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    3 Replies Latest reply on Feb 15, 2008 1:52 PM by Lighthouse24

    Do I Need to Deduct Taxes From My Overseas Employee

    tundeyoung Newbie
      I run an online radio station and have employees in foreign countries working for my C corporation as reporters and markers.
      These employees and natives of their respective companies.

      My worry then is do I need to take income taxes from their wages? If how do I capture their wages in my account reporting.
        • Re: Do I Need to Deduct Taxes From My Overseas Employee
          LUCKIEST Guide
          U.S. citizens are taxed on their worldwide income. Some taxpayers may qualify
          for the foreign earned income exclusion, foreign housing exclusion, or foreign
          housing deduction, if their tax home is in a foreign country and they are
          either a bona fide resident of a foreign country or countries for an uninterrupted
          period that includes an entire tax year, or are physically present in a foreign
          country or countries for at least 330 full days during any period of 12 consecutive
          months. If the taxpayer is temporarily away from his or her tax home in the
          United States on business (less than a year), he or she may be able to claim
          a foreign tax credit (if required to pay qualifying foreign tax on income
          earned in a foreign country), but would not qualify for the foreign earned
          income exclusion. The taxpayer may also qualify to deduct away from home expenses
          (for travel, meals, and lodging), but not against excluded income.

          LUCKIEST
          • Re: Do I Need to Deduct Taxes From My Overseas Employee
            LUCKIEST Guide
            U.S. citizens are taxed on their worldwide income. Some taxpayers may qualify
            for the foreign earned income exclusion, foreign housing exclusion, or foreign
            housing deduction, if their tax home is in a foreign country and they are
            either a bona fide resident of a foreign country or countries for an uninterrupted
            period that includes an entire tax year, or are physically present in a foreign
            country or countries for at least 330 full days during any period of 12 consecutive
            months. If the taxpayer is temporarily away from his or her tax home in the
            United States on business (less than a year), he or she may be able to claim
            a foreign tax credit (if required to pay qualifying foreign tax on income
            earned in a foreign country), but would not qualify for the foreign earned
            income exclusion. The taxpayer may also qualify to deduct away from home expenses
            (for travel, meals, and lodging), but not against excluded income.

            LUCKIEST
            • Re: Do I Need to Deduct Taxes From My Overseas Employee
              Lighthouse24 Ranger

              The answer to your question is "yes, except . . ." -- unfortunately, the "except" part is lengthy, complex, and beyond my expertise. In general, you're expected to withhold income, social security, and medicare taxes for non-resident alien employees (but not federal unemployment taxes). However, the U.S. has individual treaties with more than 80 countries that define the exceptions, exemptions, and limitations on this. You can see IRS Publication 15 for the basic guideline and explanations, but I'd seek out a tax professional to get definitive rulings -- and I'd also inquire about changing the status of these individuals from "employees" to "independent contractors." Hope this helps a little, at least. Best wishes.