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Is it foolish for my friend to report her earnings in Thailand despite a 15% Self Employment tax?

Self Employment Tax Tax Obligations U.S. Taxes Visa Regulations Work Permits Foreign Earned Income Exclusion (FEIE)Thai Tax System Expatriate Advice IRS Rules Social Security Contributions

Feb 22, 2023

2 years ago

ORIGINAL POSTER

Hello. I have an American friend living in Thailand who teaches online for a small Chinese company. She recently discovered that she will have to pay 15% Self Employment tax if she reports her earnings. Do any of you think she is foolish for reporting this? 😀

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TLDR : Answer Summary

The conversation centers around whether an American expat in Thailand should report her earnings from teaching online, considering her obligations to pay a 15% self-employment tax. Various opinions are shared: some advise that reporting is crucial to avoid legal trouble, while others suggest that as long as her income is below certain thresholds, she could avoid tax obligations. The discussion also touches on the legality of her work situation in Thailand, the implications of not reporting income, and the potential benefits of paying taxes for future social security.

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Roy ***********

This might apply, you would need to very carefully read the requirements to determine how the days are counted, it is not a simple determination of what is considered physically present in a foreign country.

Who qualifies for the foreign earned income exclusion?

A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

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Stanley **********

Your Social Security retirement is based on what you claim as earnings. If you don't claim all your earnings, your retirement will be reduced forever. Up to you. I have a friend that is a retired bartender, he never claimed his tips and now his retirement check is 30% of mine.

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John ******

ORIGINAL POSTER

Thank you everyone for your replies. I always get helpful information here.

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Jw ********

Await the 250,000 baht fine and deportation with 5 year ban!

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Luke *******

Dont report. Easy.

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Cris ********

Sounds like she is well under the Standard Deduction. Plus she could be claiming the FEIE exclusion.

Often the self employment tax is paid online quarterly through the EFTPS website. I’m self employed too and I only pay in about 10% though.

I have variable income from year to year though and claim FEIE based on the Physical Presence Test since the online business I own is back in the US.

If she wants to consult with my tax specialist, I can share his info. He focuses on taxes for US Expats and Nomads.

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Michael *******

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Robert ************

There is NO USA TAX and NO OBLIGATION (to pay tax or to file Tax Return) -- IF that is her only taxable income. Standard Deduction for Single Filer is $12,950 for 2022.

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Greg *********

@Robert ***********

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Robert ************

P.S. BUT NOTE: For those of us Ex Pats from USA, regardless of whether or not you need to file a Tax Return, IF you have a Thai Bank Account (or any foreign Bank Acct). with more than USD$10,000 equivalent, is is MANDATORY to separately file an annual FBAR/FINCEN Report with the US Treasury, or you will be subject to hefty Penalty/Fine!

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Robert ************

What is your point? I am well aware of IRS Rules. And, my comment above is absolutely correct.

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Greg *********

@Robert ***********

I was under the impression, according to that link, that income level did not negate the requirement to file. That's all. Social Security Contributions and Benefit has already been touched on by others.

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Robert ************

Nope. As stated in your posted article above: "...the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the SAME whether you are in the United States or abroad". See Also:

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Robert ************

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Aaron *******

I believe the consensus answer is: "Forget about it." (American Cinema joke). 😎

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Aaron *******

If your talking about US taxes, minimum income to be required to file a tax return 12,950 USD. So, no need to report to IRS, if income is under this.

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Mark **********

Doing things legally is not foolish

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Chris ******

Works online , at home , virtually no chance of being caught … don’t worry about it

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Kool *******

It is illegal for her to work. She should be aware that the cut-off for paying Thai income tax is bt100,000. Below that number there is no tax owed. If she only made bt30,000 then no tax is owed, no matter what illegal work she does. She does not have to file. If she had a work permit she would have to file in order to get the receipt of filing so she could renew her work permit, but because she is working illegally that is not a concern

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Paul ********

Very Silly

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Paul ********

Idea! Give me the 15% and say nothing to anyone 🕶

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Kathalyn *******

I thought it was illegal to work on retirement visa??Perhaps I am wrong.

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Larry ******

@Kathalyn ******

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Kool *******

@Kathalyn ******

you are correct. It is illegal

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Kool *******

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Braulio *********

The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance).

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Aaron ******

I think she is foolish if she doesn’t report it.

Don’t lie to the irs.

Just do proper write off and etc.

And consider the 15% an investment that pays out as social security payments later.

She likely isn’t making enough for this to make much of a difference anyways.

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Braulio *********

Pay the tax. It’s her obligation

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Robert ************

@Braulio ********

There is NO TAX and NO OBLIGATION (to pay tax or to file Tax Return) -- IF that is her only taxable income. Standard Deduction for Single Filer is $12,950 for 2022.

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Delvonte ********

This is for those spreading the misinformation. She is an independent contractor very very likely and she has to file . Don’t influence her into thinking what she might do is actually legal .

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Delvonte ********

Incorrect information. What Youre missing is that she’s self employed . The requirement is based on you not being self employed . She has to file if she made more than $400 and yes she’ll have to pay

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Delvonte ********

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Phil ********

What kind of visa does she have? Does she have a work permit?

If she has neither, and gets caught out; 15% tax will be the least of her troubles...

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Larry ******

Of the 10's if not 100's of thousands of people who have taught online in Thailand, I have not heard of one getting busted. You fear mongers are hilarious.

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Phil ********

Employment prohibited or married to a Thai?

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Michael ********

i have paid tax without a work permit, all they were interested in was the money. Was quite a funny interview

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Sam *****

@Michael *******

I can imagine this true. Money talks in Thailand

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Sam *****

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John ******

ORIGINAL POSTER

She has a retirement visa now and only makes about 30k baht a year.

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John **********

working is not allowed on a retirement visa.

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Aaron ******

basically $1k US a year? Self employed? And she can’t turn that into a loss with write offs?

Come on. She could literally buy a phone or computer and take it as a business write off and the profit would be gone.

Likely could offset other income and lower her taxes.

Just be careful to show a loss in too many years in a row.

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Aaron ******

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