Tax Advice Wanted. Us Citizen Living Thailand

[tutsiwarrior]

Boon...he started it (sniff)...

[sabaijai]

steve if you read your passport carefully you will learn that the only thing that will free you from your obligation to pay US taxes is death. Our passport notes that even in you renounce/lose your US citizenship you will still have US taz obligations.

You must have a special passport. I have a US passport and it says nothing of the kind.

As I posted earlier, the regs say that if you renounce US citizenship, you're required to file for another 10 years afterwards, and then you're done.

Edited December 2, 2004 by sabaijai

[sabaijai]

Meanwhile, anybody have opinions about owing SS taxes back in the states?

As far as I know, you're never exempt from FICA/SS taxes as long as you're a US citizen. Definitely if your tax home is ex-US, and you're either self-employed, or employed by a US company, you have to pay FICA. I'm not really sure what the case is for someone who's an employee of a non-US company living abroad. But I do know that you're required to file annually, without fail.

Since I'm self-employed, I have to pay the full 13%. That's pretty much all the income tax I pay in an average year, because the foreign-earned income exclusion (up to 80K), plus my plentiful deductions, takes care of most of the rest.

[tutsiwarrior]

sabajai...I'm not aware that my post that you indicate made any reference to what is stated in my US passport. As I posted earlier on this thread my passport (issued in 2003...earlier issues did not discuss tax liability) does say that every US citizen must file a federal tax return every year. I don't presently have it with me or I would quote...

Also my passport says that one may lose US citizenship by serving in the armed forces of a foreign country...not by not attending to one's tax liability. For that they would be content with simply chucking one's ass in jail if they had the option...

[sabaijai]

sabajai...I'm not aware that my post that you indicate made any reference to what is stated in my US passport. As I posted earlier on this thread my passport (issued in 2003...earlier issues did not discuss tax liability) does say that every US citizen must file a federal tax return every year. I don't presently have it with me or I would quote...

Also my passport says that one may lose US citizenship by serving in the armed forces of a foreign country...not by not attending to one's tax liability. For that they would be content with simply chucking one's ass in jail if they had the option...

tutsi, I hit the wrong quote/reply button and ended up quoting your message, when I'd meant to quote the one that followed your message. I edited my post so that it now shows the post I'd intended to quote in the first place.

You must have thought I'd lost a wheel ...

[Boon Mee]

Meanwhile, anybody have opinions about owing SS taxes back in the states?

As far as I know, you're never exempt from FICA/SS taxes as long as you're a US citizen. Definitely if your tax home is ex-US, and you're either self-employed, or employed by a US company, you have to pay FICA. I'm not really sure what the case is for someone who's an employee of a non-US company living abroad. But I do know that you're required to file annually, without fail.

No tax expert here, sabajai, but I work with loads of expats in the oil & gas industry who are and have been paid out of such places as the Cayman Islands; shell companys out of the Isle of Man etc (Yanks) who have never paid SS or FICA. When they eventually do end up employed by a firm headquartered in Houston, SS & FICA are taken out. It just leaves a "hole" in their cumulative earnings toward retirement. No tax authority ever questions them or drums them for back taxes.

[sabaijai]

Meanwhile, anybody have opinions about owing SS taxes back in the states?

As far as I know, you're never exempt from FICA/SS taxes as long as you're a US citizen. Definitely if your tax home is ex-US, and you're either self-employed, or employed by a US company, you have to pay FICA. I'm not really sure what the case is for someone who's an employee of a non-US company living abroad. But I do know that you're required to file annually, without fail.

No tax expert here, sabajai, but I work with loads of expats in the oil & gas industry who are and have been paid out of such places as the Cayman Islands; shell companys out of the Isle of Man etc (Yanks) who have never paid SS or FICA. When they eventually do end up employed by a firm headquartered in Houston, SS & FICA are taken out. It just leaves a "hole" in their cumulative earnings toward retirement. No tax authority ever questions them or drums them for back taxes.

Do these folks file US income tax returns? I've lived abroad for most of my adult life and have always filed, and have always had to pay social security, whether I worked for myself (most of the time, and thus paying 13%) or for a foreign company (7.5%). I don't see that it matters whether the company is based in the Caymans. That may exempt the company from corporate taxation but doesn't exempt the US citizen from taxation. The only exemption a US citizen gets, I believe, is the foreign-earned income exclusion on the first 80K income.

