Let's begin with our first section US tax concepts. Many of my clients come to me as brand new digital nomads who may also be brand new freelancers or entrepreneurs as well. That's a lot of changes to unpack, and it helps if we're using the right terminology. Let's begin with some key definitions. As we dive into the more technical content here, please bear with me. These concepts will be essential for you to understand your individual situation and will be followed later by practical examples and actionable advice.

In this section, I'll cover the definitions of the terms us person, expat and digital nomad, and self employed. The reason these terms are so important to start with is that they're very often concepts that you wouldn't have had any reason to be familiar with prior to beginning your digital nomad journey. But now there'll be very rarely To you and applying them to your situation in the right way will be crucial us person, this is an IRS definition in the tax code. For us tax purposes. A us person includes all US citizens, as well as anyone meeting the definition of a US resident of this second group, anyone holding a US green card is automatically a US resident. For this reason, when we talk about us persons, US citizens and green card holders are usually treated exactly the same.

The other residents tests are mentioned here. The substantial presence test is only applicable to individuals who are neither US citizens nor green card holders. And it's based on how many days the individual is physically present in the US. For the purpose of this course, we'll assume everyone listening is Either a US citizen or green card holder. And one final note here, if you hold multiple citizenships, and one of them happens to be a US citizenship, this definitely still applies to you. As long as you still hold US citizenship that you haven't formally renounced, which is a topic for a whole other course, you're still 100% a US person in the eyes of the IRS.

So in other words, you can't pick and choose which citizenship applies to you, as long as one of them is a US citizenship. And why is this significant? Well, it's because if you meet this definition of a US person, that means that you're subject to worldwide taxation and reporting to the IRS. And this is an ongoing requirement, no matter where you live or work around the world, or how long you've been outside the United States. Now we'll talk a little bit more about how exactly this works. But it's important to note that if you're a US person, then worldwide taxation and reporting applies to you, essentially forever.

Moving on to the terms expat and digital nomad. Let's note that these aren't IRS definitions, but they're used commonly enough in the parlance that I thought it would be helpful to define what we mean by them here. And here, what I'm really getting at is someone who spends most of their time outside of the US. In other words, someone who is outside of their country of origin, whether it's in one set location, usually referred to as an expat, or someone who travels frequently without having one set home base necessarily, often referred to as a digital nomad. And why is this significant? Well, essentially, because if you are both a a US person who B spends most of his or her time outside the US, then the tech strategies that we'll discuss later are going to be applicable to you.

Unless both of these definitions apply, then these strategies don't apply to you. This next definition will apply to some but not necessarily all of our listeners today. Self Employed is another IRS definition. And as you can see it, it contains multiple other definitions within it, which we won't go into in detail here. But essentially, it's important to note that if you have an income stream from working, that isn't a traditional employer employee relationship, then it's almost certainly going to be considered a self employment activity by the IRS. And in my experience, this probably will apply to most digital nomads at some point.

Now, if you do happen to have that traditional employer employee relationship that allows you to be location independent, that's a nice position to be in and your us taxes will be relatively less complex as a result. Although the expat provisions we'll talk about later will still be relevant to you. However, for many people, becoming location independent also comes with developing their own independent income streams. This has a lot of advantages, but it does come with additional tax complications, namely the self employment tax. So again, the reason why this definition of self employment is essential to I kind of have our arms around is because if you're considered self employed, the self employment tax, which we'll talk about in detail later will apply to you. And most often you will be required to make quarterly estimated payments, which is new for a lot of people who have previously just being employees.

So there you go with these definitions in mind, we can take our next steps forward to talk about the practicalities of really what your digital nomad tax situation is going to look like.