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Global Work Glossary

What is IRS Form 673 and its significance?

IRS Form 673, the "Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911," allows US citizens working abroad for a US employer to request an exemption from US income tax withholding.

Do I Qualify for Form 673?

To qualify for Form 673, you must meet the criteria for the IRS's foreign earned income exclusion (FEIE) or foreign housing exclusion. This includes having foreign earned income, a tax home in a foreign country, and meeting residency requirements.

How Does Form 673 Work?

Form 673 is completed by the taxpayer and submitted to their employer. It allows the employer to withhold less or no US income tax from the taxpayer's paycheck while they're working abroad.

How to Fill Out and Submit Form 673

The form requires basic information, including the taxpayer's name and social security number. It also includes sections for indicating residency status, estimating foreign housing expenses, and certifying the accuracy of the form.

Frequency of Filing

Form 673 must be filled out for each tax year spent overseas.

Other Forms and Responsibilities for US Expats

US expats may have additional forms and responsibilities, including filing US federal and state tax returns, completing Form 2555 for the FEIE, submitting FATCA Form 8938, Form 1116 for foreign tax credit, and FinCEN Form 114 or FBAR for foreign financial accounts.

Penalties and Consequences

Failure to file Form 673 may result in double taxation, as the employer will continue to withhold US taxes from the taxpayer's paycheck. Incorrectly filing Form 673 may also lead to tax withholding issues and potential tax liabilities. Understanding and correctly filing Form 673 is essential for US citizens working abroad to ensure compliance with US tax laws and maximize tax benefits.

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