What are the rules for taxing employees who work abroad?
When it comes to taxation, employees who work abroad have specific rules that apply to them under international tax law in Washington State. Generally, income earned from employment abroad is subject to U.S. federal income tax. This includes wages, salaries, tips, professional fees, and bonuses. Employees may also need to file state income tax in Washington based on the amount earned in a foreign country. If an employee works in a foreign country and earns income that is not considered taxable in the U.S., they may be able to claim a foreign tax credit on their federal return. This credit can be used to reduce or eliminate any U.S. taxes owed on the amount earned in the foreign country. If an employee works abroad for more than a year and spends at least 330 full days in a foreign country outside the U.S., they may qualify for the Foreign Earned Income Exclusion. This exclusion can help make up to $104,100 of foreign earned income exclusion from U.S. federal income tax. In addition to taxation, employee benefits, like paid time off, health insurance, and social security, may also be subject to taxation in both the U.S. as well as in other countries. It is important for employees working abroad to study international tax law carefully in order to understand their respective tax liabilities.
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