"Frank" <nospam[at]domain.bad> wrote:

- quote -

I know this is probably too late to help before you file
your 2005 return, but you can always amend or take this into
consideration for 2006.

The US has bilateral social security treaties with about 20
or so other countries designed to avoid this problem. The
treaties provide that social taxes are paid in only one
country, and which country depends on a number of factors.
Typically, for self employed individuals, the taxes are paid
only in the country of RESIDENCE, so you would not be liable
for self-employment tax.

What is typically required is that you obtain a "certificate
of coverage" from you home country indicating that you are
covered by their social security system. I believe the
instructions are to attach a copy of that certificate to
your return each year, but we generally just note the
effective date of that certificate in a footnote to the tax
return.

You didn't say what country you live in, so I can't tell
whether there is a treaty, but the text of each the treaties,
as well as a pamphlet explaining them in plain English, can be
found at www.ssa.gov/international, or more specifically at
http://www.ssa.gov/international/agr...criptions.html.

If you are not in a treaty country then you end up paying
social taxes in both countries.

--
Bruce E. Cobern, CPA
mailto:bec[at]pipeline.com

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Frank" <nospam[at]domain.bad> wrote:

- quote -

The Foreign Earned Income Exclusion is an income tax
provision, it does not apply to social security
self-employment tax. If you are a US citizen or resident
and have enough income reported on Schedule C, you are
liable for the SE tax. That tax is calculated on the gross
receipts from self employment less any related deductions.

When it comes to the income tax exclusion, the process
becomes more complicated. What is not generally understood
is that the exclusion applies to GROSS receipts from
business, not the net. If capital is a material factor in
the income, the exclusion may apply only to a portion of the
gross, at that.

Then, in calculating the amount of the exclusion from Form
2555, a pro rata share of the Schedule C deductions must be
applied, reducing the available exclusion.

Avoiding double taxation? Well, for income taxes, that is
the function of Form 2555 and the Foreign Tax Credit (Form
1116.) You don't say what country you live in but, if it is
one that has an equilazation agreement with the US, you may
be able to avoid payment of social security taxes to both.
If there is no such agreement, you will have to pay both.

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

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I've lived outside the US a number of years and regularly
filed US tax returns (as required for a USC) - after filing
2555 to exclude foreign earned income its been pretty
straightforward so far.

Last year I did some contract work on a 1099 basis for an US
employer - it was remote work not done in the US. When I
figure the taxes 1040 + Schedule C + 2555 and Schedule SE
seems I would owe SE taxes. I must be missing something to
end with paperwork which shows I would owe taxes when I'm
already paying income tax and social security tax in my tax
home.

What am I missing here - what do I need to research/file to
avoid double payment of soc. sec. stuff when I have
self-employment income??

-F

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >