TRAVEL TIPS

If companies request a W-9, do you report as a sole proprietor? If so, are you still exempt from taxation if you reside outside the country for 330 days?

One of the companies I freelance for wants me to fill out a W-9 tax form. I am a bit wary about sending around my SSN, so I was going to register as a sole proprietor so I could use an EIN. But, I believe that would make it more of a business to business transaction, no? My fear is that I will have to pay full taxes despite being out of the country for more than 330 days, which I believe exempts me from tax under 90k. Can anyone guide me on this?



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2 Comments

2 Comments

  • digitalnikocovnik

    What does it mean to “register as a sole proprietor” for IRS purposes? Some states and/or cities have a registration requirement, but as I’ve always understood it, if you’re self-employed and not otherwise incorporated, you simply *are* a [sole proprietor by definition as far as the IRS is concerned](https://www.irs.gov/businesses/small-businesses-self-employed/sole-proprietorships).

    I also don’t understand why any of this should matter for FEIE eligibility.

  • AaronDoud

    First as always get official tax advice.

    Second the w-9 should match what you are. Which appears to be self employed/sole proprietor aka not an LLC/etc

    Third the rules on tax residency are not as cut and dry as you seem to believe. Given the fact that the US is a worldwide income taxer and will actually audit/enforce it…. get real advice

    Layman summary. The 330 days is right but has to fall under certain rules (you can google these). And the limit is $105,900 and of course there are rules for writing off taxes paid to other countries.

    Which brings up the big point if you stay outside the US but don’t have tax residency in another county you will not IMO (laymen) be able to legally avoid taxes (to do that you need forign corporations and etc).

    Plus if they are requesting a w9 that means they are a US based company which means the IRS will default to considering that US based income (a tax professional can have legal ways past that but that is the default way they will read it).

    And finally if you did not break up with you state properly you could still owe state taxes. This is why many suggest creating residency in a Zero Income Tax state before leaving the US.

    **Please Note:** You can not easily and legally avoid paying taxes to the IRS if a US citizen. It is not simply about avoiding tax residency anywhere. Without another tax residency they will basically consider you a US tax resident even if you never step foot int the US during the tax year. Most states will do the same.

    Final Thought: Personally I think American digital nomads should get residency in a Zero Tax State and just use the residency there for the first year or two.

    There are advantages to doing this long term anyways since as long as you avoid the 180 day mark most other countries have and the income is from the US you can avoid their taxes legally (well at least greyly lol).

    One the other hand the US and most states in the US will aggressively try to tax you including world wide income. Basically unless you set up the right structures they are going to get your taxes anyways.

    You can always hire professionals and create the structures at any point to fix the issue.

    Also you might actually want to pay social security and medicare taxes. Since one day you will be old and America doesn’t have free health care unless you are really poor. But if you are really high income you will want to minimize the amount since SS is a horrid investment. (which brings us back to professionals and proper structures)

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