done automatically right now that you’re outside of the us and you’re living in the Gulf, then, you know, that’s not going to be done automatically for you for some people. It still is.
But for most people, it is not. So therefore you need to take responsibility for making us need to tax payments. So you need to work with your tax professional to see, well, how much taxes are going to be due in well for 2022, for example, how much tax is going to be due for 2022, even though you’re not going to file a tax return until 2023 estimated tax payments will be needed for 2022 and failure to make estimated tax payments leads to underpayment penalties. And the reason why is because the IRS prefers to get its money along the way they don’t like to wait until, you know, the following year to get it.
You know, they want to get it in those, those four quarterly payments. So speak to someone who’s us qualified about the estimated tax payments, let’s see state taxes, keep in mind. What state were you last resident before you left the US if you wanted the eight states without an income tax. Good for you. Well done. Great planning. If you still, if you move directly to the Gulf from a state, like from one of the other states where they are definitely state taxes, oops, I suggest you speak with a tax professional.
Why am I seeing that? Because most states are domiciles states. What does that mean? It means that even though you are now happy living the life in Dubai and enjoying all the Dubai has to offer, and you’ve definitely not in that state, you may still be domiciled in that state, according to their rules. And at some point in time, you may return to the U S and you may be facing a large bill. So get advice, speak to someone who knows your situation and who could advise you on your situation back with that state and what steps you may need to make to ensure that you several tax domicile with whatever state you were resident in before you left.
And so that’s BEST. What do I mean by transfer taxes? So you have someone asks about that later on. So, but generally speaking, the two transfer taxes that you need to bear in mind, that would be your gift taxes. And of course your state taxes, but morbid. But I think in terms of the gift taxes, that gets triggered a lot more often than you think, you know, you get into, especially live overseas, you get into a relationship with someone who’s not a us person, and there may be a transfer of assets back and forth.
So you give money to them. They give money to you not understanding that the US tax consequences to that, to it needs to be declared. So just keep that in mind, if there’s any transfer of assets back and forth, they may be a US a reporting obligation. So get advice. So hope that helps moving down. Okay. So I’ve been living someone is some one wouldn’t say, cause I won’t call you a name. Someone who’s been living in Dubai for a while for a long time, it seems, and they have not been 100% on the ball with their US taxes.
What do they do? Well, of course you need to get advice, but generally speaking, if it is that you have not been compliant with your us tax responsibilities while living abroad and your non-compliance was non willful. Now this, this concept of willfulness is not, it’s not really explored in the US tax code. So we have to look at case law and case law. It says, it’s when there’s like an intentional of avoidance of unknown legal duty, right? So you knew that you had a responsibility to file and pay taxes, and you took deliberate steps to willfully evade.
So basically tax evasion, right? So let’s assume that your non-compliance was non willful. So yours was not the tax evasion side, you know, and we can, we can take a deeper dive into the difference between the two concepts of willful and non willful if needs be, but let’s assume that your non-compliance was non willful. Then there’s the, the, the course of action that is usually the appropriate one would be something called a streamlined compliance procedure. So the streamlined compliance procedure is an amnesty and all but name because what it does, it allows you to come follow to the IRS before the IRS finds you, right?
So the IRS has already begun pursuing action against you or taking action against you. A streamline is not an option. So let’s assume that they have not begun taking any action against you and your non-compliance was not lawful. Then the streamline could perhaps be an option to explore. So what it does, it says, okay, I’m out of respect for the fact that you’ve come forward on your own. You would file the last three years tax returns, even though you may have lived in Dubai for more than three years, maybe 10, 15 years. And you did not file any US returns to say, doesn’t matter, just give me the last three years for it to GD.
It has already passed, which in this case will be 2019, 18. So, and that’s driven by the statute of limitations, which is three years for tax returns. And then give me six years for the foreign bank account reports and F bars. Doesn’t matter what people say, F bars or the foreign bank account report, otherwise known as FinCEN 114. That is not new. It’s a really old form. I think it’s from 1970, 71 under the bank secrecy act. So it’s an old requirement, but it’s only recently getting a lot of attention. But anyway, so it’s so streamlined requires that you go back for six years on your Fbars.
So three years returns and six years fat buys. And again, would the AirPods it’s driven by the statute of limitations as well. So just come forward with that. You, you get a state and you, you draft a statement that explains, Hey, this is why I didn’t. I was unable to meet my filing requirements, et cetera. So you package all that. You send that in. So the IRS agrees under the streamline. You will pay interest if you any taxes. So interests will be payable on the outstanding balance, but more importantly, you get to legally avoid the civil and criminal penalties, which is a huge relief, obviously.
So if this streamlined is something that you want to explore, please reach out to us and we can have that conversation. Okay. Next question. Okay. Well, back to the crypto investors, which is not a surprise. Okay. So someone is asking about strategies for mitigating crypto gains. Okay. So there are typically six strategies, right? So the two that most people would talk about.
