Abroad Taxes

U.S. Citizens and Greencard Holders

You might have tax obligations in the country you visit. Generally, most countries have a 183-day residency rule that determines whether a person establishes residency in that country. If you establish residency, you are being taxed on your world-wide income in that country. You will need to contact the equivalent of the Internal Revenue Service in your host country to find out what the rules are.

If there are tax obligations, U.S. tax treaties with many foreign countries entitle U.S. residents to certain credits, deductions, exemptions, and reduced foreign tax rates. This might lead to a lower tax burden or even avoid double-taxation.  See Publication 901 for more details.

Most countries have equivalents to Social Security taxes which have to be paid if you are taxed in that country. There are a few exceptions for countries with a so-called Totalization Agreement. See here for a list of countries. Generally (except for Italy) the rules of the Totalization agreements are as follows: if still working for a U.S. employer and being sent abroad for less than 5 years, Social Security is being withheld in the U.S., if staying longer than 5 years, Social Security is being withheld in the visiting country. If you are hired in the country by an institution / company in the country, Social Security and other benefit payments like Unemployment and Disability Insurance etc. are withheld in the country.

Note: Foreign Taxation while Abroad is a very complex topic with different rules and regulation for each country. Only accountants or lawyers specialized in the employment rules of each country can give you appropriate advice.

All Others

If you are resident alien for tax purposes, all above applies to you for the tax year in which you are in that status. Contact the Tax Office for verification of your tax status.

If you are a non-resident alien for tax purposes in the U.S., you can become a tax resident of the visiting country under the same rules as above.  You will not be liable for taxes in the U.S. for any income earned in the host country. However, when it is time to do your tax return, you might want to look into whether there are tax treaties between the host country and your home country. Contact the Tax Office for verification of your tax status in the U.S.

U.S. Taxes

U.S. Citizens

Paid by a U.S. employer:
If you are abroad for less than 330 days, Federal and State Income Taxes as well as Social Security and Medicare taxes will be withheld from your paycheck as usual.  You can deduct Business Travel Expenses and moving expenses from your taxes however when filing your tax returns. There is no need to contact Payroll or Human Resources.

If you are abroad for more than 330 days, you can fill out Form 673 (see instructions below), which you can submit to Human Resources. This will result in Federal and State Income Taxes not being withheld for that period of time. When it is time to submit your federal tax return, you will need to submit an additional form (Form 2555) with your tax return in order to get the tax benefit on your tax return as well.

Social Security and Medicare payments have to continue to be paid. There are a few exceptions for countries with a so-called Totalization Agreement. See here for a list of countries. Generally (except for Italy) the rules of the Totalization agreements are as follows: if still working for a U.S. employer and being sent abroad for less than 5 years, Social Security is being withheld in the U.S., if staying longer than 5 years, Social Security is being withheld in the visiting country. If you are hired in the host country by an institution / company of the host country, Social Security and other benefit payments like Unemployment and Disability Insurance etc. are withheld in the host country.

Paid Abroad:
U.S. Citizens are taxed on their worldwide income. Thus, you will have to report all income received in the U.S. AND abroad and will have to file Federal and if applicable State tax returns every year with the IRS and the appropriate State(s) by April 15th.  You can however claim for Foreign Earned Income Exclusion when you file your U.S. Tax return.

For more detailed information see the following IRS publications and forms: 
IRS Article, Tax Tips for Taxpayers with Foreign Income 
IRS Article, U.S. Citizens and Resident Aliens Abroad - Filing Requirements
IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad
IRS Article, U.S. Citizens and Resident Aliens Abroad - Head of Household
IRS Publication 593, Tax Highlights for U.S. Citizens and Residents Going Abroad
IRS Article, Five Facts about the Foreign Earned Income Exclusion
IRS Article, Foreign Earned Income Exclusion - Which Form to File
IRS Article, Foreign Tax Credit
IRS Publication 514, Foreign Tax Credits for Individuals
IRS Publication 901, U.S. Tax Treaties
IRS Publication 521, Moving Expenses
IRS Article, Business Travel Expenses
IRS Article, Guidance on Expatriation and Expatriation Tax - only applies after several years abroad

Green Card Holders

Paid by a U.S. employer:
For tax purposes you are treated just like a U.S. Citizen. See above for more information. The only difference is the way to claim exemption from Federal and State taxes. You cannot use Form 673. Instead you can fill out a Form W-4 as "Exempt", which you can submit to the Human Resources Office. This will result in Federal and State Income Taxes not being withheld for that period of time. In addition, you need to fill out a second Form W-4 stating what withholding you want after your return, sign it and date it with the date of your return.

Paid Abroad:
See information for U.S. citizens.

Non-Resident and Resident Aliens for Tax Purposes

Resident Aliens for Tax Purposes:
If you are a resident alien for tax purposes, see above. You are treated like a Green Card holder for tax purposes for that calendar year. Contact the Tax Office to find out whether you will still be a resident alien the following year or whether you will revert back to a non-resident alien for tax purposes.

Non-Resident Aliens for Tax Purposes:
For non-resident aliens all income received while outside the U.S. is considered "foreign source" income. Thus, this foreign source income is neither reported to the IRS nor are any taxes withheld.  This applies to all types of income such as income from employment, self-employment, fellowship, scholarship, grants, prizes, royalties, etc.  And it applies to income paid by a U.S. corporation or a foreign corporation.  Inform the Tax Office of your departure to ensure that you will not taxed on any payments from Middlebury College or the Monterey Institute while abroad.

Note: If you received any payments while still in the U.S., you will have to file a tax return by April 15th. If you were in the U.S. on a F, J, M, or Q visa, even if you did not receive any payments, you will have to file Form 8843 by June 15th.

Instructions for Form 673

  1. Go online to Form 673, Statement for Claiming Exemption from Withholding Foreign Earned Income.
  2. Enter your name (first and last) and your social security number.
  3. On the next line in Part I enter the dates from when to when you will be abroad.
  4. If you will be gone for an entire year (365 days or more) and you are a U.S. Citizen, check the Bona Fide Residence Test.
  5. If you will come back in between, but all together will still be 330 days away from the U.S., check the Physical Presence Test.
  6. For either test, enter the country you will be in and the dates from when to when you will be there.
  7. You do not have to fill out Part II. See instructions on the second page of the form, if you want to fill out Part II.
  8. Print out the form.
  9. If you are not a U.S. citizen, scratch out the word U.S. citizen, and instead write either greencard holder, or if you are not a greencard holder, the country of your last tax residency before you came to the U.S. Tax residence country is usually the country you lived in last for at least 365 days.
  10. Sign and date the form and send it via interoffice or bring it to Human Resources, Service Building, 2nd floor.