# Self-employment tax



## ogbeka (May 14, 2013)

Hi all,
I'm a dual citizen (US-Venezuela) and live in Venezuela. I'm going to make use of the streamlined process to pay my US taxes for the first time. I'm an independent litigation attorney and make less than the FEIE cap. However, after some heavy reading, it seems I should have to pay self-employment tax. Is there a way around this? What do you guys recommend?


----------



## Bevdeforges (Nov 16, 2007)

As an independent litigation attorney in Venezuela, do you pay into any sort of social insurance system? (For health care, retirement or other government benefits?) If you do, then you shouldn't have to pay "self-employment" taxes because basically all that is is US social security.
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

My understanding is that the Venezuelan Social Security system is noncompulsory for self-employed individuals.


----------



## ogbeka (May 14, 2013)

As BBCwatcher said, Venezuelan Social Security is optional for the self employed. However, even if I paid SS in Venezuela, that wouldn't exempt me in US since there's no SS treaty (like there is for a list of countries). Should I just file employed?? Is that too much of a risk?


----------



## BBCWatcher (Dec 28, 2012)

Do you work for a corporate entity? If so, what type?

U.S. Social Security contributions are never voluntary. If you're required, you're required -- we should be able to figure that out in due course. If it ends up that you're required that might be a blessing depending on your circumstances. You can qualify for retirement benefits if you have at least $4,640 per year (tax year 2013) of total income earned from work over at least 10 years of contributions. You may also qualify for disability benefits, and your children (if you have any) might qualify for survivors' benefits if you depart this planet too early. Sure, there's an involuntary contribution, but it's also one of the better systems of its kind if you can qualify for benefits.


----------



## Bevdeforges (Nov 16, 2007)

I don't think you necessarily have to be contributing in a social security treaty country to opt out. Or, as BBCWatcher indicates, you can always pay the tax and get the quarters to apply to your potential coverage.

If you have some quarters already accumulated in the US toward the 40 needed to qualify, you may want to consider just paying the tax and adding your quarters to what you already have. If you've never worked in the US and are unlikely to in future, you may just want to list your "cabinet" as your employer and let them assume that you're paying into a Venezuelan system.
Cheers,
Bev


----------



## ogbeka (May 14, 2013)

Ok. So far I decided to declare as an employee of a law firm formed as a corporation under venezuelan law. Since I don't have any quarters and probably wont be working in US any time soon, I prefer to simplify my paperwork.

Now for some simpler questions. If my wife and child dont have an SSN or ITIN, how do I file? Single or married?? Can I claim my baby as a dependent without an SSN or ITIN? I'd really prefer not to have to file for a number right now... I will be filing 0 tax so I don't really care about the deductions its just a matter of filing well.


----------



## Bevdeforges (Nov 16, 2007)

If you are married to an NRA (non-resident alien) you would normally file as "Married filing separately" - though there is the option to file jointly if your spouse has an ITIN and consents to have her worldwide income reported to the IRS.

All dependents you claim need to have either a SS number or an ITIN. Your child is probably entitled to a regular SSN but if you haven't applied for it yet, you probably want to file 2012 as MFS just to get the forms in on time.
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

The IRS explains here when Social Security payroll taxes must be paid. It's not a choice either way: just follow the rules.

Note that Social Security doesn't go by quarters any more. They go by years, and you need 10 of them with at least $4640 (current amount, subject to adjustment) of reported earnings to qualify for retirement benefits. If you're above that minimum and can get your 10 years in that's well worth doing in my view: it seems to be a fantastic deal on a tax-advantaged annuitity. Past the minimums it's less of a good deal but not bad, especially if you're healthy and expect to live a long time.


----------



## ogbeka (May 14, 2013)

BBCWatcher, I get what you're saying but unfortunately I get screwed by a faux exchange rate and would end up forking over 5K per year. Besides, I wouldn't be able to file under the streamlined process if I did this. Maybe next year I'll start paying SSN but for now I'm settling without.

Now for the question, do I have to file 2012 and 3 more years or is 2012 included???


----------



## Bevdeforges (Nov 16, 2007)

As I pointed out in another thread where you posted this reference, Social Security only applies if you are working for an American employer or the foreign affiliate of an American employer (with a couple of specialized other cases, none of which seem to apply here). There are not that many Totalization Agreements that provide for payment of US social security by those working for a foreign employer.

If you're filing as the employee of a Venezuelan corporation, I'd just forget about the social security taxes unless you need or want to accumulate the additional quarters/years or whatever.
Cheers,
Bev


----------



## BBCWatcher (Dec 28, 2012)

It's never a choice: you either must or must not contribute to Social Security. (There's no such thing as voluntary U.S. Social Security contributions, unlike some other countries' systems.)

So review the IRS document and just follow the rules. If that means you've got to pay, you've got to pay. If that means you can't use a particular IRS program because you're delinquent, then that's unavoidable. (Do NOT attempt to use a process you don't qualify for. It's a very, very bad idea to lie.)

If you must pay, the good news is you'll get some benefits, at least eventually. If you must not pay, the bad news is you won't.


----------



## ogbeka (May 14, 2013)

BBCWatcher, i never say its voluntary. But if I file under employment of a foreign entity I don't pay SS. If I file self-employed I have to pay SS. Those rules are quite explicit. What I can do is decide whether to declare under employment of one of my companies or file self-employed. 

Now, can someone please tell me if I have to file 3 years and 2012 or just 3 years including (under the streamlined process)??


----------



## BBCWatcher (Dec 28, 2012)

Not actually. How you were employed in 2012 and prior is a historical fact. You either were or were not self-employed. Working for "one of your companies" is often self employment in terms of IRS definitions. That includes partnerships. Check the rules.

You cannot choose which rules you want to follow and ignore the others you don't like, especially in a compliance process. Which, to answer your question, is this year's tax return (tax year 2012) plus three years prior (2009, 2010, and 2011). The IRS explains that rather clearly in its instructions for the streamlined compliance route.


----------

