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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I am a us Citizen working in Jamaica . I pay taxes in jamaica

Resolved Question:

I am a us Citizen working in Jamaica . I pay taxes in jamaica and we have a double taxation treaty with jamaica. How do I claim a credit for taxes paid in jamaica
Submitted: 3 years ago.
Category: Tax
Expert:  Lev replied 3 years ago.

LEV :

Hi and welcome to Just Answer!

Customer:

what is the answer

Customer:

forgive me I am not seeing your answer

Customer:

are you there

LEV :

However - because you are in a foreign country - you may claim a foreign earned income exclusion if you qualify.


For the person to qualify for the foreign earned income exclusion - he/she should:
-- Work and reside outside the United States for at least 330 days during the year(Physical Presence test), or
-- Meet either the Bona Fide test.


If the person qualifies, he/she may exclude up to $91,500 (in 2010) in foreign wages -- plus housing allowances.


Here are forms you likely need: Form 2555 Instruction 2555


However if you do not qualify for the exclusion and all or part of foreogn income is taxable in boith countries - you may claim a credit for foreign taxes paid.


Please find the form 1116 here - http://www.irs.gov/pub/irs-pdf/f1116.pdf


and instructions here - http://www.irs.gov/pub/irs-pdf/i1116.pdf


Please consider this publication - www.irs.gov/pub/irs-pdf/p54.pdf for additional information. Let me know if you need any help or clarification.


LEV :

Sorry - I am not typing too fast...

Customer:

not sue i understand are you say that under the double tax treaty I cannot claim tax credit I pay in another country

LEV :

However if you do not qualify for the exclusion and all or part of foreign income is taxable in both countries - you may claim a credit for foreign taxes paid.

Customer:

that is on 1116

LEV :

Yes - you will calculate the foreign tax credit on the form 1116 - that credit will effectively eliminate double taxation.

Customer:

would the credit set off against the taxes due in USA

LEV :

Yes - that is a credit against US income tax - it is reported on the form 1040 line 47 - www.irs.gov/pub/irs-pdf/f1040.pdf

Customer:

but this does not set off against self employment tax

LEV :

That is correct - that is a credit against income taxes.

Customer:

how do I account for medicare and ss as i am salaried in Jamaica

Customer:

as part of the total tax deducted would include these deductions

LEV :

If you receive wages in Jamaica - you do not pay self-employment taxes in the US - so there is no double taxation.

Customer:

so do i still qualify for ss and medicare at the end of my days

LEV :

If you do not pay social security and Medicare taxes in US - you will not have credits.

Customer:

How would i be able to get that then

Customer:

what would i need to do to benefit from that

LEV :

Wages that are social security and Medicare taxes - will not be counted for social security benefits in the US.

LEV :

You may choose to pay social security and Medicare taxes to be eligible.

Customer:

could you explain again for me

Customer:

how would i calcualate that amount

Customer:

and how would i pay that then

LEV :

on the schedule SE - www.irs.gov/pub/irs-pdf/f1040sse.pdf - it is 15.3% of your wages fro 2010.

LEV :

On the form 1040 - they will be reported on the line 56.

Customer:

so are you saying if i wanted to pay ss i would have to use the total income In Jamaica

LEV :

that is correct

Customer:

and pay 15.3%

Customer:

is tha optional

LEV :

yes - you do not have to pay if you are an employee in Jamaica - but have to pay if you are self-employed.

Customer:

base on what you said above i got the impression that i had a choice "You may choose to pay social security and Medicare taxes to be eligible"

LEV :

that is correct

Customer:

ok

Customer:

so if I work in Jamaica I will never qualify for ss and medicare only if I am self employed

LEV :

That is correct - if you do not have credits.

Customer:

they actuall deduct 7.5% in Jamaica

Customer:

for their social security

LEV :

that is Jamaica law - not related to the US.

Customer:

ok

Customer:

so I have to find a way to pay not to pay this 7.5% in jamaica and pay it in USA

LEV :

you need to comply with Jamaica laws.

Customer:

I thought that because the 7.5 % was apart of the taxes paid in Jamaica that I would pay the difference in the us 15.3-7.5

LEV :

There is no such arrangements - these are different social security systems.

