Overseas Freelancer

Today TaxMama® hears from Jim in the TaxQuips Forum with this question.  “I live in Thailand and do some freelance work. I can’t put that income on Form 2555 for the Foreign Earned Income Exclusion because I had to return to the US for 60 + days for an operation. How do I report this income?”

 Hi Jim, 

I hope you’re feeling much better! And perhaps this will help. There are two ways to get the Foreign Earned Income Exclusion.

1) Is to live/work outside the US for 330 days out of 365.
2) Is to be a bona fide resident of the foreign country.

So, if your regular place of residence is in Thailand, you can use that option. Then, it doesn’t matter if you were back here for health reasons.

But remember, even though the income will be excluded for income tax purposes, you must still pay self-employment taxes on it, unless you were on a payroll with that company.  

Suppose the bona fide resident option doesn’t work for you? You can also use foreign tax credits to offset your US taxes. If you paid taxes on that income in Thailand, you can use Form 1116 the Foreign Tax Credit form to reduce your US taxes.

 Aaah, but if you didn’t pay taxes in Thailand, either? Then you get no break. You have to pay taxes somewhere!

And remember, you can find answers to all kinds of questions about working overseas and other tax issues, free. Where? Where else? At www.TaxMama.com.

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