My U.S. accountant just informed me that recent tax changes mean I no longer have to pay self employment taxes starting for 2020 tax year.
My situation:
-self employed with contract wages from local Taiwan company.
-previously annually paid self employment taxes on contract wages
I have not found any information stating that U.S. and Taiwan have signed any Totalization Agreement. (Since non-Taiwanese are unable to join Taiwan retirement system I assume discussions regarding obtaining a Certificate of Coverage is not applicable.)
Has anyone heard of any changes related to self employment taxes for U.S. filers?
Are you incorporated such as S Corp in the US?
Please explore the benefits of forming different entities so you can contribute to your retirement from your income and tax write off.
In your case, you may be able to write off medical cost and office expense even u r not incorporated. You may need to incorporate if u like to have 401k write off from US income tax. Google on the internet to see which entity is best for you.
I only write off my personal insurance costs (not NHI). No one is more lazy than me when filing taxes. I have used accountants in US for 30 years to do my taxes. I don’t dare step any farther into the details of taxes…I am simply too scared.
After review with another department my accountant has informed me the previous information was incorrect. As Taiwan and U.S. has not signed a Totalization Agreement and Taiwan does not include foreigners in social security/retirement programs…I must pay into the U.S. Social Security program. Therefore, I must pay the self employment tax.
You can do a simple calculation of investing 15.3% of your income to see the return for different types of investment. You may be surprised to find out the return on just simple investing on US stock index will be many times higher than the SS income.
This 15.3% include total social security and Medicare tax and you also need to pay tax when you receive benefit.
I will not receive much from social security when I retire next year. However, my case is a little strange in that I paid into the system from 1978 to 1984 and then no payments into the system again until 2013 to now. I just want to get what I can back from social security before I kick the bucket.
Yes, investing in the U.S. stock market will outperform returns from social security.
As long as you contribute more than 10 years you are eligible for SS benefit and Medicare. The more you contribute the less the rate of return for the additional contribution. The curve will be flatten when contribution is approaching maximum.
You don’t have to contribute SS if you are overseas.
My U.S. accountant claims that due to my self-employed status that I must contribute to SS. From what I have read that seems to be the case even if overseas.
Yes, if you have SE income you still have to pay FICA tax. Only way for a person with earned income to get around this is to work for a foreign company.