Accepted Answer

Thank you that helped.

Since there will be no Federal tax withheld, you are, for US tax purposes, treated as being self employed, so you will not only have Federal taxes you must pay on the money, but also your Social Security tax. (Sometimes referred to as Self Employment or SE tax)

Since I have no way of knowing whether or not you could itemize deductions, I will use the standard deduction for 'Married Filing Jointly" for this scenario. For your Federal tax liability, your calculations should look something like this:

$180,000
- $ 91,400 Foreign income Exclusion
- $ 11,400 Standard Deduction for "Married filing Jointly"
- $ 18,250 Personal Exemption Allowance $3650 ea for 5 people
_________
$ 58,950

You Federal tax liability on $58,950 taxable income would be $10513. Please see below for tax rate schedules:

2009 Tax Rate Schedules: Marginal Ordinary Income Tax Rates for 2009

However, even though you may exclude up to $91,400 in foreign income, if this is considered self employment income, then you must pay your SE tax on the whole amount. SE tax is figured at 15.3%, so on $180,000 you SE tax liability would be $27,540.

Please see below:

US INCOME TAXATION OF AMERICANS AND EXPATRIATES LIVING ABROAD

If the link doesn't work, here is the actual web address that you can paste into your web browser:

www.taxmeless.com/page4.html

You may also find the information in the instructions for Form 2555:

Instructions for Form 2555 (2008)

I hope this helps.

Edited by Anne on 8/25/2009 at 6:36 PM

Expert:	Anne
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Accepts:
Answered:	8/25/2009

Master Tax Preparer

Enrolled Agent with 20 Years Experience specializing Individual and Small Businesses