Overseas Contractors and Employees

Kadillac Enterprises has experience with the tax situation of overseas contractors and employees that are working in Europe, the Middle East, Africa, and abroad.

Whether your overseas job is a military contractor or an employee of an international company, there are definite tax benefits not usually available to the average taxpayer. There are exclusions and allowances that apply only to the person and/or business that operates overseas. We have in depth knowledge and understanding of these tax codes that can greatly reduce your tax liability.

Another option for the overseas workers is the Foreign Income Exclusion. For the 2019 tax year this allows the first $105,900 of income to be exempt from Federal taxes if you are out of the United States and it’s territories for 330 days during a 12 month period. It can be any consecutive 12 months ending in the tax year you are filing for. Here is how it works:

If you are a W2 employee:
Only the Federal income tax is reduced/eliminated. You still pay the social security and medicare. On 100k that’s still 10-15 grand. As of 2018 unreimbursed employee expenses have been removed as a deduction so you have no extras. You must use the Form 2555.

If you are a 1099 independent contractor filing as a sole proprietor:
You still have to claim 100k for income to get the full deduction. Only the Federal income tax is reduced/eliminated. You still pay the 15.3% self employment tax. On 100k that’s still 15 grand in taxes.
Again, you must use the Form 2555.

It is not always the best route to take so check with your tax professional before using the Form 2555.

For more assistance please go to our contact page.