Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 10
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The U.S. Government or any of its instru-
Form (and Instructions)
mentalities.
U.S. Social Security Administration
Form 1040-PR Planilla para la
•
Office of International Programs
An individual who is a resident of the
Declaraci ´ on de la Contribuci ´ on
P.O. Box 17741
United States.
Federal sobre el Trabajo por
Baltimore, MD 21235-7741.
•
A partnership of which at least two-thirds
Cuenta Propia
of the partners are U.S. residents.
Form 1040-SS U.S. Self-Employment
If you have access to the Internet, you can get
•
A trust of which all the trustees are U.S.
Tax Return
more information at:
residents.
Form 4361 Application for Exemption
•
A corporation organized under the laws of
From Self-Employment Tax for Use
the United States, any U.S. state, or the
by Ministers, Members of Religious
District of Columbia, Puerto Rico, the U.S.
Orders and Christian Science
Covered by U.S. only. If your pay in a foreign
Virgin Islands, Guam, or American Sa-
Practitioners
country is subject only to U.S. social security tax
moa.
and is exempt from foreign social security tax,
Schedule SE (Form 1040)
your employer should get a certificate of compli-
Self-Employment Tax
Foreign affiliate. A foreign affiliate of an
ance from the Office of International Programs.
American employer is any foreign entity in which
See chapter 7 for information about getting
the American employer has at least a 10% inter-
Covered by foreign country only. If you are
these publications and forms.
est, directly or through one or more entities. For
permanently working in a foreign country with
a corporation, the 10% interest must be in its
which the United States has a social security
voting stock. For any other entity, the 10% inter-
agreement and, under the agreement, your pay
est must be in its profits.
Who Must Pay
is exempt from U.S. social security tax, you or
Form 2032, Contract Coverage Under Title II
your employer should get a statement from the
of the Social Security Act, is used by American
Self-Employment Tax?
authorized official or agency of the foreign coun-
employers to extend social security coverage to
try verifying that your pay is subject to social
U.S. citizens and resident aliens working abroad
security coverage in that country.
If you are a self-employed U.S. citizen or resi-
for foreign affiliates of the American employers.
If the authorities of the foreign country will not
dent, the rules for paying self-employment tax
Once you enter into an agreement, coverage
issue such a statement, either you or your em-
are generally the same whether you are living in
cannot be terminated.
ployer should get a statement from the U.S.
the United States or abroad.
Social Security Administration, Office of Interna-
Excludable meals and lodging. Social se-
The self-employment tax is a social security
tional Programs, at the above address. The
curity tax does not apply to the value of meals
and Medicare tax on net earnings from self-
statement should indicate that your wages are
and lodging provided to you for the convenience
employment. You must pay self-employment tax
of your employer if it is reasonable to believe
not covered by the U.S. social security system.
if your net earnings from self-employment are at
that you will be able to exclude the value from
This statement should be kept by your em-
least $400.
your income.
ployer because it establishes that your pay is
For 2006, the maximum amount of net earn-
exempt from U.S. social security tax.
Binational Social Security
ings from self-employment that is subject to the
Only wages paid on or after the effective date
social security portion of the tax is $94,200. All
(Totalization) Agreements
of the totalization agreement can be exempt
net earnings are subject to the Medicare portion
from U.S. social security tax.
of the tax.
The United States has entered into agreements
with several foreign countries to coordinate so-
Employed by a U.S. Church
cial security coverage and taxation of workers
who are employed in those countries. These
If you were employed by a U.S. church or a
agreements are commonly referred to as totali-
zation agreements and are in effect with the
qualified church-controlled organization that
3.
following countries.
chose exemption from social security and Medi-
care taxes and you received wages of $108.28
Australia
Greece
Republic of
or more from the organization, the amounts paid
Austria
Ireland
Korea (South
to you are subject to self-employment tax. How-
Self-Employment
Belgium
Italy
Korea)
ever, you can choose to be exempt from social
Canada
Japan
Spain
security and Medicare taxes if you are a member
Chile
Luxembourg
Sweden
Tax
of a recognized religious sect. See Publication
Finland
Netherlands
Switzerland
517 for more information about church employ-
France
Norway
United
ees and self-employment tax.
Germany
Portugal
Kingdom
Topics
Effect of Exclusion
This chapter discusses:
Under these agreements, dual coverage and
You must take all of your self-employment in-
dual contributions (taxes) for the same work are
•
Who must pay self-employment tax, and
come into account in figuring your net earnings
eliminated. The agreements generally make
•
from self-employment, even income that is ex-
sure that you pay social security taxes to only
Who is exempt from self-employment tax.
empt from income tax because of the foreign
one country.
earned income exclusion.
Generally, under these agreements, you will
Useful Items
only be subject to social security taxes in the
Example. You are in business abroad as a
You may want to see:
country where you are working. However, if you
consultant and qualify for the foreign earned
are temporarily sent to work in a foreign country
Publication
income exclusion. Your foreign earned income
and your pay would otherwise be subject to
is $95,000, your business deductions total
social security taxes in both the United States
334
Tax Guide for Small Business
$27,000, and your net profit is $68,000. You
and that country, you generally can remain cov-
517
Social Security and Other
must pay self-employment tax on all of your net
ered only by U.S. social security. You can get
Information for Members of the
profit, including the amount you can exclude
more information on any specific agreement by
contacting:
Clergy and Religious Workers
from income.
Page 10
Chapter 3 Self-Employment Tax
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