US citizen paying taxes abroad?

Question

Now I know that as a US citizen, I must pay taxes on money made internationally. But I have two added questions:

1. Is there a way to reduce this to a minimum? I.E. no FICA, SS, etc.

2. When bringing back money into the US is there a way to not pay taxes on it? (I have been told after three years, a US citizen can bring back any amount and not pay taxes)

Thanks in advance

Answer 1

And don't get cute and claim it was wages when it was SE income.

We encountered someone this week who suddenly wanted to come in from the cold because they hadn't paid payroll tax to either the US or the other country (under a totalization agreement) and was suddenly realizing that they weren't eligible for SS retirement benefits.  

Answer 2

Bringing the money into the US is not a taxable event.

FICA shouldn't be collected on wages earned in a foreign country, unless the income is treated as being US income by foreign employer and foreign country, subject to a tax treaty.

Up to $84,700 (?) of earned income can be excluded on form 2555 if you're a bona fide resident of a foreign country, or you spent little time in the US.

Also, any foreign taxes you pay on foreign income can be taken as a (possibly partial) credit on your US taxes, using form 1116.

Answer 3

You may be able to exclude some or all of your foreign earned income from US tax by filing Form 2555.  Alternatively you can take a credit for the foreign income taxes paid using Form 1116.  You may not do both, however.

If you are self-employed you must pay the FICA and Medicare taxes regardless of where you live and work.  And if you work for a US employer overseas, FICA and Medicare taxes will be withheld from your wages.  If you work for a foreign employer in most cases your wages will not be subject to FICA or Medicare taxes.

Bringing money into the country is not a taxable event.  Earning it certainly is though, whether you ever bring it to the US or not.  Also there are other reporting requirements if you have signatory control over any foreign financial accounts such as bank and investment accounts.  Additionally if you carry more than $10,000 in cash or negotiable instruments into the US there are reporting requirements.

See IRS Pub 54 for information on taxation and living and working in foreign countries.  It's a complex subject, far too complex to cover in any detail here.