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Question for the Money Doctors

Question submitted on Oct 18, 2012.


I am a US citizen that works as a consultant for a Sierra Leonan company. I have spent the entire tax year living in Sierra Leone and pay taxes to the SL government out of my salary. What taxes should I expect to pay on that income in the States if any? What forms will I need? Many thanks


As you may know, the income tax rules for US citizens working outside of the US can get pretty complicated.  The general rule is that US citizens are taxable on all income regardless of where it is generated.  However, to prevent the same income from being taxed twice you may be eligible for a credit against your US taxes for taxes paid in another country.  There is also a "foreign earned income exclusion" and a "foreign housing exclusion" available to some US citizens that work and live abroad; both of these ease the tax pain of living/working abroad for those that are eligible.  Due to the complexity of the issues, you may want to read IRS Publication 54 and determine if you need to consult with a CPA with experience dealing with "ex-pats" such as yourself. 

In addition, if you maintain bank or other financial accounts outside of the US, you should make sure you are complying with the "FBAR" rules, which require the filing of a form (TD F 90-22.1, Report of Foreign Financial Bank Accounts) on an annual basis if the value of the account(s) exceeds a certain threshold during the year.  There may be additional reporting requirements for such foreign accounts depending on the type of account and the value.

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