The topic of taxes comes up a lot. I want to talk about paying taxes as a digital nomad for those who think this will be a major issue for them.
As a digital nomad physician, I am careful to not break any major rules. But these rules aren’t as clear as one would like.
I do my own taxes annually and research such topics as best as I can.
Digital Nomad Tax Obligations
You have to pay taxes to the US regardless of where you live in the world. As long as you remain a citizen or want to enjoy that right there are some tax obligations for those who earn money.
The main taxes you’ll continue to pay are your payroll taxes. So, basically, your Social Security and Medicare taxes.
This doesn’t come out to too much and you get some nice perks in the future.
Digital Nomad Tax Residency
The main question people often want to ask is if they should pay taxes back in the US or wherever they are residing in the world.
I’ve been spending a lot of time in Spain. Their tax residency rules are that if I stay more than 183 days I could be considered a tax resident here.
Could be. Not will be. It’s never that easy and there is wiggle room for this.
For example, if I continue to pay taxes in the US and spend a good amount of time there and have a house or car there, it’s hard for Spain to prove that I’m a resident of Spain.
Multiple Countries
I spend time in Spain and have a non-lucrative visa to stay here 2 years at a time.
But I also spend time in the US and in Mexico. This is intentional.
I own a car in Spain and I purchased a condo. And I spend nearly half of the year here. I also run my businesses from here. But I’m not a tax resident and not going to be paying taxes as a digital nomad physician here.
Should someone come after me they would have to prove that I’m not a resident of the US and that the US owes Spain money.
Remember, there is a tax treaty between the US and Spain – and many other countries. As long as I’m paying someone and a resident of that one in, all is gravy.
Tax Penalties
Let’s say you’ve messed it all up. You were supposed to pay taxes in Mexico or Portugal but have been paying your taxes to the US. What could happen?
No tax prison for you, don’t worry. Someone will contact you and tell you that you owe taxes.
Next, you’ll review the documents yourself and maybe post on reddit to get some advice. Then you’ll submit the proper documents and pay whoever needs to be paid.
There might be some penalties but it’s unlikely to be more than a couple of thousand. If you’re a digital nomad physician that shouldn’t shake you too much.
How to Pay Taxes as a Digital Nomad Physician
If you have a tax person, great. Just makes life so much easier.
I file my taxes using online tax software. There any many of them now and I just shop for the cheapest one.
Keeping track of your spending and earnings isn’t too tough if you can keep separate accounts. One credit card for all business spending and one account for all business income.
Once I file I just do an e-file for my state and for federal taxes and make the payment online.
In the past, I used to pay estimated taxes but now I just wait. There is a penalty but I’d rather pay the penalty than deal with the payment deadlines.