Generally, you must pay U.S. tax on the income earned abroad in the
same way you pay the tax on income earned in the United States. If you
are an employee, your employer probably withholds income tax from your
pay. If income tax is not withheld or if not enough tax is withheld,
you might have to pay estimated tax.
Withholding tax.
You may be able to have your employer discontinue withholding
income tax from all or a part of your wages. You can do this if you
expect to qualify for the income exclusions under either the bona fide
residence test or the physical presence test. See Publication 54 for
information.
Withholding from pension payments.
U.S. payers of benefits from employer deferred compensation plans
(such as employer pension, annuity, or profit-sharing plans),
individual retirement plans, and commercial annuities generally must
withhold income tax from the payments or distributions. Withholding
will apply unless you choose exemption from withholding. You cannot
choose exemption unless you provide the payer of the benefits with a
residence address in the United States or a U.S. possession or unless
you certify to the payer that you are not a U.S. citizen or resident
alien or someone who left the United States to avoid tax.
For rules that apply to nonperiodic distributions from qualified
employer plans and tax-sheltered annuity plans, get Publication 575,
Pension and Annuity Income.
Estimated tax.
If you are working abroad for a foreign employer, you may have to
pay estimated tax, since not all foreign employers withhold U.S. tax
from your wages.
Your estimated tax is the total of your estimated income tax and
self-employment tax for the year minus your expected withholding for
the year.
When you estimate your gross income, do not include the income that
you expect to exclude. You can subtract from income your estimated
housing deduction in figuring your estimated tax liability. However,
if the actual exclusion or deduction is less than you expected, you
may be subject to a penalty on the underpayment.
Use Form 1040-ES, Estimated Tax for Individuals,
to estimate your tax. The requirements for filing and paying
estimated tax are generally the same as those you would follow if you
were in the United States.
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