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Question for the Money Doctors

Question submitted on Jun 7, 2013.

Question

I have been offered a multi year contract to work in Montreal for a US company. My payment will come from a firm in NYC. Am I entitled to the 92,000 deduction under this arrangement?

Answer

Foreign earned income relates to where you work versus where the payment comes from.&nbsp 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, including:

  • How to qualify for the foreign earned income exclusion ($97,600 for 2013)
  • Foreign housing exclusion and deduction
  • Foreign moving expenses
  • Foreign tax credit
  • Tax treaty benefits

US citizens are taxed on their worldwide income, regardless of where they live or earn their income.

Included in the income tax filing requirement is Form 8938, Statement of Specified Foreign (non-US) Financial Assets. In addition to the income tax, US citizens may be required to file Form TD 90-22.1 if they own a foreign account worth over $10,000 during the tax year.

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. Visit www.findacpapfs.com to find a CPA/PFS near you


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