Q&A: Are lottery winnings in a foreign country taxable in the US?

Posted by Don W on September 25, 2010 under Expatriate Taxes, Foreign Bank Account Reporting (FBAR)

Q: I am a US citizen living in England.  If I were to win the UK lottery (which is tax free) – would I still be liable to pay taxes to the U.S?  I file U.S. taxes each year along with the foreign earned income form.

A: Yes, foreign lottery winnings are taxable by the IRS in the US (though they are generally exempt from the particular state income tax).  Do remember that if the aggregate value of of your foreign bank accounts exceed $10,000 at any time during the calendar year you have a legal requirement to file form TD F 90.22.1– please see the IRS FAQ page on FBAR (Foreign Bank Account Reporting).

Q&A: Should I pay into the US Social Security system so that I can receive Medicare benefits down the line?

Posted by Don W on September 7, 2010 under Expatriate Taxes

Q: I am considering whether it would be worthwhile for me to pay into the US social security system, in order to receive a Social Security payment and receive Medicare benefits later on. I am a US citizen, self-employed and living in Spain since 1994. I was born in 1962. I have worked in the US as well, for a total of about 3 years. I file income taxes here in Spain (as I am based here) and the US, though I have not yet had to pay taxes to the US. I pay for social security here in Spain but would like to look into whether I can also pay into the US system as well, for some extra coverage and to secure Medicare for later. To do this, I would need to know how much I would need to pay and what the return would be, and whether I would indeed be covered by Medicare (when in the US, as I understand that Medicare does not cover outside the US). Can you please advise?

A: To be eligible for Social Security you must have paid into the system for 40 credits (approximately 10 years). http://www.ssa.gov/retire2/credits2.htm

You can certainly pay in to the US system. This is calculated on Schedule SE, generally used in conjunction with Schedule C. The tax rate is 15.3% of your net self-employment income. This represents both the employer and employee portions of Social Security and
Medicare.