Paying US taxes while in Taiwan

  1. Is it possible to find someone (e.g. an accountant, tax service company) to do (and file) US Federal and State taxes while living in Taiwan? I know that earnings under about $70,000 are exempt from US taxes, but I would still need to file. And I wonder about the State and Local tax responsibility.

  2. For long-term expats: What do you do about Social Security contributions? I mean, you earn Taiwan dollars, so what happens to your US Social Security retirement funds? In other words, how do you fund your retirement monies?

Check here and at other forums.
In brief,
l. home country forms are oft simple if one takes no
deductions except ‘foreign income.’
2. Some countries have ‘coordination.’ One pays in to the scheme of
the host country and is credited in home country.
3. Check your pay stubs. If working for local co.,
one is most likely not covered. If one is e.g. employed by
a home country bank for a brief tour overseas, one mostly
likely is still covered.
Of course, any ‘self- employment’ (check for permits first!)
must be reported. Tax on ‘self employment’ is still owed
to both host and home country as per regs.

You shouldn’t be liable for state or local taxes if you can prove that you were a bona fide resident of Taiwan for tax purposes. Federal taxes, as you point out, have to be filed but you shouldn’t owe anything, unless you had US source income, in which case you would owe Social Security and perhaps self-employment tax depending on your situation. Having to paySocial Security might not be a bad thing in the end (assuming it doesn’t go bankrupt) as you will be earning quarters toward your retirement that way.

If you’re working entirely in Taiwan, paid by a Taiwanese employer, you will probably not be participating in the Social Security scheme. In that case you should think seriously about other self-funded retirement plans or about saving compulsively.

I say boycott taxes. Screw 'em. You don’t even live there!!!

(Adherence to this advice may cause undesirable consequences)

ironlady,

Tax requirements for states vary wildly and do not use identical standards to the federal bona-fide resident test. In some states they still consider your foreign income taxable for up to two years.

As for self employment income, you can exclude the earned income, but you still must pay self employment taxes. Also the exclusion is based on your gross self-employment income, not the net income after deductions, so it can get hairy if your gross income is more than the exclusion amount (currently US$80k). Income from a local company owned by yourself is treated as foreign source income though.

This book has good coverage of the Federal tax situation and a summary of each state’s requirement: Expat’s Guide to US Taxes (Warning: the version sold on Amazon is an old version. Get it from this link instead.)

Or you can read IRS Publication 54 for free, though it’s a lot less informative about more complex issues.

Guymontag: if you are still looking for someone to prepare your US tax return and are more concerned with hiring someone who is specialized in expat taxes, and less concerned with location, then please contact me at Les@edelmantax.com
Indeed, if you qualify for the foreign earned income exclusion (FEIE), and your income is under $80,000 (and you have little or no other income), then you will owe no US income tax. However, if you are paying significant foreign income and social security, there are several reasons to use the foreign tax credit rules and not the FEIE (assuming you have not already elected to use the FEIE on a previous return). Jlick’s comment about the exclusion being based on gross SE income (if you are self-employed) is accurate, and requires careful attention to Form 2555 Line 42.
Notwithstanding the issues just mentioned, if you are self-employed (and this should be assessed based on U.S. tax rules and your substantial facts and circumstances, and not necessarily based on what your Taiwanese papers say), then you would owe U.S. self-employment tax, this being the case regardless whether you also pay Taiwanese social security contributions. There is no “coordination” (more commonly referred to as “totalization”) between the US and Taiwan.
Hope this was helpful. – Les Edelman edelmantax.com

Circular 230 Disclosure: To assure compliance with Treasury Department rules governing tax practice, we inform you that any advice contained herein (including in any attachment) (1) was not written and is not intended to be used, and cannot be used, for the purpose of avoiding any federal tax penalty that may be imposed on the taxpayer, and (2) may not be used in connection with promoting, marketing or recommending to another person any transaction or matter addressed herein.