Similar subjects have been discussed, but not this exact one, so here goes:
I have a client who wants to e-file (to get his refund quicker), but he has income from wages from a foreign corporation, which has no EIN or US address. The program I'm using says I can't do it because of that. (I also need to use a US address for his return, though he lives abroad, but we can do that by using his brother's address).
Any ideas?
David Rosenbaum
This why I have not signed up to efile for my clients. Foreign employers do not file W-2s for empolyees working in a foreign country. Using an accomodation address is not uncommon for foreign residents but there is nothing to attach to a return for foreign salaries and wages. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans
That's always (since I can remember back to 1989 at least) been the requirement. Wages must be shown on line 7 and information from the W2 entered. So if company has no FEIN, no can do. Which of course means they're not taking out FICA tax, right? Is there some treaty which exempts your client from FICA? ChEAr$, Harlan Lunsford, EA n LA
Harlan Lunsford
He doesn't need a treaty. If someone works for a foreign employer, in a foreign country, his wages are not subject to FICA taxes. Technically, the employment contract must be entered into outside the US for this to be true but I've never seen that enforced. Frankly, I don't know how it could be enforced. There are treaties with some countries, generally European, that exempt US employees of US companies from FICA -- it they are covered by the foreign countries equivalent to social security. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans
Ah, thanks for that information. I don't get any clientele like you get. (To an Alabama taxpayer, "foreign" means casino winnings from over there in Mississippi! (grin) Anyway, back to OP for a moment. It appears that only a part of his income must be from a foreign source and that majority of it in good old US of A, and that withholding is more than enough to take care of total tax for the year. Good. I was however thinking off on a tangent for a moment. Suppose someone had all income paid from a foreign source; no withholding, certainly no FICA, and he's filing a US
1040. Why not report everything on a schedule c and therefore se to continue to build up social security credits? (rhetorical question of course.) ChEAr$, Harlan Lunsford, EA n LA
Thanks for the replies. I've also understood the FICA issue as you do. In this case, the employer really is abroad, so there's no question that employment contract was entered into outside the US. Oh well.
Not so rhetorical in actuality, Harlan. I come up against this quite frequently. In fact, I raised this question with regard to my own contributions to social security when I moved to Thailand. There are too many variables to this equation for me to make an absolute declaration. However, I believe that, for most taxpayers, this would not be advisable. In my specific case, I actually went to the Social Security people and we worked out the numbers. Had I reported and paid the tax on my salary here, my benefits would have increased by a few dollars a month. But, the increased benefit would have taken 15 years(!) to repay the tax for just one year! When I did my analysis, I was within 1 year of being able to draw benefits without reducing them by working. I suspect, but admit I have never tried to prove, that the younger a person is, the longer it would take for any increase in benefits to recoup the tax paid. Personally, I believe that anyone who is in such a position (and there are a large number of expats who are) is better off just putting money aside for retirement. Once you have the necessary 40 credits, voluntary contributions to social security are probably not a good investment. Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans
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