Larry Israel wrote:

- quote -

The person is subject to US social security taxes as this
person is a US citizen employed by a US company. This
person may also be subject to foreign social security taxes
depending upon the country where the work is performed. The
US has bilateral Social Security agreements with 20
countries designed to avoid double taxation. These include
Canada, Chile, ROK, Australia, UK and 15 other West-European
nations.

The following link provides access to both the text and
summaries of these tax treaties.
http://www.ssa.gov/international/agr..._overview.html

--
Alan
http://taxtopics.net

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"Larry Israel" <VSLARRY[at]weizmann.ac.il> wrote:

- quote -

If the taxpayer expects to qualify to exclude all of his
foreign earnings, he can use IRS Form 673, or a substitute
statement, to ask the employer not to withhold federal
income tax. This is explained on pages 7 and 8 of IRS
Publication 54.

http://www.irs.gov/pub/irs-pdf/p54.pdf

As for withholding U.S.social security tax, since the worker
is a U.S. citizen employed by a U.S. company, the employer
is required to withhold FICA (IRS Revenue Ruling 92-106).

I can't give you a definite answer about withholding state
and local income tax. Most states and localities piggy back
on federal taxable income. If the foreign earnings are
excluded from federal taxable income, it therefore follows
that most states and localities would not tax them either.

Frederick Lorca

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Larry Israel wrote:

- quote -

Part-time or full-time, IRS doesn't care. If the work is
actually performed outside the U.S. and the person's tax
home is outside the U.S., up to $80,000 of earned income may
be excluded from taxable income. Taxpayers must file a
return and include Form 2555 to make the election to take
this exclusion.

Your friend should file Form 673 with his employer to avoid
withholding of U.S. income tax. If he is a bona fide
resident of another country, he should make appropriate
arrangements to pay any tax due to that country on this
income.

As long as your friend is working for a U.S. employer there
is no way to avoid the Social Security and Medicare taxes.
These taxes are not optional for citizens.

Depending on which state is involved, he may or may not be
liable for state income taxes. Generally, if this were my
client, I would probably not file a state tax return.

Lanny K. Williams, CPA
Nawarat, Williams & Co., Ltd.
Income Tax Services for Expatriate Americans

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Someone I know has been offered a part-time job by a New
York company to work online. The work will be performed
outside the US by a US citizen who is a bona-fide foreign
resident.

My understanding is that the US will not tax this income (it
will not be that much) as it can be deducted on form 2555.
But what about withholding, both state, city, and federal?
And what about Social Security? Since this will only be a
short-time job, there is no useful purpose for him to pay
Social Security.

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