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Discussion Starter · #1 ·
hi folks, i currently live in hong kong. got some question to ask.

1st, i knew that foriegn earned income exclusion excluse the federal tax. but does it exclude the state, medicare and social security tax?

what other tax is excluded?

2nd, what is a self employment tax?

3rd, i am currently living in hong kong. do you know how much % for medicare and social security tax if i file my tax?

4th, do u know the state tax rate for california?

5th, if i have to pay any tax, how can i pay?

thanks.
 

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1st, i knew that foriegn earned income exclusion excluse the federal tax. but does it exclude the state, medicare and social security tax?
Let's take these in order.

(a) You're very unlikely to pay state income tax as an FEIE-eligible resident of Hong Kong unless you have income sourced from (and taxable in) that state. For example, if you take a short business trip to New York to attend a business meeting, that portion of the tax year is New York source income and requires filing a non-resident New York State income tax return. Most states follow the IRS rules to varying degrees, so if you're taking the FEIE that'll usually be similar on the state return. Not always, though.

(b) Medicare taxes consist of two parts: the Medicare portion of the payroll tax and the recently introduced Medicare surtax owed by high income U.S. taxpayers. See below regarding the payroll tax. The latter is basically a portion of your U.S. income tax liability and doesn't kick in until your income is well above the FEIE exclusion limits.

(c) Social Security is also a payroll tax. No, the FEIE does not eliminate payroll tax liabilities if you have them. That's the key, though: if you have them. If you work for a U.S. employer in Hong Kong or are self-employed then you probably have U.S. payroll taxes to pay. (Though that also buys you disability, survivors, and retirement benefits.) If you work for a non-U.S. employer in Hong Kong you typically won't owe payroll taxes (and also won't receive U.S. Social Security and Medicare credits and coverage).

what other tax is excluded?
None that I can think of. The FEIE (and related Foreign Housing Exclusion) apply only to U.S. income taxes.

2nd, what is a self employment tax?
If you're self employed, that's the payroll tax (Social Security and Medicare).

3rd, i am currently living in hong kong. do you know how much % for medicare and social security tax if i file my tax?
If you are self-employed and not covered by the social security system of a country that has a social security treaty with the U.S., your payroll tax rate is 15.3% on your first $113,700 of earned income (income from work). The rate drops to 2.9% on earned income above that amount (since the Medicare payroll tax is uncapped). Then the Medicare tax rate increases slightly if you have a high amount of income (and then covers both earned and unearned income).

That's the self-employment rate. If you're working for a U.S. employer in Hong Kong and the U.S. employer is required to deduct U.S. payroll taxes then you pay half and your employer pays half for the same total rate.

4th, do u know the state tax rate for california?
California has a progressive income tax rate schedule with brackets up to 13% or thereabouts at the top marginal rate. Why would you owe California state tax?

5th, if i have to pay any tax, how can i pay?
The IRS is happy to accept U.S. funds in the form of a check drawn on a U.S. financial institution, including demand drafts (a.k.a. foreign drafts) prepared by a Hong Kong financial institution with their correspondent U.S. bank. There are electronic equivalents of these payments as well. There are a couple other options but they're more expensive.

The same is true with every state tax department.
 

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Just a couple of points to add to what BBCWatcher has already mentioned:

1st, i knew that foriegn earned income exclusion excluse the federal tax. but does it exclude the state, medicare and social security tax?
The FEIE allows you to exclude "earned income" only - earned income being salary income (but it includes "salary-like" earnings from self-employment).

what other tax is excluded?
The FEIE is applicable only to Federal income taxes. Period.

2nd, what is a self employment tax?
defer to BBCWatcher's answer

3rd, i am currently living in hong kong. do you know how much % for medicare and social security tax if i file my tax?
See IRS publication 54 for all the information on filing from overseas. There is a section in there on social security.

4th, do u know the state tax rate for california?
Unless you are resident in California (pretty difficult if you're living and working in Hong Kong and qualify for the FEIE) you won't owe California state tax UNLESS you have California source income. If that is the case, you should file a California NR (non-resident) return covering just the California source income.

5th, if i have to pay any tax, how can i pay?
In addition to the methods BBCWatcher has mentioned, there is now a way to pay via foreign credit card. It costs, but for small amounts it may be quicker and easier than arranging a bank transfer. Pay your Taxes by Debit or Credit Card

Cheers,
Bev
 

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Discussion Starter · #4 · (Edited)
A) but i heard people said that they have to pay california state tax even they didnt visit usa for the whole year? Is that possible?

B)i earn below 40k, does that effect me?

C)my employer are non us employer. So i dont have to pay any ss tax right?

D) so if im working as a employee (not self employee), i dont have to pay ss and medicare tax right'?

E) so i dont owe any ca tax right?

f) and also, what does it different if i file the tax as resident and non resident?

g) also, if peopel are employ by non us employer and they dont have to pay medicare and ss tax. what makes that (Totalization) Agreements different? let say i dont have to pay anyway, why the agreemtn exists so people can only pay to one country?
 

