Business Overseas: 5 Things to Know About Managing Taxes

Do you have a business abroad? Or, are you planning to start one? There are numerous critical details you need to know about managing taxes for overseas companies. This will help you avoid trouble with the IRS.

Read on to get acquainted with essential tax management requirements of offshore business and assets.

Track your Gross Receipts

According to IRS, gross receipts is the income you receive in your business from different sources. It is calculated annually without subtracting expenses or costs.

While working abroad, you should track every piece of revenue as gross receipts. It can be in the form of invoices, cash register receipts, credit cards, receipts, and bank deposits. You should record all payments that you receive and keep the gross receipts as supporting documents.

You Can Apply for Travel Deductions

When managing a business overseas, you have to keep on making relevant international business trips. Anytime you travel, you should track your expenses and use them to reduce your next tax bill.

The deductible expenses include all forms of transportation by automobile, train, or plane. However, there are special rules that apply for cruise ships and luxury water travel. Any other costs of transportation at your destination are deductible. These include expenses from your hotel to your business site or from the airport to the hotel.

Additionally, you can get a full cost deduction for accommodation expenses. For meals, you can get half cost deductions. Nevertheless, there are regulations concerning lavish and extravagant meals. You can obtain further deductions related to your business travel, such as international phone calls and shipping.

Familiarize with FBAR

Americans with overseas accounts should report their financial activities annually. The FBAR laws were established to catch those people who hide foreign funds. The set guidelines have to be followed by all American citizens.

Nevertheless, those that fall under the safety umbrella are exempted. Over the years, these regulations have been refined, making it difficult for ordinary citizens to understand.

If you have a foreign account, you should seek FBAR and offshore disclosure help from personnel familiar with the FBAR regulations. This will assist you in filing the required information and avoid monetary and criminal penalties.

Filing Deadlines for Overseas Business Owners

It is necessary to file your worldwide income to avoid hefty penalty fees. Consequently, if you are a sole-proprietor with foreign cooperation or a limited company, you should register your revenue on the required due date.

The filing date may differ depending on the type of business and global occurrences. For instance, tax filing for Americans abroad in the year 2020 was changed from July 15th to October 15th.

However, in case there are changes, the filing may differ depending on the business. For instance, if there is an ongoing case with your LLC and the IRS, you should submit your filing on the initial deadline.

Be Aware of the Forms Required for Your Business

Filling forms should be filled out depending on specific businesses. If you are a sole proprietor, you are self-employed and do not have limited liability coverage. Digital nomads, freelancers, and consultants working abroad file similar tax documents with the sole proprietors. This is Schedule C on 1040 form, used to report deductions and taxes from businesses.

If the Totalization Treaty does not cover you, there will be payment of additional self-employment taxes for Medicare and Social Security to the US.

In case you have an LLC, you should only report revenue from your tax return 1040 form. Additionally, if you have more than 10% shares of a foreign corporation, you should file form 5471.

More importantly, if you are in partnership with a foreign corporation, you should file K-1 Schedule to report your partnership's financial activities. It is also a requirement to inform the IRS about the nature of your partnership by filling form 8865.

Managing taxes will help you conduct your overseas business smoothly. Failure to report relevant information may result in penalties that can crumble your finances. If you are not familiar with the required tax documentation, consult a tax expert for guidance. As you report your revenue, do not forget to request for refunds.


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