How much will I be taxed on top of the foreign taxes I have already paid?

March 3, 2009 11:27 AM

What, if any, is my tax liability in the States as a U.S. Citizen working in the U.S. for a foreign company that taxes my earning 10% in their home country before sending payment?
posted by anniek to Work & Money (6 answers total)

Best answer: You'll want to read IRS Publication 514, Foreign Tax Credit for Individuals. I recommend speaking with a tax professional that has handled these kinds of issues (e.g. probably not an H&R Block or Jackson Hewitt preparer).

Note that I've linked to the 2007 version of Pub. 514. I couldn't find a 2008 edition on the IRS site, but you may want to call the IRS and verify that the 2007 version is the most recent version.
posted by jedicus at 11:47 AM on March 3, 2009

IIRC from law school, if you are a US citizen you owe US federal income tax REGARDLESS of where the income is earned. So, your tax liability is probably unchanged notwithstanding the 10%, that is, you probably owe federal income taxes on the gross amount. I heartily second Jedicus' opinion that you ask a qualified professional. I only know enough to know there is a problem.
posted by bunnycup at 1:02 PM on March 3, 2009

Is this an actual tax you're paying, or some other sort of withholding? Where's your parent company based?
posted by Grrlscout at 1:38 PM on March 3, 2009

if you are a US citizen you owe US federal income tax REGARDLESS of where the income is earned

While technically true, the amount of income tax can change depending on a whole lot of things. The foreign tax paid may be something you can use as a (presumably nonrefundable) credit against your U.S. tax liability.
posted by oaf at 3:25 PM on March 3, 2009

Oaf: Yes, absolutely. Let me append to my answer that I am only endeavoring to answer the "if any" part of the question, not the "how much".
posted by bunnycup at 4:28 PM on March 3, 2009

Response by poster: The company is in Poland, and I believe that they are actual taxes that I have to pay. It's a transactional thing over there. It's less because I'm a U.S. resident, but I can't get them back, believe me, I tried.

I'm pretty sure that I can deduct the 10% (thanks jedicus) that they took out as long as Poland is not on some list for sponsoring terrorists.
posted by anniek at 6:12 PM on March 3, 2009