Job Discussion Forums

[Volodiya]

What possible reason would someone living in Thailand and working as an English teacher, for a Thai employer; or earning money teaching private lessons, in Thailand, have for filing a U.S. tax return, and paying the taxes due, based on that return?

Here it is, for those American citizens who would like to know-

Time to file:
June 15, for taxpayers living abroad. Income tax returns can be filed electronically, so it's not too late to take care of it. www.irs.gov

Who is required to file:
1) single taxpayers, under age 65, who earned more than the equivalent of $7,950 USD; and,
2) married taxpayers, both under 65, filing jointly, whose combined earnings were more than $15,900;
3) taxpayers who earned more than the equivalent of $400 USD in "self-employment" income. [Monies earned from private teaching would be an example of self-employment income.]

If you are living abroad, aren't you exempt from filing?
No, but you may include with your tax return a Form 2555, Exclusion of Foreign Earned Income, which will allow most teachers of English to avoid income tax on all earnings received for work abroad (even if it was paid to your account in the U.S.)

If you had self-employment income which exceeded $400 USD, then you will owe self-employment taxes. These amount to 15.3% of your net earnings from self-employment. Self-employment earnings are reported on Schedule C; self-employment taxes are calculated and reported on Form SE.

What possible reason would someone living and working as an English teacher, for a Thai employer; or earning money teaching private lessons, in Thailand, 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).

How much will this cost me? As I mentioned, your earnings will in all likelihood be 100% exempt from income taxes, if you file, and claim the exclusion for foreign earned income. The amount of earnings you report as self-employment income (from private teaching you may do) will determine the amount of tax you pay, each year.

Suppose you had $2,000 USD net earnings from self-employment last year: the first $400 is exempt, leaving you with taxes to pay on $1600. At 15.3%, well, you figure it (in round numbers, it's $240). That would be the cost of your continued participation in Social Security. Even the minimum guaranteed social security benefit (which President Bush promises to protect) makes participation worth it in retirement benefits. Your check will be wired to an account designated by you, almost anywhere in the world, beginning when you reach retirement age.

I've filed every year since I went abroad. Because of the generous exemptions, I've never owed any income tax, but I've owed, and paid, depending on my earnings, self-employment taxes, every year.

There is no other retirement plan that I know of which pays off like this one for FTs, with modest incomes.

For those who would like to know more about what you could expect at retirement age, please have a look at- www.ssa.gov