However I'm not a tax expert either, so I could be wrong about this. Perhaps SS is collected only from the self-employed - like myself - or from those employed by US companies abroad. If so that doesn't see quite fair to me - why should someone working for a foreign company be exempt from US SS tax when someone working for himself in a foreign country isn't?

The bottom line is, if you file your tax return as required, they'll let you know whether you owe SS! I get one single tax bill every year, after filing, combines SS with regular income tax. So perhaps your friends are paying US SS and don't know it.

I don't mind paying SS myself, reasoning that I'll get it back when I retire (well most likely anyway, but that's another topic). Sure I'd rather have that money to invest myself, but to tell the truth virtually every private investment I've made has gone nowhere. I don't have a business head.

What we need is for an accountant to join this thread. Wouldn't recommend mine, as I just got a letter from the IRS claiming I'd underpaid taxes on 2003 income. I declared everything I made, so I can only assume my accountant erred.

[thaihome]

I am no tax expert either, just have several years experience working overseas for a large US Multinational. For us, the FICA issue depends on the subsidiary companies you work for in whichever country. I have paid FICA on full salary (including allowances, housing, etc) and have paid FICA on only 40% when working split onshore/offshore pay. Depends on how the company has structured the expat payroll for that particular country. Even when paying on 40% of salary, I have always reached the max deduction before the end of the year, so that may be why there has never been a problem with having to pay an additional amount when filing tax return.

TH

[Boon Mee]

Meanwhile, anybody have opinions about owing SS taxes back in the states?

As far as I know, you're never exempt from FICA/SS taxes as long as you're a US citizen. Definitely if your tax home is ex-US, and you're either self-employed, or employed by a US company, you have to pay FICA. I'm not really sure what the case is for someone who's an employee of a non-US company living abroad. But I do know that you're required to file annually, without fail.

No tax expert here, sabajai, but I work with loads of expats in the oil & gas industry who are and have been paid out of such places as the Cayman Islands; shell companys out of the Isle of Man etc (Yanks) who have never paid SS or FICA. When they eventually do end up employed by a firm headquartered in Houston, SS & FICA are taken out. It just leaves a "hole" in their cumulative earnings toward retirement. No tax authority ever questions them or drums them for back taxes.

Do these folks file US income tax returns? I've lived abroad for most of my adult life and have always filed, and have always had to pay social security, whether I worked for myself (most of the time, and thus paying 13%) or for a foreign company (7.5%).

To the best of my knowledge they file or the ones who discuss such say they file every year. If they don't, it's like sitting on a time bomb.

I do know a majority of contractors who employ expats in my field do not contribute the matching funds and so the employee has seen no necessity in contributing on his own. Also, haven't heard of anyone owing back SS & FICA as a result of this arrangement.

Like you say, we need an accountant to clear this up. I have, or should say had no intention of paying SS & FICA once I permanently shift back to LOS.

[PeaceBlondie]

I used to be an expert on US income taxes and Social Security taxes, but never was an expert on foreign issues (always left that up to the IRS folks in Philadelphia and the few accounting firms that serviced the big multi-nationals).

Quote from Publication 54 by the IRS: "If you are a US. citizen... the rules for filing income tax...are generally the same whether you are in the US or abroad." I always understood that US CITIZENS were liable for paying the tax on their world-wide income.

Social security taxes (FICA, SET) are almost completely separate from personal income tax. I'm subject to income tax, but not to SS taxes.

Again from Publ. 54, page 15: "You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 days do not have to be consecutive."

Of course, in addition to that test, there's the Bona Fide Residence test. I meet both, and the helpful guy at the IRS help line said residence was easier.

[Boon Mee]

Social security taxes (FICA, SET) are almost completely separate from personal income tax.  I'm subject to income tax, but not to SS taxes.

That's what I figured as I've never heard of anyone being drummed for back FICA & SS taxes not paid while they were overseas.

Thanks for confirming that PB!

[sabaijai]

Social security taxes (FICA, SET) are almost completely separate from personal income tax. I'm subject to income tax, but not to SS taxes.

PB, may I ask what your work situation is, ie, do you work for a foreign company, US company or for yourself (self-employed)? I've lived abroad most of my adult life, have never been able to escape SS tax. I've worked in all three situations - self-employed, employed by a foreign company and employed by a US university. Come to think of it, I might not have paid SS when I worked for a foreign company, but I'm not sure as it was quite a few years back (mid 80s).

My accountant has many expat clients, which is why I chose him in the first place. I'm still paying a 13% SS every year (having no employer to match).

[PeaceBlondie]

Social security taxes (FICA, SET) are almost completely separate from personal income tax. I'm subject to income tax, but not to SS taxes.

