Americans and Social Security Payments? Help!

[heyheychi]

Hello,

I am an American looking to move to Singapore. I have heard mixed reviews on if I have to pay American SS while living abroad in Singapore.
My salary will be about 130K (including 36k for housing) and wondering what amount (if any) I would have to pay back to America? Do I also pay SS on my housing allowance or just basic salary?
Or do you just not pay any SS during your time abroad?
I know I do not pay into the Singapore pension program CPF.

Any help would be GREATLY appreciated!

[sundaymorningstaple]

https://www.irs.gov/individuals/interna ... ing-abroad

[Strong Eagle]

After reading SMS's reference document, be clear that just because you are paid by an American entity, you are not working for that entity even though they may be paying your salary directly into your Singapore bank account.

To work in Singapore, you must work for a locally registered legal entity. For example, you work for Dell, Singapore, a 100 percent wholly owned subsidiary of Dell, Round Rock. You are paid directly by Dell out of Round Rock. You do not work for Dell, Round Rock, hence, no social security or withholding is applicable to any salary you earn.

Since Dell, Singapore is one hundred percent owned by Dell Round Rock, the SSA provides the option for you to continue to pay social security on your foreign earnings. This is a voluntary agreement entered into by employee and company by filling out form 2032.

Having said that, I met many Americans while working in Singapore and not one of them paid social security taxes. Whether or not this is a good move for you depends on your circumstances and the willingness of your employer to add another 7.5%+ to your paycheck. Most Americans who have queried about this were concerned about having 40 quarters of benefits.

[sundaymorningstaple]

Another good example of this was the fact that I was poached from my employer in Morgan City, LA back in 1982 to join Oceaneering International (the largest Diving Contractor in the world at that time) in Singapore and working throughout S.E.Asia. When I arrived in Singapore and signed my contract it was not with the parent Organization but another subsidiary (also Oceaneering Int'l but under a different country) That way, even as an American working for them overseas, I was not liable to the US for any SS payments. (Having said that, I was almost 30 when I did that, so more than had my 40 quarters in before I was 30.)

I did pay SS Taxes for 3 years here though, from 1988 to 1991, while working for the American Council for Nationalities Service out of New York, under the Joint Voluntary Agency working alongside UNHCR resettling VN Refugee Boat People throughout S.E.Asia but based out of Singapore until that program was shut down.

[heyheychi]

It does seem I have to pay SS on salary (not housing allowance)?

I will be working for an International School, so a Singapore run business.

I have talked to a bunch of Americans and none seem to be paying SS back home or abroad, am I missing something?

[PNGMK]

It does seem I have to pay SS on salary (not housing allowance)?

I will be working for an International School, so a Singapore run business.

I have talked to a bunch of Americans and none seem to be paying SS back home or abroad, am I missing something?

No I know of some who do (and specifically in Int'l schools). They usually pay it on a voluntary basis as part of 'self employed income'.

[sundaymorningstaple]

International schools are not US companies but incorporated in the country in which they operate. You will not have to pay any SS on salary either (do not confuse SS with income taxes however. You still have to file your 1040 annually along with about 18 pages of FATCA and other BS documents with the treasury department. You will be qualified for the Income Earned Abroad exclusion for the first 104?K of earned income, but any over that you will pay taxes an the rate at which it would have been taxed had there not be an exclusion. Where are you getting the information that you will be having to pay SS taxes? Could they be referring to the voluntary element the Strong Eagle mentions? This especially if you are under 30 years of age and the 40 quarter requirements.

If, as PNGMK notes, if the are hired as self-employed individuals then yes, you would be required to pay SS however, I'm not sure how that dovetails with the necessity of gaining an employment pass in Singapore to teach. Maybe PNGMK can enlighten us (me).

[Strong Eagle]

It does seem I have to pay SS on salary (not housing allowance)?

I will be working for an International School, so a Singapore run business.

I have talked to a bunch of Americans and none seem to be paying SS back home or abroad, am I missing something?

Not true. In fact, you CAN'T pay social security while working for a foreign firm unless that firm is more than 20 percent American firm owned AND you fill out the form 2032.

What makes you think you have to pay SS on your salary?

As for SMS's comment:

If, as PNGMK notes, if the are hired as self-employed individuals then yes, you would be required to pay SS however, I'm not sure how that dovetails with the necessity of gaining an employment pass in Singapore to teach.

If you are working as self employed in Singapore, then you are working as an unregistered sole proprietorship. Your legal entity is you, filling out your business return on your Singapore personal income tax return.

You cannot pay SS... you are not working for a US entity. I suppose it would be possible to form a US entity... an LLC, have it wholly own a Singapore "teaching" business, fill out form 2032 and then pay SS... sounds like a lot of work to me.

Key point: If you are self employed in Singapore, your legal business entity is your own Singapore sole proprietorship, registered or not.

