Discussion:Foreign Tax Question...
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| 23 July 2008 | |
| Issue
Client worked abroad for US company. Company hired client as employee, but sent 1099 at end of year. Client had no work visa in foreign country, but is receiving one this year. Consequently, client has paid no foreign taxes to foreign country. Client would qualify for foreign earned income exclusion based on , but since he hasn't paid taxes to the foreign country, I don't think he can (based not on firm knowledge, but thinking of something I read/heard long ago that you must pay taxes SOMEWHERE)- I can't find anything to support this. However, client is meeting with accountant in foreign country regarding his tax responsibility to that country. My questions: -If client does pay foreign taxes for last year, then he would be able to claim foreign earned income exclusion? -Secondly, since the company was a US company, he will still have to pay SE tax because the income was considered 1099 income and not salary income? The reason I ask this is because in the past, I had a client who had foreign income that normally would be subject to SE tax, but the company was foreign as well. Thank you for your responses, and if you need more info, let me know! | |
Death&Taxes (talk|edits) said: | 23 July 2008 |
| Can he meet the physical presence test? That test does not depend on whether or not he pays foreign taxes.
I believe you are correct about the SE tax. | |
| 23 July 2008 | |
| He will qualify for 183 days, which reduces his taxable income to nothing because he has rental losses to offset the rest.
D&T, is the language re: the physical presence test and not paying foreign taxes in a publication somewhere? I would like to have it handy. Thanks so much! I think I will sign up for that Foreign income online class after all... | |
Death&Taxes (talk|edits) said: | 23 July 2008 |
| Try Publication 54 | |
Death&Taxes (talk|edits) said: | 23 July 2008 |
| If I recall, the 2555 only asks the question about being responsible for foreign taxes in regard to the Bona Fide Resident qualification. | |
| 24 July 2008 | |
| To claim the exclusion he needs a foreign tax home. You'll need to decide if he has one at all (sounds like he has).
From an SET perspective the answer will depend on which country because a totalization agreement may help. | |
