American living abroad and not working for an American company - tax reporting and bank accounts
"The IRS taxes worldwide income of its citizens and green card holders.  Generally, for those Americans genuinely living/working overseas the IRS takes the somewhat reasonable position of being in ""2nd place"" tax-wise.  That is, you are expected to pay taxes in the country you are living in, and these taxes can reduce the tax you would have owed in the USA.  Unfortunately, all of this has to be documented and tax returns are still required every year.  Your European friends may find this quite surprising as I've heard, for instance, that France will not tax you if you go live and work in Germany.   A foreign company operating in a foreign country under foreign law is not typically required to give you a W-2, 1099, or any of the forms you are used to. Indeed, you should be paying taxes in the place where you live and work, which is probably somewhat different than the USA.  Keep all these records as they may be useful for your USA taxes as well.  You are required to total up what you were paid in Euros and convert them to US$.  This will go on the income section of a 1040.  You should be paying taxes in the EU country where you live.  You can also total those up and convert to US$.  This may be useful for a foreign tax credit. If you are living in the EU long term, like over 330 days/year or you have your home and family there, then you might qualify for a very large exemption from your income for US tax purposes, called the Foreign Earned Income Exclusion.  This is explained in IRS Publication 54.  The purpose of this is primarily to avoid double taxation. FBAR is a serious thing.  In past years, the FBAR form went to a Financial Crimes unit in Detroit, not the regular IRS address.  Also, getting an extension to file taxes does not extend the deadline for the FBAR.   Some rich people have paid multi-million dollar fines over FBAR and not paying taxes on foreign accounts.  I've heard you can get a $10,000 FBAR penalty for inadvertent, non-willful violations so be sure to send those in and it goes up from there to $250k or half the value of the account, whichever is more.  You also need to know about whether you need to do FATCA reporting with your 1040.  There are indeed, a lot of obnoxious things you need to know about that came into existence over the years and are still on the law books -- because of the perpetual 'arms race' between the government and would be cheaters, non-payers and their advisors.  http://www.irs.gov/publications/p54/ http://americansabroad.org/" "I'll add a bit to Paul's excellent write up. Foreign Earned Income Exclusion (form 2555): notice the earned there. It doesn't exclude capital gains, interest, dividends, and basically everything that is not salary. You pay US taxes on it from the first cent. Foreign tax credit - foreign tax credit (form 1116) doesn't reduce your US tax dollar for dollar (even though it may appear that it does from the generic explanations). By using this form you may end up accumulating unused credit while still paying double taxes at the same time. Happened to me. Thank Congress for the logical and reasonable US tax laws. New FATCA form 8938: as opposed to FBAR (that goes to the FinCEN in the Treasury), this one goes to the IRS. it contains very similar info, but the threshold requirements are different. You may have to file FBAR, but not these, or you may have to file both. Being an American citizen, some European banks will refuse to provide services to you. Again, thank Congress for FATCA. It requires foreign banks to enforce US tax regulations on US citizens, and banks that won't will get penalized in the US. Many banks refuse to provide services to Americans because of that because what IRS requires is illegal in most countries. Some countries (like UK and some other EU countries) have signed treaties with the US to resolve this, but many haven't. Currency conversion - as I commented to Paul, you convert the amounts when you receive them, which may have your fixed EUR salary be converted to different dollar amounts every time. You need to make sure you do it right. Pensions, savings, investments - if you're doing these in non-US instruments prepare to be penalized. US taxes foreign investments much more aggressively than domestic. If you're investing in indexes/mutual funds, or you're a principle in a corporation, or you create a pension account - you'll get hit by additional reporting requirements and tax. Tax treaties - the US has tax treaties with many EU countries, and equalization treaties with some. The tax treaties affect the standard tax treatment by the US and some of the ""generic"" info you got here may not apply because of a tax treaty, and some other rules may apply. Equalization treaties work similarly with regards to the Social Security. Bottom line, and I know Paul disagrees with me on this - talk with a US-licensed adviser in the country you're going to. It is very important for your tax adviser to know the relevant treaty (and not read it the first time when you call him), and to understand each and every financial instrument in your country. Missing piece of paper in your tax return can cost you thousands of dollars in penalties (not exaggerating, not filing form 3520 triggers a $10000 penalty, even if there's no tax) and additional taxes."