Customer:

yes I see that now

LEV :

You may qualify for social security benefits in Jamaica.

Customer:

the tas rate in jamaica is so high . I pay 25% in income taxes it is always more than what is due in USA. would I have to say I selfemployed to pay on the se taxes

Customer:

or do i just included that amount on the 1040 line 56 becaused I am salaried in jamaica

LEV :

on the schedule SE - www.irs.gov/pub/irs-pdf/f1040sse.pdf - it is 15.3% of your wages fro 2010.

Customer:

se is the selpemployment form but if i am not self employed do i still use this form

Customer:

y still there

Customer:

Thank you very much

Customer:

but does my last question make sense

Customer:

if I was salaried in Jamaica and had another business that made me self employed could I declared My business income on my sech c and pay SE on this income and still use the credit to set off against incometaxes in the usa. But the selpemployed is only calcalucated on the business income and not on the salaried income

LEV :

I will answer your last question.. give me some time.

Customer:

have to step away

Customer:

when i get back i will see if you answered

Customer:

thank you

Customer:

y there

Expert:  Lev replied 3 years ago.

Seems as my original assessment should be adjusted.

Self-employment taxes are due on wages of US citizens employed by a foreign or international organizations for services performed in the United States.

If services performed outside the US - those earnings are exempt from SE tax.

See instructions for schedule SE - Who Must Pay Self-Employment (SE) Tax - http://www.irs.gov/pub/irs-pdf/i1040sse.pdf

U.S. Citizens, Resident Aliens, and Nonresident Aliens employed outside the United States by a foreign employer are not generally subject to Social Security and Medicare tax withholding.

However – here is an option - an American employer with a foreign affiliate may request that Social Security and Medicare taxes be withheld from the U.S. citizen and resident alien employees of the foreign affiliate by filing Form 2032, Contract Coverage Under Title II of the Social Security Act .

Seems that is the only way for you to have your payments into socila security system.

The United States has entered into Totalization Agreements with some countries in order to avoid this double taxation. So far – there is no a Totalization Agreement with Jamaica.

If you become ­entitled to a US Social Security retirement and start to receive another monthly pension, such as Jamaica social security or private pension, based in whole or in part on work not ­covered by US Social Security - Your US Social Security benefit may be smaller due to Windfall Elimination Provision – see for details - SSA publication Publication No. 05-10045 - http://www.socialsecurity.gov/pubs/10045.pdf

You actually may estimate your possible benefits online - http://www.ssa.gov/retire2/AnypiaApplet.html

Let me know if you need any help.

Customer: replied 3 years ago.

Just read this new information but not clear

http://www.irs.gov/pub/irs-pdf/i1040sse.pdf read this but did not see the section that said that social security was optional income earned outside of US.

Form 2032 would not solve my problem because I am not employed to a company with us afficilations

if I was salaried in Jamaica and had another business that made me self employed could I declared My business income on my sech c and pay SE on this income and still use the credit to set off against incometaxes in the usa. But the selpemployed is only calcalucated on the business income and not on the salaried income

LEV :

also could you look at this it was my last question above

and also what would your suggestion be in my suitation. to avoid double taxed. I think I am clear with the federal Taxes but Social Security. I do not want to double taxed in this case and If I had a choice I would rather pay in the US system and not the Jamaica System.

Expert:  Lev replied 3 years ago.

Using the form 2032 and have your Jamaica employer to affiliate with any US company - seems as the only way to pay US social security and Medicare taxes on your Jamaica wages.

For self-employment income - you are required to pay self-employment income taxes - these will give you credits - In the year 2011, you must earn $1,120 in covered earnings to get one Social Security or Medicare work credit and $4,480 to get the maximum four credits for the year.

The tax treaty covers only income taxes - it doesn't cover other tax types. Social security taxes are covered by Totalization Agreements - so far there is no Totalization Agreement between US and Jamaica - and it is possible that some of your income is taxed twice. You do not have a choice which Social Security system to pay - but have to comply with the local and US laws. You will have a choice when the Totalization Agreement between US and Jamaica will be signed.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 23169
Experience: Taxes, Immigration, Labor Relations
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