# US Citizen working in Dubai Tax question



## rmccumber

Ill be working in Dubai on a contract with a consulting firm. What is best way to optimize my tax situation with US. Should i start my own LLC or could I just use schedule C when doing my taxs. 

Also do I pay full taxes to the US eventhough Dubai is tax free, and is there any way around this. Ie if I put the money in an offshore account and then didnt claim it. Obviously thats against IRS policy law, but how do they check. We are only talking about 50K that I will earn in 2 monts. Please advise all options


----------



## tigertmoore

Go to Bona Fide Residence & Physical Presence Tests - Foreign Earned Income Exclusion

You will find there are several explicit rules from the goons over at the IRS that our American Congress has set up to tax us US folks on income earned worldwide... apparently you are not going to meet the residency requirement that many folks do not know of... 330 days out of country meaning your two months aint gonna hack it. 

As far as "reporting" income, of course your employer assuming it is not a US based company does not have any obligation to report a darn thing to the IRS, having that income simply routed away somewhere does not obviate you from reporting that income. 

Tax cheating is frowned upon by the boys over at IRS and why would you do that with penalties more severe than the amount of tax itself?

The rules are quite clearly explained at the above link...

Cheers!

Tiger T


----------



## rmccumber

Hi Tiger T, thanks for info. FYI - I will be outside the US for more than 330 days, as I will be taking a job in Australia following here. I also may stay here past 2 months possibly 2-6, then head to Sydney. So yes outside the US for more than 330 days so please advise how that changes siutation


----------



## tigertmoore

rmccumber said:


> Hi Tiger T, thanks for info. FYI - I will be outside the US for more than 330 days, as I will be taking a job in Australia following here. I also may stay here past 2 months possibly 2-6, then head to Sydney. So yes outside the US for more than 330 days so please advise how that changes siutation


Here's the deal buster! As mentioned, there are many websites covering this subject... simply google up "foreign earned income" and you'll bore yourself silly with hundreds of pages... now OZ is a bit different as they have quite onerous taxation of foreigners and you MUST seek the advice of an expat tax service and yes google that up too... I have found several that I use out of India that are very expert and very inexpensive... FAR less than american firms. 

There are other taxation rules for double-taxation and I'm quite certain you are going to pay taxes to someone somewhere... 

There's a myriad (of course) of laws on this subject and if you screw the pooch, do not think for a moment that there aren't IRS agents at every major US Intl airport just waiting for their hen to land, go through customs and then get plucked. You do know that your passport control number is easily accessable and can be monitored by the IRS? Big Brother indeed. Airlines inbound to the US are of course required to submit their passenger list as we all know and if you have raised a snoop for tax from the feds, they will be smiling happily at your return with forms and papers and maybe a new set of silver bracelets!

You also know that upon your return to the US eventually that the Fed Government can detain you and ask all about your extended trips abroad, where and what you were doing and false statements are a federal offense... just a word of warning there.

I'm no expert on this but google up one on Expat Executive Tax and there ya go. 

Best luck:

TT


----------



## Bevdeforges

Easiest thing for you to do is to download Publication 54 from the IRS site. As an employee (contractor counts as employee under most circumstances), you are entitled to "exclude" (via form 2555) up to about $90K of "earned income" while resident overseas, plus there is a housing allowance. If that won't entirely eliminate your tax obligation to Uncle Sam, your only option is the foreign tax credit, which for Dubai is kind of a non-starter (though if you're transfering on to Australia, will become relevant again).

Net-net, you won't pay full taxes to the US, but you don't get to enjoy the tax-free advantages of Dubai to the fullest, either.
Cheers,
Bev


----------



## DavidM

*Tax Answer*



rmccumber said:


> Ill be working in Dubai on a contract with a consulting firm. What is best way to optimize my tax situation with US. Should i start my own LLC or could I just use schedule C when doing my taxs.
> 
> Also do I pay full taxes to the US eventhough Dubai is tax free, and is there any way around this. Ie if I put the money in an offshore account and then didnt claim it. Obviously thats against IRS policy law, but how do they check. We are only talking about 50K that I will earn in 2 monts. Please advise all options


Since you will earn your income in only 2 months, you are not going to get anything out of the FEIE or foreign tax credits. Your best option will be to file a Schedule C as part of his 1040 and take as many deductions against the income as possible. The offshore idea is not going to help. Even if you chose this route, you would have to report it on the FBAR and it would be fraudulent to not report your income, which would then be taxed. If you wanted to stay abroad for 12 months then you would meet the physical presence test and that would allow you to file for the Foreign Earned Income Exclusion. You may want to consider that!


----------



## Iron Horse

Just do the right thing and pay the tax that is required.


----------



## Andrew James

Hi,

You can reduce your taxes by working through your own incorporated company.

Cheers,

Andrew


----------

