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DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Years of Experience in Business & Personal Taxes
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What are the tax implications for a US citizen working overseas

Customer Question

What are the tax implications for a US citizen working overseas earning about 10,000US as a consultant? This is for my wife, should I try to get her hired as a regular employee? Does it make a difference?
Submitted: 5 years ago.
Category: Tax
Expert:  DanielleCPA replied 5 years ago.


Hi and welcome to Just Answer! I'm happy to help with your tax questions. Feel free to interject at any time if you need clarification.


Will your wife be working abroad for a foreign or U.S. Company?

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She will be working for a US company.

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I am working internationally as well, but I am working as an employee of an American organization. I should add, that the American company wants to pay my wife as a consultant, she has not set herself up as a Sole Proprietorship, LLC, S-Corp, Corp or Partnership. She is contracted to receive only $10,000US


The tax implications of your wife's consultant job would be two-fold, although they really would not be much different than if she was working as a consultant in the States.

Since you wife would technically be self-employed, her income would need to be reported on Schedule C of your 1040. She would be allowed to deduct any expenses that would be considered ordinary and necessary (office supplies, travel, business cards, etc) to her performing her job from the $10,000 income. You would be taxed only on her net income (revenues less expenses) at your ordinary income rates. You would also be required to pay self-employment tax, currently 13.3%, on her net income. This represents the Social Security and Medicare taxes that would normally be withheld from your wife's paycheck and that her employer would match if she was a regular employee.

Of course, if you or your wife is required to pay tax in the foreign country you are in, you may qualify for a foreign tax credit to offset some of your tax liability. Additionally, if you meet certain requirements you may qualify for the foreign earned income exclusion, which would allow you to exclude up to 91,500 of your foreign earned income. IRS Publication 54 is a great resource on US Citizens working abroad on the tax implications involved.

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