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I'm in the US on an H1B visa (I'm a citizen of Serbia) and plan on leaving the US for the next 6 months (maybe longer).

If I stay in Serbia during that time, work for a UK company (that doesn't take any taxes out) and I receive payments to my US bank account...to whom do I owe taxes? Can somebody help me understand what are my options?

I should mention that I've been in the US for last 2.5/3 years so I should satisfy the substantial presence test. Does that mean I'm taxed in US (at least for the 2020) no matter what?

I'm really confused with what to do here and will talk to a tax professional but any advice would be much appreciated, I want to get information from as many sources as possible.

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  • You would likely have to file taxes in the US and in Serbia, although there might be tax treaties that prevent double taxation. But this kind of stuff is complicated, and talking to a professional who has experience with this kind of cross-border case can save you a lot of money.
    – amon
    Jul 3, 2020 at 6:30

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First, where the bank account that your salary goes into is doesn't matter. Even if your salary went to a foreign bank account, if the income is taxable, you are responsible for filing US tax returns and paying US taxes on it as appropriate. And conversely, if the salary went to a US bank account, but the income is not taxable in the US, then you don't pay US taxes on it -- you would just have money in a bank in the US, and you can transfer money between your bank accounts in different countries without tax.

Generally, if you are a resident of the US for tax purposes, your foreign income would be subject to US tax, but if you are a nonresident alien of the US for tax purposes, your foreign income would not be subject to US tax.

I should mention that I've been in the US for last 2.5/3 years so I should satisfy the substantial presence test. Does that mean I'm taxed in US (at least for the 2020) no matter what?

Not necessarily. If you were in the US less than 183 days in 2020, but pass the Substantial Presence Test anyway due to days from previous years, you could choose to be treated as a nonresident for 2020 if you can claim Closer Connection to a Foreign Country.

Or, if you will be nonresident for 2021, you can use the Last Year of Residency rule to choose your residence termination date to be the last day you are in the US in 2020.

Alternately, if you will be considered a resident alien during this time, your foreign income will be subject to US tax, but you can use the Foreign Earned Income Exclusion and/or the Foreign Tax Credit. You qualify for the FEIE in a 12-month period in which you are outside the US for 330 days (e.g. the 12 months starting from when you leave the US); and it would allow you to exclude the first about $105k of foreign earned income from US tax.

For amounts that you cannot exclude with FEIE, you can use the Foreign Tax Credit, which allows you (as a tax resident of the US) to take a tax credit for income that is taxed by both countries, and the amount of the credit (i.e. the amount your tax is reduced by) is the minimum of the tax you paid for that income in the US and the tax you paid for the same income in the foreign country. The net result is you pay whichever is higher of the two taxes.

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