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Question for the Money Doctors

Question submitted on Sep 19, 2012.

Question

I am an American and I have been working in Kurdistan for the past year and by the time this year ends it will be a year and a half. I have a Kurdish Foreign Resident I.D, my question is this. The company that signs my checks is an American Company in Houston,Tx, but the company I am contracted to work for in Kurdistan is a Canadian company. My company takes taxes out of my paycheck like normal. AM I allowed to be exempt from paying taxes and if so do I get the taxes i paid back when I file?

Answer

Generally, as a U.S. citizen, your worldwide income is subject to U.S. income taxation, regardless of where you are living.

IRS Publication 54 is always a good reference tool for US citizens working abroad.  The publication discusses special tax rules for U.S. citizens who work abroad or who have income earned in foreign countries.

IRS Publication 54 discusses several tax provisions that mitigate your double taxation concern, such as:

  • Foreign earned income exclusion
  • Foreign housing exclusion and deduction
  • Foreign moving expenses
  • Foreign taxes
  • Tax treaty benefits

That being said, please note that the income tax rules applicable to expatriates are very complex and that you would be well served by contacting a CPA/PFS who will be able to help you analyze the tax rules and whether or not you are eligible for treaty benefits.  Please visit www.findacpapfs.com to find a CPA/PFS in your area. 


For additional information visit http://www.360financialliteracy.org/