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I am a US Citizen living in Colorado and presently unemployed.

I have been offered a...
I am a US Citizen living in Colorado and presently unemployed. I have been offered a job in Sierra Leone in Africa. I will be working for a UK company on contract for 6 months and they will withhold 30% of my income to pay taxes in Sierra Leone. I will maintain my residence here and return approximatley every 6 weeks for 3 weeks R&R.
Annual Basic Salary $165,000
Annual Location Alllowance $58,928
My wife will remain in Colorado and has a part time job. Her W2 for 2012 was $13,300.
QUESTIONS:
1) Will I have to pay State and Federal Tax?
2) What documentation will I require for my 2013 tax return as I will not get a W2?
3) If I do have to pay US taxes, what progressive (monthly or quarterly) payments be required?
4) Which IRS documents support the responses as I would like to get a copy for my records?
Thank you for your help.
GorXXXXX XXXXX
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Answered in 10 minutes by:
3/27/2013
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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NPVAdvisor :

Hi Gordon, I can help here ...

NPVAdvisor :

First, according to PKF's Sierra Leone Tax Guide the withholding for residents is 30%, but for non- residents it should be 25%

NPVAdvisor :

Two possibilities there (a very restrictive definition of residency) or (Your UK company being conservative) , and of course they could be wrong, but their business is providing tax information for expatriates

NPVAdvisor :

Now, in terms of your US tax, yes US persons ( and you would still be domiciled here as well as a resident, given your intent to return AND the term of the contract) all US citizens must pay tax on their worldwide income: Here's the IRS guidance: http://www.irs.gov/Businesses/Income-from-Abroad-is-Taxable

NPVAdvisor :

There is good news, however.

NPVAdvisor :

There is a tax credit on your US return for taxes paid to a foreign state:

NPVAdvisor :

There is a four point test

NPVAdvisor :

Four tests must be met for the tax to qualify for the credit:



  1. The tax must be a legal and actual foreign tax liability

  2. The tax must be imposed on you

  3. You must have paid or accrued the tax, and

  4. The tax must be an income tax (or a tax in lieu of an income tax)

NPVAdvisor :

Here's the IRS guidance on that: http://www.irs.gov/taxtopics/tc856.html

NPVAdvisor :

In terms of you rstate taxes, this is from Colorado:

NPVAdvisor :

ncome Tax - Living Abroad
Does a Colorado resident who moves out of the country have to continue filing a
Colorado income tax return?
A Colorado resident reporting U.S. federal taxable income must continue to file Colorado
returns as a full-year resident no matter how long he or she is out of the country. Most
such individuals are working on a temporary assignment, and return to Colorado.
Because of this, there is a presumption that people from Colorado working in foreign
countries are still Colorado residents.
All foreign income that is exempt for federal purposes is also exempt for Colorado
purposes.
Individuals who abandon their Colorado domicile and become permanent residents of a
foreign country no longer have to file Colorado returns. However, they would have to file
a Colorado tax return as a nonresident if they had Colorado-source income (e.g., rental
income). Such individuals bear the burden of proving their abandonment of Colorado
residency. Continued Colorado residency will be presumed if the individual has not
severed all Colorado connections; for example, if the individual still carries a Colorado
driver’s license, votes in Colorado by absentee ballot, and/or still owns a home in
Colorado, or returns to Colorado.

NPVAdvisor :

In terms of reporting, Use line 21 on your 1040 to report income that is not reported on any other line.

NPVAdvisor :

In some cases, tax treaties with various countries will provide a method to waive the withholding (such as yours in Sierra Leone) but Sierra Leone does not waive withholding under double taxation treaties with ANY country, so you'll have to get relief there from the credit for taxes paid to a foreign country, mentioned above.

NPVAdvisor :

THis should give you everything you need

NPVAdvisor :

Questions?

Customer:

Thank you for the very prompt response. I would like to review your answers and check the links and may then have some questions.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Verified
Lane and 87 other Tax Specialists are ready to help you
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Lane
Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 12,878
12,878 Satisfied Customers
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986

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