Why wouldn’t he be able to claim FEIE?
To claim that you need proof such as photocopies of the tax form given by Taiwan companies.
Huh? If the OP has earned income, he has to report this to the IRS. His eligiblity for FEIE is based on the physical presence/bona fide residence tests.
Perhaps you’re confusing FEIE with credit for foreign taxes paid?
So let me make sure I understand this correctly: My earned income will exclusively come from clients in the US into my US bank account, so I will still pay 1099 taxes to the US as if I were living in the US? And I won’t need to pay any taxes to Taiwan because my income is exclusively in the US? And I won’t be able to claim FEI because nobody in Taiwan is paying me anything?
You should still report your overseas income for income tax in Taiwan.
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Now what if skipped my US bank account and have all my clients deposit directly into my Taiwan bank account. In theory I would be able to claim FEI because the work was performed in Taiwan and my money never reached a US bank account, right? And I’ll only need to pay payroll taxes to the US. In this scenario, would I still be able to skip paying taxes to Taiwan because my clients are in the US?
In that case, you might not need to pay business tax, but the income may be considered to be domestic in Taiwan.
You really should talk to a tax professional.
I am not a tax professional, so this is not advice, but some friendly help…
How and where you get paid is largely irrelevant.
The US taxes citizens on worldwide income. Uncle Sam does not exclude you from its tax grip simply because you’re living abroad. There are some benefits available, such as the Foreign Earned Income Exclusion and tax credits, that you might be able to use to reduce your US tax liability as an expat.
Taiwan taxes Taiwan-source income. Basically, if you’re in Taiwan >90 days a year, Taiwan expects you to pay taxes on the income you generate from any services you render from within Taiwan, regardless of whether or not that income was paid to you by a Taiwan employer and regardless of where payment was made.
A competent tax professional can help you understand your liabilities in both countries and possibly help you structure your business in a way that optimizes your tax liability.
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Ok thanks for all the information. It seems like the right thing to do would be to find an accountant when I get to Taiwan. I won’t need them to do my taxes, I’ll just need some one-time tax advice from them. Do accountants in Taiwan typically offer one-time tax advice services?
yes, they do.
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I would recommend also talking to a US tax professional as I wouldn’t rely on a Taiwan-based accountant to render US tax advice.
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As long as you are a US citizen, you need to report earnings no matter where you live. If you’re making about $180,000 per year, you’ll almost definitely need to pay taxes.