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Freelancer working in Mexico

10:50 pm on Feb 17, 2009 (gmt 0)

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I'm currently a webmaster/coder/designer in the U.S. however I'm planning on moving to Mexico soon on a student visa(no working in Mexico). I am planning on keeping all my US clients though. 99% of the work is done online, 1% is an occasional phone call shouldn't be a problem.

Can anyone see any potential problems with doing this? I have a P.O. box in Michigan.

My main question is what would I need to worry about or be on the lookout for if I tried to do this? Do I need to register anything with the Mexican gov? Am I correct is assuming the first $80000/yr I make will not be taxed by Uncle Sam? Do I even need to report earnings to the US? To Mexico?

11:05 pm on Feb 17, 2009 (gmt 0)

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Am I correct is assuming the first $80000/yr I make will not be taxed by Uncle Sam?

It's a bit more complicated than that. (And the current amount is somewhere north of $91K plus housing expenses.) First, you have to qualify for the exclusion. It's something like 330 calendar days outside the U.S. (remember to include any days you're back in the U.S., even just for short stays back home to visit- they all count against your 330), otherwise it's prorated. It's just income tax that the exclusion applies to- you're still responsible for Social Security taxes on the full amount.

Do I even need to report earnings to the US?

YES! Even if you don't owe, you still have to file. Otherwise, Uncle Sam may decide to file on your behalf and would most likely forget to include your expat exclusion...

No matter what, consult with a tax professional and discuss your entire situation. You may need more documentation to prove that you are actually doing the work outside the U.S.

Oh, and don't forget that you'll still be taxed normally on non-earned U.S. income (e.g., interest on bank accounts, dividends from U.S. securities, revenue from U.S. rental properties, etc.). And your state may not have any exclusion at all, so you'd still be subject to state taxes.

[edited by: LifeinAsia at 11:08 pm (utc) on Feb. 17, 2009]


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