My question is regarding foreign tax exemption form 673. I am curious how qualification is met if all money earned is earned overseas but the candidate only lived in a foreign residence 320days instea

[42d_XS]

no more to add

[LeonardS · Accepted solution]

An employee gives Form 637 to their U.S. employer to claim an exemption from U.S. income tax withholding on wages earned abroad.   The employer is not part of the qualifying process.  They are only following the employee's request not to withhold taxes on the employe's wages.

When the employee gives Form 637 to their employer they are anticipating that they will meet either the physical presence test or bonified presence residence test to qualify for the Foreign Earned Income Exclusion FEIE. It is up to the employee to meet the requirements to claim the FEIE.

Based on the information in your question the employee would not qualify for the FEIE as they only had 320 qualifying days.  Therefore, all of the employee's wages would subject to income tax.

[42d_XS]

LeonardS,

So I found out, the 673 doesn't work on a fixed tax year. It works within a years time depending upon when you leave the country. So, the 330day requirement is from the start of work overseas. So, it makes sense that if you left the country in December, there's no way you could meet that 330 days in that tax year.

[nchelsee]

Hello 

I am very new to Contracting, I've been overseas since April 1st. I will be paying taxes in the country I will be working in. I would like to file exempt For united states taxes, so my question is am I eligible for form 673 and to be exempt from united state taxes? and if yes, what portions do i fill out.

I really do not want to end up owing the united states. Please help. i have no idea and i am very new to contracting. thank you so much

[DaveF1006]

A 673 is a form that you would file with your US employer to claim an exemption for US tax withholding if you expect to pay foreign taxes in the country where you are now working. If you are a self-employed contractor, you would not file a 673.

If the country where you are working has a tax treaty with the US, you may claim a foreign tax credit for the amount you paid to the country where you are now working. Please review this IRS link for more information regarding the Foreign Tax Credit.

[nchelsee]

I am a contractor with a company, and i have been out of the US since March 30th. Do i need to be in the other country for 335 - 365 days out of a complete year (JAN-DEC), in order to file exemption in the US and fill out the form 673?  Or it doesn't matter how many days out of the year i work in the other country,?

[DaveF1006]

Yes, you would need to be in the foreign country for at least 330 days during the 2020 tax year to qualify for the Foreign Earned Income Exclusion.. Please read this link for more information.

You would qualify for the foreign tax credit though as this does not have residency requirements. 

[nchelsee]

You're AWESOME. Thank You.

[CMR2021]

Can you refuse to sign a form 673 form. I want me employer you take taxes out because as a contractor you never know when you could be sent home and not make the amount of days required to earn the exemption. Been down that road and was a huge tax bill at the end of the year 

[MarilynG1]

You should be able to have your employer take out US tax if you desire.

You may end up being double-taxed, though, if you pay pay in the foreign country as well.

If so, be sure to file for the Foreign Tax Credit.