Thank you for getting back to me. You are entiteld to as many followups as it takes to gain understanding and clarity.
It is still unclear to me what you are asking. Are you a U.S. Citizen or Legal Permanent Resident (which one)?
Let me answser in this way, you let me know if I hit the mark:
1. You are allowed to submit a form W-4 based on the expected gross income and exemptions. which will take into account the income exclusions and exemptions to in effect, have the amount of income withheld that is appropriate for your circumstances. In your case that would be maybe 14 or more exemptions to take advantage of the exclusion. However,
2. Some American Employers overseas of U.S. Citizens, Legal Permanent Residents, or aliens considered permanent residents for tax purposes, will automatically apply the credit to adjuste income and will withhold at that rate or not withhold at all, depending on the persons circumstances. For example: if after the company subtracts the exclusion, the resulting taxable income is less than the personal exemptions and standard deduction, they will withhold zero taxes. If an employee for example were earning 87,600 before taxes, the company would only withhold SS and MC taxes and no income taxes.
3. Everyone is required to make estimated tax payments quarterly. Your employer does this by payroll deduction according to the W-4 form you turn in, or according to the default rate.
4. Since withholding of MC and SS taxes is based on gross income, having income taxes withheld will not change that. Your MC and SS withholding are always on before tax income.
5. Withholding income taxes during each pay period will not change the amount of MC and SS taxes withheld.
6. Withholding periodically, every pay period, is the normal way, but whether you do or not, will not change your final tax liability. Your final tax liability is based on your Year to date gross income as of December 31 of the tax year, adjusted by the foreign earned icome exclusion, further reduced by your standard or itemized deductions, personal exemptions, and any tax credidts you might be eligible for.
So withholding periodically or not at all will not change your tax liability. EXCEPT that:
If you do not have enough withheld, the IRS can assess penalties and interest for underwithholding. Under withholding would represent under payment of quarterly estimated taxes. (even if the reason for the underwithholding was the fault of the employer...the IRS considers that to be your responsibility and if the employer does not withhold you have to technially, make an estimated payment).
You can make about 8600 more than the 87,600 and still not pay any tax. So if you wait the 330 days, you would pay no taxes if your income was about 96,200. So in this situation you can have zero tax withheld.
If you EXPECT to remain in country for 330 days, then you can most likely in your situation not withhold. This would mean you can retain your earnings to use for your own needs instead of giving it to the government.
BUT, If you will not be remaining in country for the 330 days, then you should have with holding to avoid paying in at the end of the year, and to avoid any potential of penalties and interest for under withholding.
You save by waiting the 330 days because your tax liablity is less or zero depending on your total before tax income.
If you do not wait until the 330 days you will have a large tax liablity,and if you did not have withholding, then you may owe penalties and interest.