Are U.S. Digital Nomads Taxed on Income They Earn Abroad?

Do Digital Nomads Pay U.S. Taxes

The Digital Nomad Visa Explained 

In recent years, many countries have introduced Visas that make it easier for non-citizens or residents to travel to their country to live and work temporarily. Many of these Taxpayers work online, with the general catchall phrase of being a ‘Digital Nomad,’ because they can work from anywhere they can find internet service. The digital nomad visa is ideal for individuals who want to travel the globe in order to try working in different countries — without becoming a citizen or permanent resident of that country — may qualify for a digital nomad visa in order to streamline their ability to temporarily reside abroad. Similar to the visa waiver program in the United States and other countries, a digital nomad visa allows a person a more direct or streamlined route to becoming a resident of a foreign country, for a temporary time. Especially with Taxpayers across the globe having been cooped up over the past few years the digital nomad visa has become much more popular in the past years. While not every country offers a digital nomad visa, let’s explore the basics.

Common Countries That Offer the Digital Nomad Visa

While there are many different countries across the globe that offer the digital nomad visa, the more popular digital nomad busiest time to be in countries with high-demand coastal cities and/or metropolitans.  Some of the more popular digital nomad visa countries include:

• • • Portugal

    • Spain

    • Greece

    • Barbados

    • Bermuda

    • Cayman Islands

    • Brazil

    • Taiwan

    • Panama

Is it Hard To Get a Digital Nomad Visa?

In general, it is not very difficult to obtain this type of visa – noting, that is different than citizenship-by-investment or residency-by-investment in that the digital nomad visas are just temporary visas Most of the time, the application fee is a few thousand dollars (vs. hundreds or thousands, if not millions of dollars for a CBI or RBI). Applicants are required to prove that they have a certain amount of income — and the amount of income varies depending on which country the taxpayer seeks to obtain a digital nomad visa.

Is a Digital Nomad Visa Expensive?

The cost to obtain one of these types of visas is generally not very expensive.  For usually a few thousand dollars or even less, Taxpayers can apply for a digital nomad visa – and the length of the process for acceptance is generally relatively short — as taxpayers are only granted a year or less of residence in that country.

US Persons and Worldwide Income

One important fact for US Taxpayers is that since they are US persons, they are still required to pay tax on their worldwide income and report their global assets in investments on various international information reporting forms such as the FBAR and FATCA Form 8938. Even if the taxpayer is in a tax-free country, that does not mean they escape US tax on their worldwide income, although they may want to consider making a treaty election to be treated as a foreign person—although this also has some pitfalls to be aware of, especially for those who are already considered long-term lawful permanent residents.

Late Filing Penalties May be Reduced or Avoided

For Taxpayers who did not timely file their FBAR and other international information-related reporting forms, the IRS has developed many different offshore amnesty programs to assist taxpayers with safely getting into compliance. These programs may reduce or even eliminate international reporting penalties.

Current Year vs. Prior Year Non-Compliance

Once a taxpayer missed the tax and reporting (such as FBAR and FATCA) requirements for prior years, they will want to be careful before submitting their information to the IRS in the current year. That is because they may risk making a quiet disclosure if they just begin filing forward in the current year and/or mass filing previous year forms without doing so under one of the approved IRS offshore submission procedures. Before filing prior untimely foreign reporting forms, taxpayers should consider speaking with a Board-Certified Tax Law Specialist who specializes exclusively in these types of offshore disclosure matters.

Avoid False Offshore Disclosure Submissions (Willful vs Non-Willful)

In recent years, the IRS has increased the level of scrutiny for certain streamlined procedure submissions. When a person is non-willful, they have an excellent chance of making a successful submission to Streamlined Procedures. If they are willful, they would submit to the IRS Voluntary Disclosure Program instead. But, if a willful Taxpayer submits an intentionally false narrative under the Streamlined Procedures (and gets caught), they may become subject to significant fines and penalties. 

Need Help Finding an Experienced Offshore Tax Attorney?

When it comes to hiring an experienced international tax attorney to represent you for unreported foreign and offshore account reporting, it can become overwhelming for taxpayers trying to trek through all the false information and nonsense they will find in their online research. There are only a handful of attorneys worldwide who are Board-Certified Tax Specialists and who specialize exclusively in offshore disclosure and international tax amnesty reporting. 

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure. 

Contact our firm today for assistance.