[Thyrza]

Hi everyone,

We are struggling with what appears to be a requirement for self-employed US persons working anywhere in the world to pay self-employment tax to the IRS in the amount of 15.3% on top of other taxes paid (except where Totalization Agreements exist, unfortunately, there does not appear to be such an agreement with NZ).

My husband and I both plan to be real estate sales agents in NZ, a self-employment opportunity. From what I understand, there is no way to structure this endeavor as a company to any way alleviate the burden of the self-employment tax (US persons who are employed overseas are not subject to the same self-employment tax or any FICA or Medicare tax at all).

In essence, it is our understanding that our profits would still qualify for the foreign earned exclusion for federal tax purposes but our profits would still be subject to the self-employment tax.

Can anyone confirm, have suggestions or recommend a consultant to discuss this issue?

Thank you!

[toesonthenose]

I am no expert, but I believe you are correct. Americans abroad get screwed on taxes, unless they work for a favored defense contractor in some corner of the Empire. The State Dept website states Americans pay tax in foreign countries because we still reap the benefits that being an American incur. Oh brother, talk about exceptionalist BS! The IRS website has extensive documentation on their website on income earned outside the USA.
Good Luck!

[RJLink]

If you're never going to use US Social Security or Medicare, the self-employment tax is a raw deal. If you are going to use those things, then it's not so bad. As you may know, you get half the 15.3% back as a credit. The other half is equivalent to what's taken out of a U.S. employee's paycheck to pay for Social Security and Medicare. Or so the theory goes. Someone please weigh in if I'm being naive.

[Park City Partner]

I would suggest contacting Accru Smith Chilcott in Auckland. Ask for Peter Chatfield. He is a partner there that I consulted on some US tax matters. They also do my US return for me. They aren't super cheap but the have US experience. I think I originally found them through the US consulate in NZ website.

Good luck.