Are you planning to not pay taxes? Any time someone has income in the U.S., it is subject to U.S. taxes. You must file tax returns (and pay taxes if necessary) if you have income above a certain threshold, regardless of whether you're not authorized to work or not. If you plan to intentionally not pay taxes, then that's a whole other matter from working without authorization. Working without authorization is an immigration issue. It probably violates the conditions of your status, which will make you to automatically lose your status. That may or may not affect when you want to want to visit, immigrate to, or get other immigration benefits in the U.S. in the future; and at worst you may be deported. It's a complicated topic, but not really relevant for this site. One other consideration. If you are a US citizen or Resident Alien, you are going to owe US income taxes regardless of where you earn the money. Here it is straight from the horse's mouth: Tax guide for US Citizens living abroad There might be a problem. Some reporting paperwork will have to be done for the IRS, obviously, but technically it will be business income zeroed out by business expense. Withholding requirements will shift to your friend, which is a mess. Talk to a licensed tax adviser (EA/CPA) about these. But the immigration may consider this arrangement as employment, which is in violation of the visa conditions. You need to talk to an immigration attorney. You're asking three different questions...  Q1: What's to stop people not reporting income earned in this manner?  A: Nothing. Absolutely nothing. The IRS doesn't have the means to keep track of your cash flow and your reported taxes on the fly.  Q2: How could the IRS possibly keep track of that? A: When you get audited. If it ever did come up that things didn't balance you would end up owing back taxes, with interest and possibly fines.  Q3: Moral obligations aside... why report? A: Since you've dismissed 'doing your duty as a citizen' as a moral obligation, the only other real one is that it's a pain in the butt to get audited and it is expensive if you lie and get caught. it just depends on your situation and sometimes accounting can't fix that.  by mentor pays 35% even though he only goes back to the USA to visit. I go back less than 30 days a year so I can claim I'm a foreign resident but if all my income is in the USA I'm screwed.   I can't even route my income through my wife who has never stepped foot in the USA because we must claim whatever she makes.    US tax laws are so bad that it takes a lot just to get an account with HSBC in Hong Kong First, yes, your LLC has to file annual taxes to the US government.  All US companies do, regardless of where their owners live.  Second, you will also probably be liable to personally file a return in the US and unless the US has a tax treaty with India (which I don't believe it does) you may end up paying taxes on your same income to both countries.  Finally, opening a US bank account as a foreign citizen can be very tricky. You need to talk to a US accountant who is familiar with Indian & US laws. Generally speaking, if you have significant revenue outside the US, then you're better off incorporating out of the US. The US has significantly higher corporate tax rates, and taxes on worldwide income not just revenue in the US. Setting up in an offshore country would have no corporate tax but would cost about $1000 a year in fees.   For any non-US company, your US partner would need to file a 5471 form with his US personal tax which reports the company's finances. That costs about $1000 a year for an accountant to prepare. So you still need accounting on the company, even if you are not paying corporate tax.  Setting up the company is reasonably easy, you just use a broker. The bank account may be more difficult but they can help with that too.  You may find that your optimal personal tax strategy and your US partner's strategy are different. For example, if your partner is living overseas, then they are not taxed on salary in the US, but are taxed on dividends. So they would prefer to take any money out of the company as salary, resulting in no corporate profits. You, on the other hand, might prefer dividends. I agree with Joe, having the money deposited to the US bank account may land you in trouble. Technically, a US business paying a foreigner must withhold 30% of the payment, unless a tax treaty says otherwise. The US business should do that based on your W8-BEN/W8-ECI form that you should have given to the business before being paid. I'm guessing, that by paying to your US bank account, you (and your American counterpart) are trying to avoid this withholding. That may cause trouble for both of you. I would suggest you talking to a professional (EA/CPA licensed in the State where the business is located) and having the situation resolved ASAP. You may not be liable for the US taxes at all, but because of incorrectly reporting the income/expense - you and the US business may end up paying way more than the $0 you otherwise would have, in penalties. The US requires its (tax) residents to report foreign accounts if the balances (on all the accounts together) are $10K or more at any given day during the year. This is done through the FBAR system. In addition, you obviously need to report this income on your US tax return and pay taxes. If the balances on your foreign accounts exceed specific threshold, your tax return should also include form 8938. If you report everything and pay the taxes due - you can keep the money wherever you want and transfer it between your accounts as you may see fit. If you don't - the US government may come after you with huge penalties, and the Dubai bank may freeze your account. Its easy to become US tax resident. Stay in the US for more than half a year in a row - and here you are. Subject to the US taxation. Even if you're not a US citizen or green card holder, or at all illegal. Some immigration statuses may grant you an exemption, but none that allows you working for your Dubai employer, so I'm assuming you're a US tax resident. "Tax US corporate ""persons (citizens)"" under the same regime as US human persons/citizens, i.e., file/pay taxes on all income earned annually with deductions for foreign taxes paid.  