PB, may I ask what your work situation is, ie, do you work for a foreign company, US company or for yourself (self-employed)? I've lived abroad most of my adult life, have never been able to escape SS tax. I've worked in all three situations - self-employed, employed by a foreign company and employed by a US university. Come to think of it, I might not have paid SS when I worked for a foreign company, but I'm not sure as it was quite a few years back (mid 80s).

My accountant has many expat clients, which is why I chose him in the first place. I'm still paying a 13% SS every year (having no employer to match).

<{POST_SNAPBACK}>

My comment above doesn't mean that the final liabilities for personal taxes are completely separate. They're calculated separately, but added together. If you owe back taxes, or haven't filed and owe either kind of tax, you owe.

I'm exempt from paying US Social Security taxes because I'm employed, not self employed. I'm not employed by a US company, but for an exempt Thai government agency (public matayom school). When I read the USA-Thailand tax treaty last week, it seemed to exempt it. Again, Publ. 54 (page 10) has a long section about whether EMPLOYMENT (as an employee) is taxable for SS or not. Self-employment is different: "If you are a self-employed U.S. citizen or resident, the rules for paying SE tax are generally the same whether you are living in the US or abroad."

It's easy to get confused between employment as an employee (FICA) and self-employment tax (SET). It's explained fairly well at www.irs.gov Type in Pub 54 inside the box in the left column of the front page for PUBLICATIONS.

[sabaijai]

It's easy to get confused between employment as an employee (FICA) and self-employment tax (SET). It's explained fairly well at www.irs.gov Type in Pub 54 inside the box in the left column of the front page for PUBLICATIONS.

It amounts to the same thing, funds for SS, as explained by the IRS:

"The self-employment tax is based solely on the business income that you report on Schedule C. It is 15.3% of your net earnings from self-employment as reported on Schedule SE. The tax consists of two portions:

12.4% for Social Security. The Social Security portion of the self-employment tax is limited to $10,788.00 for 2003 if you earn equal to or less than $87,000 ($87,000 earnings limit x .124 = 10,788.00). Once you hit $87,000 of self-employment earnings, you have paid all you need to for Social Security.

2.9% for Medicare. The Medicare portion of the self-employment tax is unlimited. No matter how much, or how little you earn, you will be paying for Medicare."

Those are exactly the same percentages and destination for FICA taxes, the only difference being that one's employer contributes funds for half of these. Fortunately the self-employed taxpayer is permitted to deduct half of what they pay in SET.

I checked with an American accountant working in Bangkok and he had this to say about the three situations:

"1) As a self-employed US citizen, you are subject to self-employment tax on your self employment income (income less expenses). The tax is computed on the first 87,000 of income and you pay both the employee and employer portions which amount to 15.3%.

2) If you work for a U.S. company overseas, that company is required to withhold the employee's portion of FICA.

3) Foreign companies are not required to withhold FICA."

So that answers the earlier question, I think.

[taxout]

1. The 330 days do not have to be consecutive, though they must fall within a period of 12 consecutive months. Thus, if you're physically present in Thailand from July 1 to June 30, except for two two-week trips back to the States, you meet the test.

2. If you're self-employed in Thailand you pay Social Security tax at the same rates as if you were self-employed in the States. Similar result if you're employed by a "US employer" in Thailand, that is, a US-incorporated company or a foreign subsidiary of a US company that's elected to be treated as a "US employer." If you're employed in Thailand, but not by a "US employer," then you don't pay Social Security tax.

Most US companies operate overseas through foreign subsidiaries; some make the election to be treated as a "US employer" and pay and withhold Social Security tax and some do not. As a result, you may be subject to different tax treatment with different US multinationals.

In the short run, not paying Social Security tax is great; in the long run, if you don't qualify for Medicare because you don't have 10 years of covered employment, then perhaps it isn't so great.

3. Give up your US citizenship and you MAY be subject to US tax for ten years afterwards, but only if your income or assets meet very substantial tests; it's a provision aimed at the wealthy. In any event, if you do meet those tests, you'll be taxed only on your US-source income during the ten years, unless you spend more than 30 days a year back in the States.

If you look up the detailed rules on the expatriation tax, make sure you're looking at the current version; the rules were changed somewhat in this year's tax bill.

[Thaigrr]

All this talk about paying US taxes is BS. First off, legally, an income tax return cannot be mandatory, because anything you report / provide on your tax return can be used against you in a court of law, and the Bill of Rights plainly states that you can not be compelled to be a witness against yourself.