So sod were the two that most people talk about. And the two more that there’s some people that push it, but this so many terms and conditions around it that you may or may not find it restrictive. And then the two that people talk to us the most about. So six things, okay. So the first two will be lost harvesting and, and just trying to manage your portfolio to, to pursue long-term capital gains rather than short term capital gains. So long, the latter just makes a lot more sense.
When you have short term capital gains, that’s going to be taxed at ordinary tax rates, right? Which could be 35, 30 7% rate. But if it is, you have longer term capital gains. So more than a year, then you all the way down to 20 plus the, in that investment tax. So let’s say 22% or 22, 23%. So that that’s, that’s a huge tax saving on its own. Just try to manage your portfolio to have a situation where you can, if you can, you, you have long-term capital gains as opposed to short-term capital gains loss, harvesting.
So, at this point in time, and it may change. So this is one of those strategies that may be out the door soon, a loss harvesting. So at this point in time, unlike other securities, you, you can’t do this with like apple or Tesla shares or whatever. This is only for crypto at this point, because they’re not considered securities. They’re just considered property, right? It’s from a US tax perspective. So at this point in time, you can, well, it’s, it’s already too late, but if it is that you were involved in a strategy session with your tax professional at the end of last year, they could have recommended you. Okay. If it is that you’re up on certain tokens and you’re down on certain tokens, you can do something called loss harvesting, which is you just, you convert to Fiat, or you can convert a stable coin or to maybe Bitcoin.
And then in, you know, just wait a few days and then you can repurchase that same token. So you can just, so you can, you can, you can maintain that position while realizing that that loss and that that capital loss will be used to offset capital gains. And so that that’s, that that loss harvesting is what, what we talk about when we, when we talk about using losses, capital losses to offset capital gains, right?
So those are the two that, you know, you, you just Google for five minutes and lots of people talk about that. The other two, which are really kind of complicated. And some, I mean, there are, there’s a lot of discussion around it, but when I speak to clients about it and they take a deeper dive into it, and we refer them to the, to attorneys to walk them through it, they get cold feet and they walk away and that’s the opportunity zones and the charitable remainder trusts. So essentially both a similar in that you, you basically take them and you lock them up in a structure in this case, the opportunity zone, or you just, you give it away completely with the charter charitable remainder trust, because it’s transferred into a trust.
So either way you don’t necessarily have full control over it, over that portfolio anymore in a way. And yeah, you know, with the opportunities zone, it can reduce depending on how long you’re willing to leave it in, you can reduce the ultimate tax bill or some conditions. You, it might be eliminated completely with the charitable remainder trust. You get distributions and you’ll pay tax on the distributions that come to you. But you can, as a whole will, in theory, dramatically reduced what, what your tax bill would be.
But it just has lots of terms and conditions, and people don’t feel comfortable with it, but I’m not saying that it should, it should, it will work for the right people. If you want, just reach out to me and I’ll introduce you to some of the attorneys that we work with that can walk you through it, and you can figure out if it’s the right fit for you. The last two, where we have a lot of conversations with our clients would be Puerto Rico and actual renunciation or expatriation. So Puerto Rico, there are, as, I mean, this is kind of popular right now. Actually, I think I saw a video clip on Fox business a few days ago.
This we’re doing this on the third, right? Yeah. So a few days before the 3rd of January is the time that this live stream is happening. So a few days back, I remember seeing something on Fox business about Puerto Rico. So a lot, you know, the media, but a lot of crypto investors are making their way to Puerto Rico. Because as I mentioned, regardless of where you go, you will be subject to tax any role that income. And, you know, the IRS sees no difference between Detroit and Dubai. You’re going to be chats all the same, but the exception is Puerto Rico. You can enjoy a reduced tax bill.
If some people are able to able to bring it down to even zero, depending on how you structure it. So the attractiveness is there. The downside is you have to really move to Puerto Rico. You can’t pretend you can’t, you know, and your center light needs to be Puerto Rico. If that’s right for you, the opportunities there last, but not least would be expatriation, which is where we get involved. We do probably two, a three per month. These are people giving up their passport or their green thoughts. Yes. Depending on how well the crypto portfolio may be doing, they may incur an exit tax.
But if it is that you really bullish on crypto, some people make the decision that, Hey, it’s better to pay an exit tax now. And at least whatever the upside is, once I leave, it’ll be free and clear of taxes. So it’s up to you, but essentially you’re looking at loss, harvesting long-term capital gains opportunities, zones, charitable, remainder, trust, Purdue, coal, and expatriation. So those are your six options of that helps. All right. Next question. Okay. This is a lengthy one. This is the most recent one that we got. I’m sitting on some appreciated crypto.
