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Joe C.
Joined: 08 May 2003
Posts: 993
Location: Witness Protection Program
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 Posted: Sun Feb 19, 2006 3:04 am Post subject: Re: Tax time for Americans residing abroad |
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| Volodiya wrote: |
| What possible reason would someone living and working as an English teacher, for a Chinese employer; or earning money teaching private lessons, in China, have for filing a U.S. tax return, and paying the taxes due, based on that return? There're just two that I know of. First, U.S. law requires it, when the earnings exceed the sums mentioned above. Second, and perhaps important to some people, it keeps you involved in the U.S. system of social security, guaranteeing you a place at the trough when you reach retirement age (currently, at least 62). |
Wait a minute. I think you are oversimplifying things and, albeit unintentionally, misleading people.
One quite effective and extremely uncomplicated way to keep your place at the trough (assuming it still exists in any meaningful form when the time comes) is to get any job when you return to the states and work for a little while.
Using your method not only creates unnecessary administrative burdens and the real risk of getting audited, but is just not economically justifiable. Even in the event one has no tax liability, the fact remains that no matter how minimal their income is they have to pay the self-employment tax of approximately 15%. Let's say that one earns only RMB 4,000 per month which equates to $5,930 a year. That means they have to pay $890 in self-employment taxes -- much more than they will get as their monthly Social Security entitlement ... and that's not even taking into account the investment value of their $890 self-employment tax payment.
Now, lest you start to think that you'll just report an annual income of, say, $2,000 to make a cost effective self-employment tax payment, consider that you must report all foreign bank accounts that you possess or control. Failure to do so is a crime. Another can of worms is that come an audit how are you going to justify having lived on, say, $100 per month?
To honestly file a tax return and self-employment earnings just to make it a little easier to get Social Security when you turn 62 is not a cost-effective idea. And to lie on your tax return in order to make it cost effective is a foolish endeavor. |
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jeffinflorida
Joined: 22 Dec 2004
Posts: 2024
Location: "I'm too proud to beg and too lazy to work" Uncle Fester, The Addams Family season two
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| Posted: Sun Feb 19, 2006 5:26 pm Post subject: |
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File online is the easiest way to do it.
www.efile.com or www.irs.gov there are FREE links for filing online from the US Government.
I did this and will have my RETURN depositied into my banking account.
You should file even if you have nothing to declaire or you don't have to file. Why? 5 years down the road when the IRS says "Where's your 2005 return" and you have nothing to show it could be a problem. If you file and say that you made $25 all year for 2005 then at least you have a paper accounting for that period.
face it working in China we are under the US poverty line - making $500 a month...So paying taxes on China income to the US will not really be feasible unless you are making alot of RMB. or if you have income from the US. |
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Joe C.
Joined: 08 May 2003
Posts: 993
Location: Witness Protection Program
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| Posted: Mon Feb 20, 2006 6:08 am Post subject: |
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| jeffinflorida wrote: |
| 5 years down the road when the IRS says "Where's your 2005 return" and you have nothing to show it could be a problem. If you file and say that you made $25 all year for 2005 then at least you have a paper accounting for that period. |
It doesn't work that way. You don't have to prove how little you earned. Rather, the IRS has to prove how much you earned.
Remember, when you file you also certify that you have no overseas bank accounts anywhere in the world. |
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