Secondly, the IRS has been using fear and intimidation since its indception to coerce American citizens into paying an income tax, and yet most Americans don't make 'income' they make wages. Wages are not income.

It's way past time for Americans to wake up to the hosing they have been getting and refuse to fund the military machine that is creating enemies all over the world and making it increasingly dangerous to be an American in other parts of the world.

Those of us living ouotside the US should be the first to stop filing and let them find us. They can't even find the supposedly most wanted criminal in the world, OBL, so how would they find you?

[stevehaigh]

All this talk about paying US taxes is BS.  First off, legally, an income tax return cannot be mandatory,  because anything you report / provide on your tax return can be used against you in a court of law, and the Bill of Rights plainly states that you can not be compelled to be a witness against yourself.

Secondly,  the IRS has been using fear and intimidation since its indception to coerce American citizens into paying an income tax, and yet most Americans don't make 'income' they make wages. Wages are not income.

It's way past time for Americans to wake up to the hosing they have been getting and refuse to fund the military machine that is creating enemies all over the world and making it increasingly dangerous to be an American in other parts of the world.

Those of us living ouotside the US should be the first to stop filing and let them find us.  They can't even find the supposedly most wanted criminal in the world, OBL, so how would they find you?

<{POST_SNAPBACK}>

interesting concept and a good idea if i never had to go back there and didn't have a bunch of $$ in 401k/IRA accounts!

on another topic, i got a referal to an accountant at KPMG in BKK. i contacted them and in a very nice email they said they would love to talk to me, at $400/hour (yes $US not bhat!)

[suzib]

Sorry to resurrect an old thread, but I have a US social security question and this covers it pretty well.

I work for a US company here in Bangkok. They withhold FICA from my pay every month. This is based on my gross salary, of course. Then they take out Thai income tax, also based on my gross salary, and deposit the remainder in my Thai bank account.

My question is whether they should be taking the Thai tax out of my total salary, or out of my net salary after FICA is deducted. On the one hand it seems like since the net is all that ever makes it in to Thailand this is what I should be taxed on. Plus it seems like double taxation to be paying FICA and Thai income tax on the gross salary.

On the other hand, I can see where an argument could be made that I earn the gross salary in Thailand and the whole thing should be subject to thai income tax.

Does anyone know whether the amount of my salary that goes to FICA should be exempt from thai income tax or not?

[PeaceBlondie]

Sorry to resurrect an old thread, but I have a US social security question and this covers it pretty well.

I work for a US company here in Bangkok. They withhold FICA from my pay every month. This is based on my gross salary, of course. Then they take out Thai income tax, also based on my gross salary, and deposit the remainder in my Thai bank account.

My question is whether they should be taking the Thai tax out of my total salary, or out of my net salary after FICA is deducted. On the one hand it seems like since the net is all that ever makes it in to Thailand this is what I should be taxed on. Plus it seems like double taxation to be paying FICA and Thai income tax on the gross salary.

On the other hand, I can see where an argument could be made that I earn the gross salary in Thailand and the whole thing should be subject to thai income tax.

Does anyone know whether the amount of my salary that goes to FICA should be exempt from thai income tax or not?

suzib, your logic makes common sense, but I have no idea if it is logical. FICA is computed on the gross wage because US tax law says so. Thai law is separate. As a former expert on US income tax and FICA tax, I have no idea (and no reason to believe) that Thai law would have an exclusion for FICA. It is not double taxation in the usual meaning of the term, because income taxes are separate from employment taxes. E.g., various items that are not includable for income tax are includable for FICA, and vice versa.

[Lost in LOS]

paid US taxes all my life but i sure don't like the US giving it all away to other countries and not taking care of itself ......thats another story and one i don't wish to discuss here

Yes i want to keep my citizenship but i want to lower my tax obligation. what the US has done to me in 2 short years :

moved here 2 years ago

exchange rate 40 to 1

interest rate in US 5%+ on Cd's

now :

exchange rate 31.5 to 1 and dropping

interest rate in US 3% on Cd's and dropping

to add insult to injury the US takes 20% of whats left after my pitiful interest income for taxes and I am there 2 weeks max a year. this is not fair. charge me 5% for my passport and I willingly pay it but 20% on top of killing my income is not fair. I paid all taxes for the 58 years i lived there.

no, i don't want to renounce my citizenship although I doubt i will ever live in the US again. Anyone know any ways to reduce my tax obligation? moving my account to an overseas bank will still have US taxes due PMs welcome

thanks

Jimmy