Taxing can be a daunting undertaking, especially if you live a nomadic lifestyle. Many blogs have helpful and educational posts about the top finance companies to help you decide what finical companies would best suit you. In addition, companies such as 97tax offer their services by making your taxing process more effortless and lighter for you. The following blog will detail what a digital nomad is, if you can become one in the US, if taxes apply to digital nomads, and understand the difference between tax avoidance and tax evasion- one of them is a criminal offense.
What is a digital nomad?
A digital nomad, in essence, is someone who can work all over the world. Digital nomads can achieve this as their work is technology-based, and therefore they are not required to go into an office every day. To do their job, all they need is a charger and wifi.
Can you be a digital nomad in the US?
The short answer is yes. Many travelers from all over the world can live in the USA and be digital nomads. However, the type of VISA that they get is essential. The H visa is the one suited for digital nomads. There are three subcategories to this visa. Namely, an H-1 visa is issued to individuals with a college degree or work experience and is valid for three years. The H-2A visa is issued to temporary or seasonal workers in the agricultural field and is suitable for one year, maximum. The H-2B is available to non-agricultural workers and valid for one year. Finally, the H-3 visa is open to individuals interested in training activities; however, this visa does not support all fields.
Do taxes apply to digital nomads?
One might think that digital nomads could get away without paying take; however, it is very far from the truth. Any US citizen or green cardholder has to pay taxes. Often digital nomads are self-employed, and therefore, they will have to pay self-employment tax, which is 12.4% of your income that goes to Social Security and 2.9% of your payment goes to Medicare. So a total of 15.3% is what you essentially pay towards tax. However, there are a few ways to lower the amount of tax that a digital nomad might have to pay. For example, suppose you might have business expenses, such as internet services, equipment (iPhone or laptop), subscription fees, account fees, etc. It can all be tax deducted.
The difference between tax avoidance and evasion
There are many ways that individuals can make tax work for them rather than take from them. However, the line is fragile between avoidance and evasion. Tax avoidance is essentially when an individual carefully crafts their transactions to reap the rewards that tax can have. On the other hand, tax evasion is a criminal offense. It is considered tax evasion when individuals are not upfront with their income, have two sets of books, and fill in false transactions, claiming personal expenses to be business expenses, and transferring or hiding any assets. While there is nothing wrong with tax avoidance, it takes an educated person to do it correctly. Therefore it is advisable to speak to a tax consultant before doing it yourself.
Due to technology and the internet becoming rapidly accessible, becoming a digital nomad has never been easier. All you need is a laptop, a charging port, and access to the internet. Even though you are self-employed, digital nomads are still required to pay tax; however, there are a few legal loopholes.