If a taxpayer works overseas, do they pay federal taxes on the income? What forms need to be completed?

Taxpayers and overseas work

If you are that taxpayer and you are employed by a company who has international offices and wind up working overseas, there may be tax consequences you should to be aware of.  Whether you are only spending six months or spending several years working abroad, as long as you remain a US citizen, you must still file a U.S. federal tax return, and in most cases, pay income taxes on the money you earn while abroad. A good place to start is with Form 2555. The U.S. Tax Form 2555, is provided to assist with figuring out if you have a foreign earned-income exclusion or a housing exclusion or deduction.

Now, in addition to federal income taxes, the country you work in likely has a set of tax policy rules that you must also abide by while working abroad. It is important that you familiarize yourself with those.  The first and most important question you should ask yourself is, in which countries do I have tax obligations — this is especially important if you periodically travel to or work out of more than one country.

As a U.S. citizen or resident alien abroad you are allowed an automatic 2-month extension to file. If you file a Form 4868 , you may also be granted an additional six-month extension of time to file your tax return. There are a couple of exclusions to this rule, however. One is you may not be ordered by the court to file by the regular due date. The other is if you are asking to IRS to figure your tax for you. It is important to ask for the extension by the April 15th due date for taxes.

Now, please remember, paying taxes to the country in which you have been working, does not necessarily relieve you from an obligation to file U.S. income taxes remotely. If you end up paying foreign taxes to a foreign country or a U.S. possession, it is possible you can take either a credit or an itemized deduction for those tax payments on your U.S. tax return. The IRS specifies which foreign taxes qualify for the tax credit when on their website. It can be found by searching for “international tax payers”. You may also find it helpful to review the Tax Guide they have published for U.S. Citizens and Resident Aliens abroad. 


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