How Much Taxes Must Be Paid On Money Earned While I Worked For Contractor In South Korea

U.South. Contractor Abroad Tax Guide

Who Should Use This Guide?

Whatsoever U.Due south. person who already is, or is considering working as a contractor exterior of the U.Due south.

Why Use This Guide?

Understanding your tax obligations as a contractor is vital earlier accepting a chore offer away. Prophylactic in a conflict zone is priority number 1. However, you lot want to make sure that you are fairly compensated for the risks you are taking and the tax implications are something yous must be enlightened of before taking the job.

How To Use This Guide?

Apply the considerations we discuss below when weighing chore offers. A college bacon as a contractor may non necessarily be ameliorate from a financial position than accepting a lower-paying job as a salaried employee . Read this guide as a tool to aid your chore search and as a reference point to negotiate any potential job offers.

Step 1

Contractor & FEIE

Tin can contractors utilize the Strange Earned Income Exclusion (FEIE) to exclude up to $108K of income?

Yes, contractors tin can certainly qualify for the Strange Earned Income Exclusion (FEIE). Withal, in general, the nature of contractor employment terms does not let using the Bona Fide Residence Exam. Therefore, civilian contractors working abroad are express to the Physical Presence Exam.

You must closely rail your time spent in the U.South. (whether for personal or business reasons) in order to secure the power to exclude upwardly to $108K from taxable income. Depending on your home land, you may besides be able to exclude your earnings at the land level.

Step two

Contractors & FTC

Tin can contractors use the Foreign Housing Exclusion and Strange Tax Credit (FTC)?

That depends on their living arrangements. If the contractor is living on employer-provided premises and does not pay out-of-pocket housing expenses, they do non qualify for the Foreign Housing Exclusion.

The Foreign Tax Credit (FTC) allows U.Due south citizens abroad to utilize any tax paid to a foreign regime towards their U.S. tax obligations. However, contractors almost never pay revenue enhancement in the country of strange employment, thus they do not take the ability to utilize the Foreign Tax Credit (FTC) mechanism to reduce tax on earnings remaining afterwards exclusion of the offset $108K.

You work in a war zone. Exercise y'all authorize for the Foreign Earned Income Exclusion?

Yes. Beginning taxation year 2018, contractors and employees of contractors supporting the U.Southward. Military in designated combat zones may now qualify for the Strange Earned Income Exclusion (FEIE). To claim the Foreign Earned Income Exclusion, you must meet the Bona Fide Residence Test or the Physical Presence Test.

The Bipartisan Budget Act of 2018 changed the tax home requirement for eligible taxpayers, allowing them to merits the Foreign Earned Income Exclusion even if their "dwelling" is in the United States.

Step 3

Practice not ignore your state returns

The biggest, nigh often ignored, and about expensive outcome for contractors is that they must e'er file a State Revenue enhancement Return unless their domicile of record is in a tax-free U.S. state. Noncombatant contractors e'er file as full-twelvemonth residents of the state that is indicated equally their home of record on Form W-2.

Civilian contractors with compensation reported on Form 1099-Misc (independent contractors) are also obligated to file a state return, even if the abode of record is not shown on Form 1099-Misc. Nearly often this is the state where their family (spouse and children) remained. If single, they file a country return with the state where they lived and filed prior to working overseas.

Pace four

Tax Deadlines & Extensions

What are the tax deadlines for contractors? What if I work in a combat zone - practise I get an automatic extension?

Fifty-fifty when working in a war zone, you lot are still field of study to normal tax filing deadlines. If yous are abroad on Apr fifteen, you lot have an automated 2-calendar month extension until June fifteen. Similarly, the FBAR is due Apr 15 with an automatic extension until October 15.

Civilian contractors working in direct support of military machine operations in designated gainsay zones can take reward of a penalty waiver. If qualified, one can obtain an extension of time to pay federal taxes for the menstruum of service in the combat zone, plus 180 days later their last day in the gainsay zone. If you lot have outstanding taxation due (any tax due is owed by Apr 15; involvement accrues from then on) - we tin file for a penalisation waiver to take this removed.

I spent 3 months in the U.Due south. for job-related grooming ahead of my upcoming deployment. Can I still qualify for the Strange Earned Income Exclusion?

You may be able to utilize partial Strange Earned Income Exclusion if you had 12 sequent months overlapping two years where you met the 330 days abroad requirement for the Physical Presence Test. If a consecutive 12-month period cannot be established then yous will not be able to use the Foreign Earned Income Exclusion. Months spent in the U.S. on task-related grooming cannot be included in the selected 12 months period.

If your spouse and children reside in the U.S., you tin still file jointly even though you are working abroad.

You have the right to file jointly (MFJ) or separately (MFS). Even if you lot file separately (MFS) hoping to utilize the Earned Income Credit (EIC), this will not work because the MFS status does non let the utilize of the Earned Income Credit. Your spouse cannot apply the Head of Household condition every bit long as y'all are officially married and not legally separated. Moreover, if your spouse lives in a community property land similar California, half of your income will be counted as her income. For the bulk of taxpayers, the overall family unit economical benefit will be higher if they file jointly.

Footstep vi

Partial FEIE Qualifier

My contract ended early because of a job-related injury. I had to return to the U.Due south. later 10 months away to go handling in a hospital. Tin can I claim partial foreign earned income exclusion based on the qualifying life event?

The minimum fourth dimension requirement tin be waived if you must leave a foreign land because of war, civil unrest, or similar adverse weather condition in that state. Y'all must be able to show that y'all reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. Unfortunately, any other unexpected events including family or health-related issues do not qualify for the fourth dimension requirement waiver.

Source: https://www.taxesforexpats.com/guides/contractors-abroad.html

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