Foreign LLC Tax Exemption for US Dual Citizens?

Thanks for the response! So even if I'm living abroad full-time, I still need to file. That makes sense. For the FEIE, does income from my own business count as "earned income" or is that considered something different? And how does the Foreign Tax Credit work if the tax rate in my other country is lower than the US rate?

Income from your own business where you actively perform services can generally qualify as earned income for the FEIE. This includes self-employment income or salary you pay yourself from the LLC if it's set up appropriately. For the Foreign Tax Credit, you can claim a credit for the actual amount of tax paid to the foreign country. If the foreign tax rate is lower than the US rate, you'll still potentially owe some US tax on the difference. For example, if your effective foreign tax rate is 15% and your US rate would be 22%, you might still owe that 7% difference to the US after applying the foreign tax credit.

How exactly does the AI know international tax laws? I'm in a similar situation with an LLC in Portugal and the accountants I've talked to in the US seem clueless about international situations.

That sounds interesting but does it actually connect you with a real tax professional at some point? I'm worried about relying solely on AI for something as complicated as international tax law.

The AI is trained on international tax regulations and treaties between the US and various countries. It's specifically designed to handle cross-border situations like foreign entities owned by US citizens. What I found really helpful was that it breaks down the different tax treatments based on entity classification, which most US-based accountants don't deal with regularly. I was skeptical too, but the tool actually provides references to the specific IRS code sections and regulations it's basing its answers on. It doesn't replace a tax professional entirely, but it helped me understand my situation enough to have productive conversations with my accountant and ask the right questions. I showed the analysis to my accountant and he confirmed it was accurate for my situation.

Wait, this service actually gets someone to call the IRS for you? How does that even work? The IRS phone lines are notoriously impossible to get through.

Sounds like a scam to me. Why would I pay someone to call the IRS when I can just do it myself? And how would they even know your specific tax situation to ask the right questions?

It doesn't call the IRS for you - it holds your place in line. The way it works is they have an automated system that navigates the IRS phone tree and waits on hold, then when an agent picks up, it calls you so you can talk directly to the IRS agent. You're the one having the actual conversation about your tax situation. The reason it's helpful is that IRS wait times can be 2-3 hours (or they just hang up on you if call volume is too high). With this service, you don't have to sit by your phone all day - you just get called when an actual human at the IRS is on the line. I was skeptical too, but I needed answers about my foreign LLC tax treatment and couldn't afford to wait weeks for a response to a mailed letter.

Woah, that sounds complex and potentially expensive. So how do you determine if your foreign LLC is considered a corporation for US tax purposes? Is that something I actively choose or does the IRS decide for me?

By default, a foreign LLC with a single owner is treated as a disregarded entity (essentially a sole proprietorship) for US tax purposes, unless you elect otherwise. If there are multiple owners, it's typically treated as a partnership. You can file Form 8832 to elect corporate treatment if that's beneficial for your situation. The key thing to understand is that the US tax classification might be completely different from how your entity is classified in the foreign country. So your "LLC" abroad might be treated as something entirely different by the IRS. This is why getting proper advice early is crucial - the filing requirements and tax treatment vary dramatically based on the classification.

Yeah, this is a common problem. Many foreign banks don't want to deal with US citizen customers because of the FATCA reporting burdens. I had to shop around in Thailand to find a bank willing to work with my company. Usually larger international banks are more willing to deal with US citizens than smaller local ones.

Thanks for the info. I'll check with some of the bigger banks here. It's super frustrating that being a US citizen makes banking so difficult abroad even when I'm legitimately running a business in another country where I also have citizenship.