Author Topic: Any way to create US earned income when outside USA?  (Read 2970 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

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

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...

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.

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

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

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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??

CareCPA

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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.