Okay. Now the crypto person, right. I’m sitting on some appreciated crypto married to non-American. How much can I gift to Anon to my non-American spouse? Okay. So the IRS released recently a revenue procedure, 2021 dash 45. Right? So what that does it increase the, the exclusion, because every, you know, everyone who’s domicile in the us for tax purposes, I’m not talking about state domiciled, but federal domicile in the us for, for transfer tax purposes, a state tax purposes, you get a lifetime exclusion.
So it was 11.7 million, but it’s now 12.06 million. So, so yeah. And if, if, of course, if your spouse was a us citizen, then there’s a, it’s unlimited gifting. So you don’t need to worry about it, but because you you’re married to non-American. So once you gift more than 164,000, so anything less than 164,000, it’s below the threshold above 164,000, you’d be eating into your, to your lifetime exclusion, which right now is 12.06 million.
So I don’t know how much you’re up. You can reach out. We can, we can have that conversation, but basically to answer your question, generally, you have a lifetime exclusion right now of 12.06 million. And remember that I think the sunset’s at 2025. So, you know, it’s, it’s something with a bit of a time sensitivity to it. So hope that helps. All right, moving down the list. Can you help with filing income tax returns for 2021? Absolutely. Yes, we can. You can have a look at a website which is ATG, not tax, and you can see a lot of information about who we are, what we do. You can send me an email at firstname.lastname@example.org, that’s email@example.com. And we can take you through the process for filing a 2021 tax return.
Next question. Can I continue contributing to social security if I live in the UAE? Yes, you can. The easiest way is if you have self-employment income. So if you, because I don’t know what your situation is for being the UAE in the UAE, whether it is you are an entrepreneur, so you, they independently, or you there’s an employee for big corporation or whatever.
But one of the easiest ways is if it is that you are self-employed, then you can work with your chosen tax team to have self-employment to have that self-employment income reflected on your tax return. And you will be subject to the 15.3% self-employment tax. So hope that helps moving down the list, any special disclosure or wording on the 10 40, when wages are not paid from us company and no W2.
No, if you an employee of a foreign company, then depending on your situation, generally speaking, there’ll be a sec disclosure of your employer. Employee relationship with a foreign company will be on the form 2555. So on the first pot of pot, a page or the first, the first part of the first page on the form, 2555 discloses your foreign employer that, you know, the full legal name, their address and whatever. So that, that’s where it’s asking you to disclose. And that’s also the form that you would use to clean the foreign earned income exclusion.
So that’s a really important form. As I said, that, you know, that’s perhaps the number one benefit that section 911 foreign income exclusion is the number one benefit that US exposed persons working outside of the US can enjoy. So you want to get that 2555, right? Because that’s your savior hope that helps. And you know, the questions I’m just going to look on some of the other platforms, see if anyone has been asking questions there. So, Nope.
Hmm. Okay. Great mailing address on the 1040 better just to use a US address since the mail does not see to yeah, yeah. That’s where, I mean, so, so sorry, let me just what this person is saying. What mailing address should you use on the 1040? Because they, they made a comment on the, on the postal system in Dubai, of course, you know, all due respect. I don’t want to say anything that’s derogatory, but it is different. The postal system is different.
So, i just leave it as that. It’s just took some getting used to it, right? Hey, personally, if it is that you do have a mailing address back in the US I mean, the important, the important thing, the mailing address that you use for the actual 1040, the top of your 1040, that’s the address that the IRS can most easily and efficiently get to you. So, you know, if it is that you want to use a relative that you trust, and it has to be someone who you trust. I’ve seen clients, you know, who believed that their brother, sister, mom, dad, or whatever, and it got lost, or they didn’t pay attention and really important stuff was missed out.
So if it is that you have a reliable address back in the US otherwise there are services that I don’t want to name any, because I don’t want to be seen as promoting one or the other. But if you do Google, if you just Google, whatever you would, you know, you would find a number of options for like a virtual mailbox back in the US so I’ll just leave it like that. Right? So there’s some options. So me, me personally, yes, I use a US address rather than one outside of the US because I just find it to be less of a hassle.
So if possible, you will want to use a, an address back in the US, but again, keep in mind what I said earlier, as well about state tax domicile. And remember that some states are dumb. Most states are domicile states. And unless you’re in one of those eight states without a state income tax, you made just one speak to your tax professional, whoever your chosen tax professional is have a conversation with them to make sure that you making decisions that are strategic in intent. So nothing that will come back to bite you in a few years time when you, because you didn’t understand the implications of, for example, having a California address, right.
Because California is just one of those sticky states as is Virginia is another one that’s really aggressive for, for many of our clients. So have a conversation and make sure that it’s the right fit for you. Okay. Any other questions? Can you just have a quick look? All right. So that’s it. Thank you very much. I appreciate your time and attention. If you need to reach us, we’re always available.
Just reach out to us by HTJ.TAX. We have thousands of articles freely available and international tax issues, and we actually load or produce one video, one short video every day with a useful tax tip that’s available on all our social media platforms. So thank you for joining us and we’ll see you next time. Have a good evening. Bye.
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