An American digital nomad running a US LLC from Bali faces a common problem: complete confusion about tax obligations. With clients in four countries, they don't know whether to file based on where clients are located, where they live, or where the business is registered — and accountants charge a fortune for international tax help.
Posting to r/digitalnomad, the traveler described their predicament: "Living in Bali, running a US LLC and making money from clients in like 4 different countries. Tax time rolls around and I genuinely don't know what I'm doing."
The confusion is understandable — and expensive to resolve. International tax accountants charge $500-2,000+ for digital nomad tax preparation, depending on complexity.
The Basic Answer (That Gets Complicated Fast)
For US citizens and permanent residents, you file based on where you're a tax resident — which, for Americans, means filing US federal taxes regardless of where you live. The US is one of only two countries (along with Eritrea) that taxes based on citizenship, not residency.
This means:
1. You file US taxes on worldwide income even if you never set foot in the US that year 2. Your LLC's location determines business taxes (a US LLC pays US business taxes) 3. Where your clients are located is mostly irrelevant for your filing obligations (though it may create obligations for them) 4. Where you physically live may create additional tax obligations to that country
The Foreign Earned Income Exclusion
US citizens living abroad can exclude up to $120,000 (2023 limit) of foreign earned income from US taxes if they meet physical presence or bona fide residence requirements. But here's the catch: income from a US LLC typically doesn't qualify as foreign earned income.
If you're a single-member LLC (treated as a disregarded entity for tax purposes), your income is considered self-employment income from a US business. You still owe US self-employment taxes (Social Security and Medicare) regardless of where you live.
The Indonesia Complication
Living in Bali adds another layer. Indonesia considers you a tax resident if you spend 183+ days there in a year. As a tax resident, you owe Indonesian income tax on worldwide income — potentially creating double taxation.
The US-Indonesia tax treaty provides some relief through foreign tax credits, but calculating this requires professional help. "My accountant back home charges a fortune for international stuff," the nomad noted.
Why It's So Expensive
International tax preparation is costly because accountants must:
1. Understand US tax law 2. Understand your host country's tax law 3. Navigate the tax treaty between them 4. Determine which income qualifies for exclusions/credits 5. File multiple returns (US federal, potentially state, potentially foreign) 6. Handle foreign bank account reporting (FBAR) and FATCA compliance
Mistakes can trigger audits or penalties in multiple jurisdictions.
The DIY Approach (Risky but Possible)
Some nomads use services like H&R Block Expat ($200-400) or Taxes for Expats ($450-800) which specialize in Americans abroad. These are cheaper than full-service international accountants but require you to understand your situation well enough to provide accurate information.
The Uncomfortable Truth
Multiple commenters noted: "If you're making enough to worry about multi-country tax optimization, you're making enough to pay an accountant." And conversely: if you're barely scraping by as a nomad, spending $1,500 on tax preparation may consume your profit margin entirely.
One experienced nomad summarized: "People think the digital nomad life is 'work from a beach.' Nobody mentions that tax compliance alone can cost 5-10% of your gross income and requires skills most people don't have."
The lesson: factor international tax complexity and costs into your nomad budget before you leave. That beach sunset has a $1,500 accountant bill attached.
