0

I have received an offer for a postdoc in Europe. The postdoc gets paid a scholarship that is not taxed in the European country. I will be living in this country 12 months out of the year and will receive full social security benefits from this country. Will I need to pay US taxes?

When I look at the IRS form 2555 (which you fill out to determine if you are eligible for the foreign income tax credit), line 13b states that if you do not pay income tax you are not a bonafide resident and therefore cannot claim the foreign income tax credit.

Also, if I have to pay US taxes, will I be considered self employed? Which I believe would mean that I would also have to pay the employer's contribution to social security.

1

You would not qualify for Foreign Earned Income Exclusion based on Bona Fide Residence Test. That's the Part II on Form 2555. The reason why you don't qualify is that you will not be a Bona Fide resident for at least one full tax year (01/01 -> 12/31).

However, you might qualify for Foreign Earned Income Exclusion based on Physical Presence Test. That's the Part III on Form 2555. Make sure you spend 330 full days in that foreign country.

You will also need to make sure that your tax home is in that foreign country, since that is the second requirement for Foreign Earned Income Exclusion. For that, IRS requires for your assignment to be indefinite (more than a year).

You might want to talk to a tax attorney to make sure your stay in the foreign country will really be considered indefinite, so that you can meet Tax Home Test as well. Ask them if just staying there for a year + one day will help, or your contract with that institution needs to last for a year + one day.

For more info, take a look at IRS Publication 54 > Chapter 4 > Page 12 > Tax Home in Foreign Country.

That's for income taxes, there is another set of rules that determine whether you pay U.S. social security taxes.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.