2555 and Self-Employed overseas

[Mickster]

What is the name of your state?
OHIO

I'm a freelance TV cameraman overseas. I meet the physical presence test and pay taxes in the foreign country where I live.

I work for a few production companies based here and also from clients from all over the world. Can I claim all this as being Foreign Earned Income and therefore be excluded from paying taxes? OR Do I still need to pay Self-Employed Tax? ( I do realize that this is contributing to Social and Medicare).

When I read FAQ in IRS publication 54 they give an example of a painter selling their work can claim this as earned income and not need to pay taxes.

If I do have to pay Self-Employed Tax, why does a US cameraman who works fulltime for a Foreign Company, earning a monthly wage, can claim all their income as wages and not have to pay anthing at all ( including Social and Medicare). It's a bit confusing to me.

Any help will be deeply appreciated.

[LdiJ]

Originally Posted by Mickster

What is the name of your state?
OHIO

I'm a freelance TV cameraman overseas. I meet the physical presence test and pay taxes in the foreign country where I live.

I work for a few production companies based here and also from clients from all over the world. Can I claim all this as being Foreign Earned Income and therefore be excluded from paying taxes? OR Do I still need to pay Self-Employed Tax? ( I do realize that this is contributing to Social and Medicare).

When I read FAQ in IRS publication 54 they give an example of a painter selling their work can claim this as earned income and not need to pay taxes.

If I do have to pay Self-Employed Tax, why does a US cameraman who works fulltime for a Foreign Company, earning a monthly wage, can claim all their income as wages and not have to pay anthing at all ( including Social and Medicare). It's a bit confusing to me.

Any help will be deeply appreciated.

The reason why the person working for a foreign company, for a wage, doesn't have to pay social security and medicare taxes is complicated....but it has to do with tax treaties and also that the income generally qualifies that person for pension or retirement credits in the country where he is working.

You, as a self employed individual, ARE subject to self employment tax.

I could not find the question you were refering to in the FAQs for publication 54, so I couldn't review it to give you any additional explanation.

[Snipes5]

What country are you living in?

If the US has a totalization agreement with your country of residence, it is possible you won't have to pay SS and Medicare taxes if you are paying "employment" taxes in the other country. Canada is one such country, and here is the list from the IRS website.

Please note that this is complex and you should seek assistance from a tax professional who is experienced in international issues.

Australia
Austria
Belgium
Canada
Chile
Finland
France
Germany
Greece
Ireland
Italy
Japan
Luxembourg
Netherlands
Norway
Portugal
South Korea
Spain
Sweden
Switzerland
United Kingdom
Copies of the Totalization Agreements may be obtained from the Social Security Administration at the following address:

Social Security Administration
Office of International Programs
P.O. Box 17741
Baltimore, Maryland 21235-7741


Snipes

[Mickster]

Thanks for your reply. Very appreciated. I'm based in Asia, and I don't think the US has an agreement with Thailand.

That example of the painter comes in Publication 54 Tax Guide for US citizens living abroad. It was under where they give examples of what is and is not considered Earned Income.

So basically, if Self-Employed, the 2555 exclusion does nothing for me, Right? Should I be putting my total income still on 1040 Line 7 (wages, salaries, etc) and then again that amount on my Schedule C-EZ and my Self-Employed Tax SE?

Thanks again.

[LdiJ]

Originally Posted by Mickster

Thanks for your reply. Very appreciated. I'm based in Asia, and I don't think the US has an agreement with Thailand.

That example of the painter comes in Publication 54 Tax Guide for US citizens living abroad. It was under where they give examples of what is and is not considered Earned Income.

So basically, if Self-Employed, the 2555 exclusion does nothing for me, Right? Should I be putting my total income still on 1040 Line 7 (wages, salaries, etc) and then again that amount on my Schedule C-EZ and my Self-Employed Tax SE?

Thanks again.

No, absolutely not, if you put your income on line 7 then you are counting it twice. Your income goes on a Schedule C (not necessarily a C-EZ), your self employment tax on an SE and then your net profit from Schedule C goes on line 12 of your 1040.

When someone is self employed there are two components of tax. There are self employment taxes, and there is regular income tax. The foreign income exclusion applies to your regular income tax, so yes, you absolutely will benefit from the exclusion.

However, in my opinion this is not something that you should be trying to handle yourself. A form 2555 is difficult to do properly. You need help from a professional. Talk to other ex-pats in your area to see who they use to handle their tax returns, or have a family member in the states ask around for someone here that has experience with foreign income exclusions. Someone here can work with you by fax and email.

[Mickster]

Yes, seeking a professional tax accountant is what I'll be doing next year.
Will save all the headaches.

Thanks again for your advice.