Author Topic: Any way to create US earned income when outside USA?  (Read 1394 times)

Mr Mark

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Any way to create US earned income when outside USA?
« on: August 27, 2017, 11:41:54 PM »
Hi tax gurus,

I contributed the full 6500 to my IRA in early 2017, but now realise I won't have any W2 income this year (I'm working overseas and am not currently resident in USA). Lots of rental income (doesn't count I think) and taxable investment income (again, doesn't count).

I know I can 'reverse' the over contribution and the earnings associated with it, but is there a better way? Can I somehow legally create taxable income up to the deduction so I can fund the IRA?

cheers,
Mr Mark
Mr. Mark

SeattleCPA

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Re: Any way to create US earned income when outside USA?
« Reply #1 on: August 28, 2017, 06:49:12 AM »
Assuming you're a US citizen or permanent resident, you're taxed on your worldwide income. If you're working outside the US for taxable compensation, you may still be able to contribute... Though you need to think about whether you qualify for the foreign earned income exclusion...

I just skimmed this article, but it looks right:

https://www.thebalance.com/ira-for-workers-abroad-3193218
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Mr Mark

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Re: Any way to create US earned income when outside USA?
« Reply #2 on: August 28, 2017, 12:42:53 PM »
Seattle.

Nope. Neither right now. That's the core problem I guess.

So my non USA income is tax free thank goodness. So just hoping there was a way to generate a tiny bit taxable...
Mr. Mark

jim555

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Re: Any way to create US earned income when outside USA?
« Reply #3 on: August 28, 2017, 02:18:03 PM »
One downside to earned income is Social Security tax gets levied on it.

Mr Mark

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Re: Any way to create US earned income when outside USA?
« Reply #4 on: August 29, 2017, 12:32:56 AM »
^ actually some SS tax would be an additional benefit.
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sokoloff

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Re: Any way to create US earned income when outside USA?
« Reply #5 on: August 29, 2017, 04:03:32 AM »
If you're eligibile to work in the US, you could actually do that.

Take a visit to the US and work. Find a remote work position that you could spin into US W2/1099.

jim555

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Re: Any way to create US earned income when outside USA?
« Reply #6 on: August 29, 2017, 02:38:39 PM »
^ actually some SS tax would be an additional benefit.
I guess you trust that they will honor the promises of SS.  I have a hard time believing that.

sokoloff

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Re: Any way to create US earned income when outside USA?
« Reply #7 on: August 29, 2017, 04:28:53 PM »
^ actually some SS tax would be an additional benefit.
I guess you trust that they will honor the promises of SS.  I have a hard time believing that.
I'll bet that a 40 year old working today gets 75% or more of promised/projected benefits.

SeattleCPA

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Re: Any way to create US earned income when outside USA?
« Reply #8 on: August 29, 2017, 04:52:48 PM »
^ actually some SS tax would be an additional benefit.
I guess you trust that they will honor the promises of SS.  I have a hard time believing that.
I'll bet that a 40 year old working today gets 75% or more of promised/projected benefits.

Yeah. Me too.

BTW the most recent trustees report (available via link below) gives that same 75% number starting in 2037... so I would think that's a pretty safe planning assumption:

I.e., Congress does nothing (probably supported at some level by we voters) and in about 20 years, everybody takes a 25%-ish haircut.

https://www.ssa.gov/OACT/TR/2017/tr2017.pdf
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Mr Mark

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Re: Any way to create US earned income when outside USA?
« Reply #9 on: August 30, 2017, 05:56:42 AM »
^ actually some SS tax would be an additional benefit.
I guess you trust that they will honor the promises of SS.  I have a hard time believing that.

Unfortunately I'm a bit beyond my 40s. By working in the USA for a few years earning large I find I am just a few years away from getting  SS payment of over $1000 a month at 62 if i make another 12 units of qualifying employment . With inflation adjustment thats a pretty sweet deal IMHO.

Would I count on it if I was 30? No. But as I'm less than 9 years away it seems pretty secure to me. Perhaps more valuable will be qualifying for Medicare.   
Mr. Mark

Mr Mark

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Re: Any way to create US earned income when outside USA?
« Reply #10 on: August 30, 2017, 06:04:01 AM »
Another thing I was reminded by another thread. I did get a big federal tax refund this year - can that be used to put in an IRA in the absence of any other taxable income this year??
Mr. Mark

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Re: Any way to create US earned income when outside USA?
« Reply #11 on: August 30, 2017, 06:45:53 PM »
You can use that cash however you want. However, a federal refund does not affect your taxable income.
Always happy to help with tax or accounting questions - feel free to private message me.

I am a licensed CPA in Pennsylvania. However, any tax advice I give should be considered general information and not used in the avoidance of tax. There is most likely information about your situation that I do not know, and thus you should do your own additional research.

Yes, in case it confuses you, I did change my forum name.

lhamo

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Re: Any way to create US earned income when outside USA?
« Reply #12 on: August 30, 2017, 06:52:17 PM »
Is there any way to make a work-related trip back?   DH and I used to typically have 1-2 trips of 1-2 weeks each back to our HQs each year.   The pro-rated amount of our annual pay for those trips was excluded from the FEIE amount, so we would throw it in our Roths.   It usually was only 2-3k/each, but there were a couple of years when we had to make longer trips and were able to put in more.  Every little bit helps.  Doesn't really work out if you have a non-US based employer, though.
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