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I was curious about a hypothetical situation. Let's say I'm a US citizen, who lives abroad, and works remotely for a company based in the US. Would I qualify for the $100k Foreign Earned Income Exclusion tax credit? If I made 100k or less in a tax year, does that effectively mean I owe nothing to the US for that year?

Also, is there a difference of whether I am paid via direct deposit into my US bank account, or via wire transfers into my foreign account?

(For the sake of example, let's say I am an official resident of a state without income taxes)

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  • What exactly confuses you here?
    – littleadv
    Commented Dec 19, 2015 at 22:41
  • @littleadv My question. "Would I qualify for the $100k Foreign Earned Income Exclusion tax credit?"
    – Ruslan
    Commented Dec 19, 2015 at 23:05
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    I'm trying to understand why you're asking. Clearly you already know the answer. What exactly triggered you posting this question?
    – littleadv
    Commented Dec 19, 2015 at 23:07
  • @littleadv I don't know the answer... I know that the 100k foreign exemption applies if you have no ties to the US other than being a citizen (meaning you live abroad and work for a company located abroad). My question was whether it can apply if you live abroad BUT work for a US-based company, and get paid by them from the US...
    – Ruslan
    Commented Dec 19, 2015 at 23:23
  • @littleadv For example, if I live in NJ but work in NY, I need to pay taxes for both states. However, I understand that this is state tax law and has nothing to do with federal/international tax law, but my question still remains (because I have NO idea how these tax laws work). If I live in Germany (/Australia/Philippines/etc) but tele-commute to a company physically located in Nevada, and receive a W2 paycheck from them, do I still pay US federal income taxes on income if I made below $100k and don't actually live in the US?
    – Ruslan
    Commented Dec 19, 2015 at 23:31

3 Answers 3

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There's no difference how you're getting paid or how you're being taxed (if at all) where you live.

There's no difference where your employer is either.

If you live in a foreign country and qualify for the FEIE - you can exclude your foreign earned income, up to the limit. The requirements for qualification are summarized by the IRS here.

In your question it is evident that you already know that and since you refuse to state what exactly confused you, I don't know if this answer will help you. But, here it is.

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    On the very link you provided, one of the requirements is "you must have foreign earned income". I do not understand if me earning income ABROAD, from a DOMESTIC corporation, qualifies as foreign earned income or not. Hence, I do not understand if I would qualify for FEIE in that circumstance or not. I really do not see how my question could be so difficult to comprehend and how I can word it any simpler. I have no familiarity with legal, accounting, or financial terms, and I do not know what is and isn't "foreign earned income" when the company is internet based and telecommuting is involved.
    – Ruslan
    Commented Dec 20, 2015 at 1:20
  • The income would be physically earned abroad. Whether that is the case legally or not, I have no clue, since the company is based in the US and is paying from the US. Hence my question on this site. Sorry we are not all tax lawyers here and some of our stupidity levels approach "troll" proportions.
    – Ruslan
    Commented Dec 20, 2015 at 1:24
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    Income is sourced to where it is earned.
    – littleadv
    Commented Dec 20, 2015 at 10:42
  • To clarify what littleadv is saying, see the section "Source of Earned Income" here: irs.gov/publications/p54/ch04.html
    – Eric
    Commented Dec 21, 2015 at 14:33
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In short, yes as of 2020, your US company paying you to your US bank account is foreign earned income if you work from a foreign residence. The source is where you are working from.

Your income and residence have to qualify as foreign. So you have to be outside of the US more than 350 days, or a legal resident of another country. And your work must not be physically in the US.

Expect this to change soon with all the remote work happening now.

Per the IRS 2020:

The source of your earned income is the place where you perform the services for which you received the income. Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income. For example, income you receive for work done in France is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is in New York City.

Foreign Earned Income Exclusion (FEIE) https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion

What is Foreign Earned Income? https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-what-is-foreign-earned-income

Obviously, ask your lawyer and read the law. Not financial advice.

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From what I understand from the IRS 2020:

The source of your earned income is the place where you perform the services for which you received the income. Foreign earned income is income you receive for performing personal services in a foreign country. Where or how you are paid has no effect on the source of the income. For example, income you receive for work done in France is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is in New York City.

There could be gray area here. Hypothetical scenario... If you work remotely for a company in the USA while living overseas AND you are managing foreign workers.... I would consider that valid income for the FEIE. Even if you are performing work that is for the company in the USA, managing a foreign locals while abroad could be considered foreign work. Thoughts?

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