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Social Security Law - Here's a Doozie!!

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mikeinsf

Junior Member
What is the name of your state? California

So if I understand Social Security Tax correctly, if I work for an employer, 6.2% of my wages is withheld along with another 1.45% for Medicare program. Total 7.65% of my gross income. Correct?

Here's the doozie:
I am a US citizen currently living in China. I am moving to San Francisco, CA to be the US Sales Rep for my company, which is located in China. It is an American owned company in China but is also registered in Hong Kong. My salary will be coming in monthly checks from the Hong Kong registered company and the funds be taken out of a bank in San Francisco. They will not be withholding any taxes and so that is up to me.

How does it work? Do I just take 7.65% of my taxable income and put that aside for when I have to pay taxes? What about when companies make matching contributions? In this case my company won't be doing that, all they will do is send my checks.

Can anyone answer this?

Regards,
Mike
 


LdiJ

LdiJ

Senior Member
mikeinsf said:
What is the name of your state? California

So if I understand Social Security Tax correctly, if I work for an employer, 6.2% of my wages is withheld along with another 1.45% for Medicare program. Total 7.65% of my gross income. Correct?

Here's the doozie:
I am a US citizen currently living in China. I am moving to San Francisco, CA to be the US Sales Rep for my company, which is located in China. It is an American owned company in China but is also registered in Hong Kong. My salary will be coming in monthly checks from the Hong Kong registered company and the funds be taken out of a bank in San Francisco. They will not be withholding any taxes and so that is up to me.

How does it work? Do I just take 7.65% of my taxable income and put that aside for when I have to pay taxes? What about when companies make matching contributions? In this case my company won't be doing that, all they will do is send my checks.

Can anyone answer this?

Regards,
Mike
Click to expand...
I suspect that you are going to be treated as an Independent sales rep which means that you will be commissioned and paid on a 1099. If that is the case, then you will have to double the 7.65%, because you will have to cover both the employee and the employer's share of social security and medicare taxes. You will also need to be prepared to cover the appropriate state and federal income taxes as well. You are basically going to be self employed.
 
A

abezon

Senior Member
Not only that, there's a chance you should have been paying into social security while working in China. US citizens are required to pay into social security unless they are paying into a similar system in a country with which we have a totalization agreement. I don't think we have one with China. Go to www.ssa.gov & search totalization for details.
 
M

mikeinsf

Junior Member
Thanks!

Thanks for the responses.

My company will not be making contributions, just sending me a check every month. So the Social Security Administration expects 15.3% from your taxable income and usually splits it between the individual and the company? Does that mean all companies have to pay half this tax for all their employees?

I don't think I have been paying Social Security. Will I be open to any penalties? I've been in China for 2 years.
 
LdiJ

LdiJ

Senior Member
mikeinsf said:
Thanks for the responses.

My company will not be making contributions, just sending me a check every month. So the Social Security Administration expects 15.3% from your taxable income and usually splits it between the individual and the company? Does that mean all companies have to pay half this tax for all their employees?

I don't think I have been paying Social Security. Will I be open to any penalties? I've been in China for 2 years.
Click to expand...
You will possibly be open to penalties. However, it depends on how you were paid while you were in China. Since you stated that you were working for an American company, that makes it possible that they were doing withholding for you.

And yes, it means that all employers have to pay half the tax for all their employees.
 
M

mikeinsf

Junior Member
Tax Status

When I was living in China, I was only paid $28,800 a year. I've heard that there's an expat salary exemption of $88,000? So I didn't have to pay any taxes.

When I move to California in February, would I be able to file as if still based in China but in California on a temporary assignment (doing sales)? This would be for like a year. Is there any tax break opportunities there? So retain my status as an expat in China but be in California on temporary assignment. If that could be done, what kind of forms would be needed and other considerations?
 
A

abezon

Senior Member
An expat is someone who has formally relinquished US citizenship. You were just living abroad. Also, don't confuse the income tax exemption with an exemption from employment taxes. Contact a tax pro with some international experience in CA.

For the coming year, ask the tax pro about a temporary assignment & the expenses you may be able to claim.
 
LdiJ

LdiJ

Senior Member
mikeinsf said:
When I was living in China, I was only paid $28,800 a year. I've heard that there's an expat salary exemption of $88,000? So I didn't have to pay any taxes.

When I move to California in February, would I be able to file as if still based in China but in California on a temporary assignment (doing sales)? This would be for like a year. Is there any tax break opportunities there? So retain my status as an expat in China but be in California on temporary assignment. If that could be done, what kind of forms would be needed and other considerations?
Click to expand...
There is a foreign income exclusion, but that doesn't applies to social security and medicare taxes, it applies to income tax, and it doesn't mean that you don't have to file a tax return.

Do get a consult with a local tax professional once you are back in the US.
 
LdiJ

LdiJ

Senior Member
abezon said:
An expat is someone who has formally relinquished US citizenship. You were just living abroad. Also, don't confuse the income tax exemption with an exemption from employment taxes. Contact a tax pro with some international experience in CA.

For the coming year, ask the tax pro about a temporary assignment & the expenses you may be able to claim.
Click to expand...
Expat is not a formal designation, nor does it mean that someone has relinquished their citizenship. It simply an informal description that indicates that someone is living abroad.
 
A

abezon

Senior Member
Expat is shortened from expatriate, which is defined in the tax code as a nonresident alien who used to be a US citizen. Sec. 877.
 
LdiJ

LdiJ

Senior Member
abezon said:
Expat is shortened from expatriate, which is defined in the tax code as a nonresident alien who used to be a US citizen. Sec. 877.
Click to expand...
Ok...I didn't realize that the tax code had appropriated the word expatriate. That is not what the word means in general language usage.
 
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