As a US Permanent Resident working for a US company, I'd like to work remotely in my home country Malaysia during the pandemic. Is there any tax implication?

[Opus 17 · Accepted solution]

If you are a US citizen or a permanent resident with a green card, then you are required to file a US tax return and pay US income tax on all your worldwide income, no matter where you actually live.  If you also pay income tax in the country where you are living, there are at least two provisions I know of that reduce the burden of double taxation.  You can claim a deduction or credit on your US tax return for any foreign income taxes that you paid on the same income.  If you are overseas at least 330 days of the tax year, you can claim a foreign earned income exclusion. This excludes your foreign earned income from US taxation, but it does not exclude unearned income such as interest, dividends, and capital gains.  But no matter which tax provisions apply, you would be required to file a return and pay whatever taxes are owed unless you renounce your permanent residency.

Other matters include the following:

TurboTax is technically not licensed for use overseas. I don’t think you can file using TurboTax online.  You may be able to file using TurboTax if you buy the CD and install it on your own computer, but you may have to have someone in the US mail you the CD, because Amazon and other retailers may not be allowed to ship overseas.

Also, if you are owed a US tax refund, the IRS will only do direct deposit into a US bank account, or they will mail you a check, but the international mails are not always reliable. You may want to keep a US bank account open in your name to make tax payments and receive your refund by direct deposit.  You can also check with the local US Consulate to see if they know of any local banks that will deposit a US check and convert it to local funds.  

[Anonymous]

Thanks @Opus 17 ! I am planning to pay US income taxes normally. It sounds like there is NO tax implication if it's less than 330 days, and I plan to pay the full US income taxes, keep my house and banks?

[Opus 17]

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@Anonymous wrote:

Thanks @Opus 17 ! I am planning to pay US income taxes normally. It sounds like there is NO tax implication if it's less than 330 days, and I plan to pay the full US income taxes, keep my house and banks?

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There are no US tax implications, you pay US tax as usual.  You may also owe Malayasia income tax, and if you do, you will need to include an extra form on your US tax return to claim the credit.  (Turbotax will do this automatically.)

Now, you could still owe more tax than if you worked in the US, if Malaysian tax rates are higher. For example, suppose the Malaysian tax on the income you earn while in that country is $5,000, and the US income tax on the same earnings is $4,000.  You pay $5000 to Malaysia and the US taxes you $4000 but gives you a $4000 credit (the maximum credit is what the US tax would have been for that money) so your effective income tax rate is whichever country is the highest.

And unfortunately, you probably also will continue to owe state income tax, if you maintain your residence there and your move to Malaysia is temporary.

You will be required to declare to the IRS any foreign bank accounts you own that are worth more than $10,000 (US) using the online FBAR form, but no tax is owed, it's just a report.  And if you move more than $10,000 (US) between banks, the banks will be required to file a report.  Again, no tax is owed, but if you are moving money around and decide to move $5,000 x 4 transactions instead of $20,000 all at once, that can sometimes be considered a crime called "Structuring" to avoid the $10,000 reporting rule.  

That's all I can think of. 

[Anonymous]

Thank you so much for your explanation and the example really helped. It is very much appreciated!