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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15175
Experience:  15years with H & R Block. Divisional leader, Instructor
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For a w2 employee living outside the USA earning about $2k

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For a w2 employee living outside the USA earning about $2k a month, claiming the FEIE, what would be their net per month?

Robin D :

Hello and thank you for using Just Answer,
The net would be dependent on their allowances for withholding and if they asked to be exempt from withholding because they were going to have no tax liability.
Based on the $2k a month, they would earn $24k a year and so all would be allowed for exclusion.
The FICA rate is 6.2% ($124 each month) so $1876 a month after FICA.

Customer:

Why do they have to pay FICA if living outside the USA? And what taxes would they pay if earning all via 1099/contractor? Thanks

Robin D :

If they are receiving a W2 then they are still working for a US company. Unless there is an agreement with the foreign country to pay into their SS system the US citizen would still have FICA withheld which goes into their personal SS account.

Robin D :

\If a 1099Contractor?

Robin D :

They are Self Employed

Robin D :

This means they would be allowed the FEIE but they would still pay Self Employment tax even if all is excluded.

Customer:

what would be amount of self employment tax?

Robin D :

SE Tax is the equal of FICA it is just for the self employed

Robin D :

The same as FICA

Customer:

Even if living outside the USA, they would still pay the self employment tax?

Robin D :

Yes

Customer:

So basically, whether they are on W2 or 1099, living outside the USA all year, there is NO net pay difference after paying taxes at year end? The only difference are taxes the company has to pay, correct?

Robin D :

Correct, the US company that employees them pays half of FICA or teh self employed person pays it all.

Robin D :

They are still allowed to pay no income tax on the earned amount.

Robin D :

That is a very good deal.

Robin D :

Did that cover your question?

Customer:

Thank you

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