Discussion:FICA & Medicare taxes or SE tax on wages of US citizen

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Discussion Forum Index --> Advanced Tax Questions --> FICA & Medicare taxes or SE tax on wages of US citizen


Discussion Forum Index --> Tax Questions --> FICA & Medicare taxes or SE tax on wages of US citizen

Lhhesscpa (talk|edits) said:

5 September 2009
I would appreciate it if someone will comment on my understanding that wages earned abroad by a US citizen as an employee by a foreign employer are not subject to either Social Security, Medicare or self-employment taxes. This conclusion is stated in Pub. 54 although I haven't found a rule directly on point. -- Larry Hess, CPA ~ Albuquerque, NM

LH2004 (talk|edits) said:

September 5, 2009
Sec. 3121(b).

Lhhesscpa (talk|edits) said:

5 September 2009
Lionel, well done! And many thanks. Some of the sub-sections of 3121 have long, involved sentences, so I'll have to read it several times. I think you've found the heart of the matter and the basis of the info. in Pub. 54. -- Larry Hess, CPA ~ Albuquerque, NM

Derwood (talk|edits) said:

5 September 2009
Lhh, if the "foreign employer" is an division or branch of a USA company ... then those foreign wages are in deed subject to FICA & federal withholding.

If the "foreign employer" is an entity that is incorporated in a foreign country, even if it is a fully owned subsidiary of a USA corporation ... then those foreign wages are not subject to FICA & federal withholding.

If the "foreign employer" is an entity with no US ownership, then those foreign wages are not subject to FICA & federal withholding.

I'm not sure why you asked about self-employment tax in the same question regarding employee wages, since self-employment tax never arises from wages ...even for US citizens living and working only in the US.

Anyway FYI, if you are a US citizen and are self employed in a foreign country ... then your self-employed earnings are subject to SE tax. It doesn't matter if you earn the self-imployment income from a foreign company with no US ownership/affiliation or from a US company's operations in the foreign country.

Lhhesscpa (talk|edits) said:

5 September 2009
Derwood,those are my conclusions exactly. I'm into authorities. Do you agree that the authority for this issue is Sec. 3121? -- Larry Hess, CPA ~ Albuquerque, NM

Jimi (talk|edits) said:

5 September 2009
Derwood, US citizens working in the US for a foreign government do not have FICA withheld but are subject to SE tax.

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