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A) but i heard people said that they have to pay california state tax even they didnt visit usa for the whole year? Is that possible?
It has been known to happen. Depends on if the person is maintaining any "presence" there - like they still own their house and are just "renting it out" pending their eventual return. There have been a couple high profile cases on this issue, though the matter of state residence is still subject to interpretation.
B)i earn below 40k, does that effect me?
If you're referring to California taxes, officially, no. But at that level, you aren't terribly interesting to the tax office in California, anyhow.

C)my employer are non us employer. So i dont have to pay any ss tax right?
It can depend on the social security treaty that does or doesn't exist between the US and Hong Kong, but if you are paying into the local "social security" system, then you most likely don't need to pay US SS. However, you may at some point need to produce a certificate showing that you are paying into the local system.

D) so if im working as a employee (not self employee), i dont have to pay ss and medicare tax right'?
If you are working as an employee and paying into whatever the local version of social security is, there's a good chance you don't need to be paying into the US SS system.
E) so i dont owe any ca tax right?
Unless you have some sort of binding ties that would suggest you are resident there - or only temporarily resident abroad - yes.

f) and also, what does it different if i file the tax as resident and non resident?
For state taxes, you file as non-resident if you have income from that state but you aren't resident in that state. Normally that means that you only have to declare and pay taxes on the income you receive from that state. You also may file as a non-resident the year you moved out of the state and established residence elsewhere (and then you only pay on the income from the part of the year when you were resident there).
g) also, if peopel are employ by non us employer and they dont have to pay medicare and ss tax. what makes that (Totalization) Agreements different? let say i dont have to pay anyway, why the agreemtn exists so people can only pay to one country?
Not sure what you're asking here, but if you're interested, this is the information from the Social Security Administration about Totalization agreements: International Programs - U.S. International Social Security Agreements

I do note, however, that neither Hong Kong nor China have Totalization Agreements with the US.
Cheers,
Bev
 

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If you are working as an employee and paying into whatever the local version of social security is, there's a good chance you don't need to be paying into the US SS system.
That isn't actually a requirement in deciding whether U.S. Social Security/Medicare tax must be paid. If you're not self-employed and your employer doesn't have a U.S. Social Security obligation, then you don't either. Even if there's no foreign social security system.

The IRS explains the situation pretty well here.

I think Bev you're most familiar with France which has both a social security system and a social security treaty with the U.S. In places like Hong Kong (and Singapore for that matter) it's perfectly ordinary for U.S. citizens to work for foreign employers and thus not owe Social Security/Medicare payroll tax. That happens to be my situation.

There are some downsides, though. If you don't have at least 10 calendar years of non-trivial contributions to U.S. Social Security then you probably won't qualify for retirement benefits (unless you contributed to another country's system and that country has a totalization agreement with the U.S.) Same with Medicare benefits. Even if you're vested (i.e. qualify for retirement benefits) you might not be increasing those future benefits through your contributions. And you lose disability and survivors benefit coverage if you depart Social Security for too long.

U.S. Social Security (and Medicare) doesn't have a voluntary "top up" option. You either legally must contribute or must not. I must not because I work for a foreign employer that did not agree to have its U.S. citizen employees covered by U.S. Social Security. (Not that many foreign employers would have ever done that.)
 

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Discussion Starter · #7 ·
1st, does the state tax rates matter if i file for resident or non resident. (i currently live oversea for 6 years, no property in usa, used to live with mom in usa before, had 2 banks account with usa address). To my situation, am i better to declare as resident or non-resident?

2)so i still confused with that Totalization) Agreement. Ok, let say i work for a country that HAS an agreement with USA (france). If i contribute some kind of ss and medicare into france govt, am i getting the same contribution to my ss and medicare in USA? Or the money i fund into france will just into france and USA had no funds in the account?

thanks.
 

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I admit I'm mostly familiar with the European countries, and many of them do have Totalization Agreements with the US. Am currently in the process of working with someone here who actually needs the certification that she's paying into the local system - though admittedly, she's working for a US employer. (And it gets complicated from there...)

mousefai - Why would you file a state return at all if you've been living in Hong Kong for the last 6 years?

As far as 2) is concerned, you're just confusing yourself by doing the "what ifs" about Totalization Agreements. (And there are some differences from one country's agreement with the US to the next.)

The main thing about a totalization agreement is that both countries involved (US and France, for example) usually specify terms under which one country or the other will give you credit for the number of years (or quarters) worked in the other if you are "close" to being able to qualify in either country. How "close" you have to be can vary from one agreement to the next. And, you can wind up with two pensions, one from each country - though the US will penalize you a bit in the amount of your SS benefit if you do. (If you want more information, go to the US SS website and search for WEP - windfall elimination provision.)

Probably more than you wanted to know.
Cheers,
Bev
 

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Discussion Starter · #9 ·
thanks to all people in here.

i glad i post this question coz i sense lot of you guys are pro and expert in the field.

if i had more quesiton i will post here.
 
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