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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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We live in Belize, Central America and have a business, ...

Resolved Question:

We live in Belize, Central America and have a business, which generates less than $60,000. We pay taxes in Belize. Are we required to pay U.S. Social Security every month (or quarterly), or is paying Social Security optional. If it is required, what is the penalty for not paying it timely. Thank you,
Submitted: 9 years ago.
Category: Tax
Expert:  Merlo replied 9 years ago.

Are you a US citizen? Do you also file a tax return in the US?

Customer: replied 9 years ago.
Reply to Merlo's Post: My wife and I are U.S. citizens, with SSN's, but we havan't been resident in the U.S. since 2000.
Expert:  Merlo replied 9 years ago.

Hello Asian Garden,

As a US citizen, you are still responsible for taxes on any income you earn worldwide, regardless of where you reside. So you should be filing tax returns in the US, even though you reside in Belize.

However, if you live outside of the United States for 330 days in any 12 month consecutive period, you are also eligible to exclude from your income up to $85,700 of your foreign income (that is the current exemption amount). So if your foreign income is less than this amount, then chances are you will not owe any income taxes on your foreign income, however, a return should still be filed.

However, if you own your own business or are self employed, you are still responsible for paying social security and medicare taxes on your earnings, even though those earnings may not be subject to income tax. The current self employment tax rate for self employed individuals is 15.3% of your net income. The US does not have a tax treaty with Belize on social security taxes, so you would not be exempt from the social security and medicare taxes.

If you have not filed your returns for several years, you should do so as soon as possible. Penalties may be assessed for failure to file and also for late filing. Interest will also be accrued on any tax liability that you may have. Even if you cannot afford to pay whatever taxes may be due, you should still file your returns, as it is possible that a payment plan might be worked out by the IRS for you to pay off any tax liability owed for past years.

I am giving you a link to a section of the IRS website that expalins steps you should take for filing past due returns. It will also include links to web pages and phone numbers you can call to obtain help from the IRS in filing these returns.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you and good luck in getting this resolved.,,id=108326,00.html



Customer: replied 9 years ago.
Thank you for your response. I do know we do not have to pay income tax, as we are below the income threshold. Please advise, though, what percentage is paid for Social Security tax and medicare taxes (we are a husband and wife). As well, I am traveling to the US shortly. Any suggestions what type of tax advisor I should contact while there?

Thank you again for your assistance.
Expert:  Merlo replied 9 years ago.

Hello againCustomer

A couple of points. First, even if you are below the income threshold for income taxes, you still need to file a return reporting your income and then claiming the exemption. No tax would be due on your foreign earnings, but it is still a requirement to file the return.

As far as the percentage on social security and medicare taxes, since you are self employed the rate for both taxes combined would be 15.3% of your net income.

If you are coming to the US and would like assistance with your tax issues, you should consider consulting with a tax advisor, particularly one who has experience in dealing with foreign income issues. Depending on where you will be, you can easily find a tax advisor in the area, and just make sure they are familiar with tax filings for US citizens living abroad.

If this answer was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you.

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