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Mail Bag 7: Freelancers, Partnerships, Italian Social Security idiosyncrasies, ROTH contributions, and Student Stipends

1. Freelancer

I’m a current client of yours – and very happy about it, by the way! Until now I have been employed in Germany but had a small amount of freelance income. Since July of this year I have been unemployed, and am launching a full-time freelance career either later this year or at the beginning of next year. Are there any tax considerations that I should take into account when planning the start date? The business will be registered in Germany, but I would like to know if it makes a significant difference to my US if a product is sold primarily to customers in the US or to customers in Germany. Thank you for your help!

Good luck with the business!

You can sell to whomever you wish from a US tax standpoint. Please note that if you have a foreign tax corp – there are implications from that (positive ones from a tax standpoint, but heavier on compliance).

If your business is registered as GmbH, this will be your additional filing requirement.

2. ROTH contributions

I currently work overseas as a teacher in Myanmar and my salary is tax free and I am a U.S. citizen. I have a roth and a rollover ira through vanguard. My question is, if I contribute money out of my checking account into my rollover ira or roth ($9000) to purchase stocks or index funds does my whole salary I earn from overseas become taxed, meaning I am no longer tax exempt?

Your tax exemption status would not be compromised. However , if all of your income exempt through the Foreign Earned Income exclusion, you cannot make contributions to ROTH IRA. However, there are methods that allow you to leave a portion of your foreign earned income not excluded.

Contributions to Traditional or ROTH IRA account can be made until April 17, 2018 (for 2017 tax year). We recommend to do your tax return early next year, and we will calculate how much you can put towards your IRA account while preparing your return. This way there will be no need for a potential amendment.

Whole Story at TFX.

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