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IRS.gov Website
Publication 54
taxmap/pubs/p54-005.htm#en_us_publink100047370

Chapter 2
Withholding Tax(p8)


taxmap/pubs/p54-005.htm#TXMP534dc196

Useful items

You may want to see:


Publication
 505 Tax Withholding and Estimated Tax
Form (and Instructions)
 673: Statement For Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion Provided by Section 911
 W-4: Employee's Withholding Allowance Certificate
 W-9: Request for Taxpayer Identification Number and Certification
See chapter 7 for information about getting this publication and these forms.
taxmap/pubs/p54-005.htm#en_us_publink100047371

Income Tax Withholding(p8)

rule
U.S. employers generally must withhold U.S. income tax from the pay of U.S. citizens working abroad unless the employer is required by foreign law to withhold foreign income tax.
taxmap/pubs/p54-005.htm#en_us_publink100047372

Foreign earned income exclusion.(p8)

rule
Your employer does not have to withhold U.S. income taxes from wages you earn abroad if it is reasonable to believe that you will exclude them from income under the foreign earned income exclusion or the foreign housing exclusion.
Your employer should withhold taxes from any wages you earn for working in the United States.
taxmap/pubs/p54-005.htm#en_us_publink100047373
Statement.(p8)
You can give a statement to your employer indicating that you expect to qualify for the foreign earned income exclusion under either the bona fide residence test or the physical presence test and indicating your estimated housing cost exclusion.
Form 673 is an acceptable statement. You can use Form 673 only if you are a U.S. citizen. You do not have to use the form. You can prepare your own statement. See a copy of Form 673, later. taxmap/pubs/p54-005.htm#en_us_publink1000264598
Generally, your employer can stop the withholding once you submit the statement that includes a declaration that the statement is made under penalties of perjury. However, if your employer has reason to believe that you will not qualify for either the foreign earned income or the foreign housing exclusion, your employer must continue to withhold.
In determining whether your foreign earned income is more than the limit on either the foreign earned income exclusion or the foreign housing exclusion, if your employer has any information about pay you received from any other source outside the United States, your employer must take that information into account.
taxmap/pubs/p54-005.htm#en_us_publink100047375

Foreign tax credit.(p8)

rule
If you plan to take a foreign tax credit, you may be eligible for additional withholding allowances on Form W-4. You can take these additional withholding allowances only for foreign tax credits attributable to taxable salary or wage income.
taxmap/pubs/p54-005.htm#en_us_publink100047376

Withholding from pension payments.(p8)

rule
U.S. payers of benefits from employer-deferred compensation plans, individual retirement plans, and commercial annuities generally must withhold income tax from payments delivered outside of the United States. You can choose exemption from withholding if you:
taxmap/pubs/p54-005.htm#en_us_publink100047377

Check your withholding.(p8)

rule
Before you report U.S. income tax withholding on your tax return, you should carefully review all information documents, such as Form W-2, Wage and Tax Statement, and the Form 1099 information returns. Compare other records, such as final pay records or bank statements, with Form W-2 or Form 1099 to verify the withholding on these forms. Check your U.S. income tax withholding even if you pay someone else to prepare your tax return. You may be assessed penalties and interest if you claim more than your correct amount of withholding allowances.