[PNGMK]

SMS/SE: you can pay SS on self employment income that is in addition to your locally earned income in Singapore. I know a teacher who does it with her side income - there is a specific form or section to fill out - can't remember which one. It helps get her 40 quarters in. It's above board and legit - the US IRS is quite happy to collect the money. This was based on advice from a Fin Adviser here and has worked now for 5 years. The advantage is that it gets around the non-payment of SS by International Schools and keeps your SS up to date. Note that the additional income need not actually exist - just be listed and have the SS paid on it. Once again the IRS is not going to come running and ask you to show where the income is (note that you would not do this if your income was above the Foreign Earned Income Exclusion because you'd then be liable for TAX and SS payments). It's not a lot of money and helps lock in SS and medicare - very important for older people who are getting close to 65 but don't expect to have enough work in the domestic US economy to get their 40 quarters in.

[sundaymorningstaple]

I did something very similar to that which PNGMK is talking about and I half suspected his answer was going to be as it was, to whit...

Back in 1976 when I decided to quit as the District Director of H & R Block in Washington DC to do what I wanted to do, I did some forward planning, re: educational expenses (my nickle). So, I resigned from HRB on my 29th birthday and immediately opened a diving company (self employed) doing harbour diving around Washington/Maryland area. (I'd been a scuba diver since the age of 16). I didn't actually do much work (some hull scrubbing an such) but I reported enough income on my Schedule C (sole Proprietorship) and deducted some costs and depreciation on equipment, etc, that I showed a profit that first year (last quarter of 1976). That return was filed and I paid my SE taxes on it and around 200 of net profit. (existing business duly paid tax in previous year)

In January 1977 I enrolled in a commercial diving school in Oakland CA on the other side of the country and subsequently passed it and then when down to the gulf of Mexico (Morgan City, LA) where I found a job with an offshore oilfield diving company. In February,1978 I filed my tax return for 1977, that first year as a commercial oilfield diver, and deducted ALL of my educational expenses incurred for the 4 months I stayed in Oakland, CA going to school. I was pretty sure I would get audited, so I had already documented everything as I knew what I was doing before I even started the school (The whole purpose of the fledgling company doing 'harbor' diving).

Educational expenses are not deductible if the educational expenses will qualify you for a different profession but are deductible if they will further your career in your current profession (which I had established as a working, profitable concern the year before. As I said, I expected to get audited and I did. Now for the fun part.....

I have attend close to 1000 audits with clients at the Baily's Crossroad IRS office in Virginia just over the DC line while working for HRB in Washington DC. I knew most of the auditors there have seen them on multiple occasions and I had a very good record for fully documented cases at those audits. So, imagine my surprise when I waltzed into the New Orleans IRS Office and when I went into the interview room, it was one of the female Auditors from VA who had transferred down there the year previous (married and followed husband and transferred) she took one look at me and motioned me to sit down and we spend the remaining 55 minutes of the hour I was there chit-chatting about anything except my tax return. She told me when she got my file, the name sounded so familiar but was 1200 miles away from DC so she was rather curious if it was the same person. Then, quote " I remember how well prepared you are with other people tax returns, but I am only curious how you pulled this off. I just told her I resigned from HRB and became a commercial diver in MD and then decided to see if I could upgrade myself to an oilfield diver. So, I went to school on the tail end of my GI bill and here I am. She smiled and said "I guess I don't need to see what's in your briefcase then" I said nope, I'm prepared as usual. That was the end of it.

So yeah, what PNGMK is saying was perfectly feasible (the worst that could happen is that all would be deleted and the SS refunded). However, not so feasible today (well, it is but..) as what we did wasn't illegal (in writing). Today, however ....definition has changed somewhat.

What is Income Tax Fraud?

Income tax fraud is the willful attempt to evade tax law or defraud the IRS. Tax fraud occurs when a person or a company does any of the following:

Intentionally fails to file a income tax return - not an issue here
Willfully fails to pay taxes due - not an issue here
Intentionally fails to report all income received - not an issue here
Makes fraudulent or false claims - this one and the last one are the ones that can bite you in the arse today.
Prepares and files a false return - see above.

So, PNGMK, just for the record, what they are doing is exactly the same thing and it's not legit as it's a false return. If the income is legit then there is a legit way to report it. Small but significant difference.

[PNGMK]

Well the lady I know doing it has run it for 5 years at least and the fin advisor (who I won't name) has probably many more doing it. I might add that for a int'l teacher to have "cash tuition income" is not at all unusual and frankly almost expected for the lousy rates they get paid. To be clear you can't use rental income or investment income for this category. It has to be earned income in addition to any actual salary. Tuition, writing for cash (articles etc), lesson prep, exams fees (AP and IB pay those), cash overtime for extra classes, TESL income are all perfectly legit forms of extraneous earned income that should be declared and have SS paid on....

[sundaymorningstaple]

However, the MOM is quite specific about carrying on another business, either self-employed or working for another company other than the one your EP is registered under. So, it IS illegal even if they have been flying under the radar for years with the IRS. IRAS might have a different take on it though.

[PNGMK]

The work need not be performed in Singapore. Teachers often taken extended leave elsewhere.