If a US citizen works in Europe as a consultant, what are the tax consequences? - KamilTaylan.blog
26 June 2022 2:22

If a US citizen works in Europe as a consultant, what are the tax consequences?

If you are working in Europe you will owe income taxes to the country you are living in and to the IRS. Unlike most countries in the world the US citizens pay taxes on income they earn anywhere in the world.

Do U.S. citizen pay taxes working abroad?

Yes, U.S. citizens have to pay taxes on foreign income if they meet the filing thresholds, which are generally equivalent to the standard deduction for your filing status. You may wonder why U.S. citizens pay taxes on income earned abroad. U.S. taxes are based on citizenship, not country of residence.

How can double taxation be avoided on foreign income?

To avoid double taxation of U.S. sourced income, expats must pay U.S. tax and then claim foreign tax credits in the country they live in.

Do I have to pay taxes in two countries?

United States citizens who live abroad can exempt themselves from paying taxes on the income they earn in other countries if they qualify for the Foreign-Earned Income Exemption, allowing them to avoid double taxation.

Do U.S. citizens living in UK pay U.S. taxes?

Because U.S. taxes are based on citizenship, not place of residency, tax rules for U.S. expats state you have a U.S. tax filing obligation no matter when or where you lived or worked in the U.K.

How does the IRS find out about foreign income?

One of the main catalysts for the IRS to learn about foreign income which was not reported, is through FATCA, which is the Foreign Account Tax Compliance Act. In accordance with FATCA, more than 300,000 FFIs (Foreign Financial Institution) in over 110 countries actively report account holder information to the IRS.

How much money can you receive from overseas without paying taxes?

$100,000

You can receive a gift of as much as $100,000 from a foreigner without reporting it, as long as it is not paid out through a trust and it does not get deposited in a foreign bank account owned by you.

How much tax do U.S. citizens living abroad pay?

Foreign persons are generally subject to U.S. withholding tax at a 30% rate on the gross amount of certain income they receive from U.S. sources.

Can IRS come after you in another country?

Yes. Regardless of where you live, the IRS can file a lien against your assets regardless if the assets are located in the US or in a foreign country. Just as long as you own the assets, they are subject to levy.

What happens if I don’t declare foreign income?

If you committed a non-willful violation which was not due to any reasonable cause, you may face a civil penalty of up to $10,000 per violation. If you committed a willful violation, the penalties can rise to $100,000, or 50% of the foreign account balance at the time the each violation occurred.