Problem solved for both shareholders and governments.  [US Citizens and Resident Aliens Abroad - Filing Requirements](https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad-filing-requirements)  &gt;If you are a U.S. citizen or resident alien living or traveling outside the United States, **you generally are required to file income tax returns, estate tax returns, and gift tax returns and pay estimated tax in the same way as those residing in the United States.**  Thing is, we know solving this isn't the point.  It is to misdirect and talk about everything, but the actual issues, i.e., the discrepancy between tax regimes applied to persons and the massive inequality it creates in tax responsibility.  Because that would lead to the simple solutions that the populace need/crave.  My guess is most US human persons would LOVE to pay taxes only on what was left AFTER they covered their expenses." It makes no difference (to the UK) what country a bank account is in.  What matters is whether you are resident in the UK or not while employed locally in a foreign country.  You're taxed on where you are tax resident (which could be either country, both, or neither), not where the money is earned or banked.  You can assume, with modern exchange of information agreements, that all money you put in bank accounts anywhere in the world will eventually be known to the UK authorities. The rules for when you are a UK tax resident changed recently, there is now a statutory test for residence (pdf).  The rules are complex, but in general if you are outside the UK for less than one full tax year you're still resident, and in many cases where you're gone longer than that you may still be, depending on the length of your trips back to the UK and the ties you have there. So a 6-month winter job in Thailand teaching English as a foreign language will be subject to UK tax if you come back after, even if you leave all the money there or in a third country. If you pay local tax as well there are agreements between countries to avoid double taxation, but these do vary.  What you do about National Insurance payments while gone for a short time is another complex area. "I don't see why you would need an ""international tax specialist"". You need a tax specialist to give you a consultation and training on your situation, but it doesn't seem too complicated to me. You invoice your client and get paid - you're a 1099 contractor. They should issue you a 1099 at the end of the year on everything they paid you. Once you become full-time employee - you become a W2 employee and will get a W2 at the end of the year on the amounts paid as such. From your perspective there's nothing international here, regular business. You have to pay your own taxes on the 1099 income (including SE taxes), they have to withhold taxes from your W2 income (including FICA). Since they're foreign employers, they might not do that latter part, and you'll have to deal with that on your tax return, any decent EA/CPA will be able to accommodate you with that. For the employer there's an issue of international taxation. They might have to register as a foreign business in your state, they might be liable for some payroll taxes and State taxes, etc etc. They might not be aware of all that. They might also be liable (or exempt) for Federal taxes, depending on the treaty provisions. But that's their problem. Your only concern is whether they're going to issue you a proper W2 and do all the withholdings or not when the time comes." Banks do not report transactions within accounts except as required by law, usually as part of anti-money-laundering efforts. Generally those involve tracking large cash transactions. As far as large payments go, there are two reasons they might be reported to the government: taxes, and criminal investigations. For tax purposes, if the payment is considered a salary or wage (that is, you are an employee of the company and the payment is for your time working there), then the company paying you is responsible for reporting the wage and withholding applicable taxes from your salary. If you are considered an independent contract employee, then you yourself will be responsible for reporting the income to the IRS and paying the applicable taxes yourself. In the second case, unless you are already under investigation, I wouldn't worry about it. Banks are very touchy about financial records being kept private, and won't release them without a subpoena. One caveat is that this is under US law. Banks which maintain branches in multiple countries must, of course, comply with all local laws in the jurisdiction where they do business. The take away from this is that Bank of America is unlikely to report a single deposit of $75,000 into your account to anyone on their own. If it is a paper check being deposited they will probably place a hold on it to make sure it clears, but that is all. My concern is if I need to report and pay extra taxes for the part of   the company that will be under my name Yes, d'uh. Of course. It's actually quite complicated when it comes to foreign companies owned by US people, and you'll need a good tax adviser (EA/CPA licensed in your State) who's fluent in that area. Citizenship has nothing to do with this, from tax perspective there's no difference between a green card holder and a citizen (except that green card holder cannot claim non-resident exemptions and certain tax treaties' exemptions). There's nothing wrong with your reasoning except that you expect the tax laws to make perfect sense. More often than not they don't. I suggest getting in touch with a professional tax preparer (preferably with a CPA or EA designation), who will be able to understand the issue, including the relevant portions of the French-US tax treaty, and explain it to you. You will probably also need to do some reporting in France, so get a professional advice from a French tax professional as well. So, in my tax return, can I say that I had no US revenue at all during   this whole year? I doubt it.