Adnams

Hi,
So OH and I became USC last December after ten years as GC holders.
If we were to take a 2 - 3 year corporate secondment to the OH's European corporate HQ are we still liable to pay income tax to the US authorities while we're abroad?
I've been trying to do some research but it seems to be a quagmire and I've found conflicting info on line.
Has anyone done this and then returned to the US at the end of the secondment period? Were there income tax liabilities while working abroad?
Thx

Noorah101

You are required to do a US tax return and report worldwide income. Whether you will actually owe any tax depends on how much you earn. I would say most people don't end up owing tax; I think the threshold is pretty high.

Rene

Giantaxe

There's a foreign earned income exclusion of about $100k and a foreign tax credit for any foreign taxes paid on income that is taxable in the US (for example, interest, capital gains and income above the exclusion level). You may or may not owe US taxes depending on your income level, types of income and the level of taxation where you are living. As already pointed out, you'll have to report your total worldwide income.

Adnams

Thx both, this is what I'm trying to figure out will we be liable for double taxation from both the country of residence and the USA above the threshold of 100k?
I think I get it that we have to pay taxes on investments / interest in the US and that's fine it's the liability on income taxes that concerns me.

Giantaxe

You'll have to report all earned income to the US with the first $100k being excluded and the rest you'll get a foreign tax credit for any taxes paid on it. If the US tax is higher than the credit, you'll pay the difference to the IRS. There also an exclusion for foreign housing.

https://www.irs.gov/individuals/inte...come-exclusion

You'll pay tax on investments/interest on a worldwide basis, not just the US. Again, a foreign tax credit may come into play if you paid any.

Adnams

Thank you, that's helped to clarify

Steve_

Basically in the first year you file for a foreign tax credit on 1116 and then after that you claim the foreign earned income tax credit on Form 2555-EZ (or 2555 if you're too wealthy to be posting here). If you have any passive income from abroad you have to use 1116.

That typically reduces your liability to zero. It's just a massive paper chase.

For temporary assignments there are usually temporary exemptions from _payroll_ taxes in the foreign country (not income taxes).

Have a read of IRS publication 54. https://www.irs.gov/pub/irs-pdf/p54.pdf

And far more importantly, the tax treaty between the US and whatever country you're going to.

durham_lad

You may well have to pay taxes in the European country you will be living in on your US investments and interests as many countries levy taxes on one’s worldwide income.

PeterNem

If you work for a large multinational they'll usually have some sort of tax equalization policy to ensure you neither benefit or lose out from a tax perspective when on assignment. Worth reading policies and checking with HR. My company will gross up salary enough to offset additional tax burden when traveling. Conversely if you're resident of a country which doesn't tax worldwide income and travel somewhere that there is no income tax, they'll reduce your salary so that you receive approximately the same net amount that you would in your home location.

Lololita

I was wondering, will Prince Harry have to file FBAR and pay US Tax, or is there a clause that exempts the monarchy?

tom169

Why would he be a US tax resident? Meghan can still married file separately.

Lololita

I think you're right, she can file separately, so he won't need to file.

BigK

Yes, as a US citizen you must file US taxes. The way it works is that you pay the difference in taxes owed. If you pay 20% on your foreign income to that foreign govt, and your effective tax rate in the US that year is 22%, then you will pay Uncle Sam 2%. When it comes to capital gains, its the same concept and even the states get involved in collecting (that's if you still maintain a residence in the state as your primary residence, which shouldn't be the case). So, basically it becomes a paperwork issue as you have to use an accountant etc., but it must be done

Giantaxe

They will also have to be very careful not to commingle assets so as not to have his info appear on FBAR/FACTA. I'm sure there are plenty of high paid tax accountants involved...

durham_lad

Exactly

I'm sure they will be well covered, but who knows, maybe they will sign up here for some free advice. (anonymously of course)