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Did You Say Charla?

Charles Owen is an American citizen living in Venezuela.  A young person in his mid-twenties, he moved to this unstable country in a rush of missionary zeal to get to know and work with the Venezuelan people.  Now five years later, he lives with his new wife in an apartment somewhere in the upper reaches of Caracas.

In July the writer traveled to this oil rich country of President Hugo Chaves to participate in a conference on moral education in the interior of the country by presenting a talk on the destructive consequences of backbiting and gossip.  When the international flight from Madrid arrived at Caracas too late to catch the national flight to Barquisimeto, he was fortunate to accept Charlie's and his wife's overnight hospitality.

Because Venezuela is impoverished and unstable, travelers are often preyed upon.  From the moment of leaving the security area at Caracas's international airport, they can find themselves confronted by a muddle of competing hustlers who descend upon them like swarms of flies in order to promote questionable services as guides, drivers, baggage carriers, or money changers.  And should the unwary tourist be momentarily distracted, he or she may quickly discover that a bag, a wallet or a purse has been spirited away.  Once curb side, visitors to Venezuela cannot always determine whether a taxi is legitimate or the hotel destination certain.  Tourists have occasionally been robbed of all their belongings once out of sight of the airport.  So having a predetermined place to stay and a host who provides the transportation are essential requisites to visiting the country.

Charlie has a job transcribing medical records for a U.S. based firm via the Internet.  He earns twelve hundred dollars a month and works his own hours.  Charlie also files his own tax returns stateside and asked me whether he was following correct procedure.  'I report my income on Form 1040 and then exclude it on Form 2555,' he told me.  'Do you report your income to Venezuela?' I asked.  When Charlie replied that he did not because Venezuela did not require him to do so, I told him that he could not use Form 2555.  Instead he had to amend his last 3 years of tax returns and pay taxes on the earned income to Internal Revenue Service.

Charlie was naturally anxious to know what he would have to pay.  After he explained that he had only worked five months in 2004, I told him:  'Based on $1,200 a month, you will owe, before penalties and interest, $848 in self-employment social security taxes.  Your Standard Deduction and Exemption amounts are enough to offset your earnings for income tax purposes.' 'What about 2005?' he quickly asked.  'You will owe $2,035 in social security taxes but no income taxes if you file jointly with your wife,' I said to him after making the calculations.

Charlie was not pleased with these tax liabilities and so I suggested he investigate whether reporting his income to Venezuela could result in reducing his taxes.  While taxation in Europe absorbs between 35-45% of gross domestic product, Venezuela only captures 8.4%.  Feeling relieved, Charlie said he was definitely going to look into this possibility.

However, after I returned to Europe, Charlie sent me an email that his mother had advised him to pay U.S. social security taxes for his eventual retirement.  'What can I expect by following her advice?' he asked.  I referred him to the Social Security Administration's website at www.ssa.gov, where anyone can calculate his or her potential benefits based upon presumptions of future income.