# International organization taxes as US citizen



## mdb111 (Feb 18, 2020)

Hello,

I recently received a job offer and wanted to cross-check my understanding on the tax implications while I think about it (I will get formal advisory later).

The job is with an international organization that pays salary on a net-of-tax basis with employees exempt from national income tax, except for US citizens. Unlike some other well known international orgs that gross up US citizens for tax, this one does not. Thus, I will get paid the same net-of-tax salary and be on the hook for US tax. 

I expect to qualify for the FEIE and file as single with no dependents.

Questions:
1. To calculate AGI, would I simply take my total income from the job over the year (ie, no adjustments needed for it being classified as "net of tax" salary by the org)?

2. There is a retirement account that I must contribute in and they provide a company match. Since this isn't a qualified plan (I assume, how can I validate this?), is it correct that I would need to count both my contributions and company contributions as part of AGI? If so, what happens after I return to the US and I transfer the funds onshore to a US account?

3. Is it correct that since I am employed by an organization rather than self employed, I will not be liable for self-employment tax even if the organization doesn't issue a W2?

4. If I don't pay more than ~$17k in rent over the year, there is no benefit to the foreign housing exclusion, correct? Only on marginal amounts above that?

5. Any other obvious considerations I am missing?

Thus, to a first approximation, if I made $120k net-of-tax plus company contributions of $10k to retirement fund and had $10k of dividend income in the US (assume no other income or credits/deductions), I would have $140k - $108k = $32k of taxable income, which would all be taxed at the relevant marginal tax rate (24%), so total tax wound be ~$8k or an effective tax rate of 6%. I know the math is a little more complicated but is this the general gist of how it would work out?

Thanks so much for any thoughts!


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## Bevdeforges (Nov 16, 2007)

This is a long-standing issue for US citizens who work for international organizations that are tax exempt in the country where they are working.

Net-net, your calculation is roughly OK - you'll be taxed at the 24% level (but don't forget to apportion the standard deduction in there, too). The actual calculation is to take the tax on the $140K and then subtract from that the tax on the $108K FEIE amount (but with an apportioned amount of the standard deduction). But ultimately that still lands you in the 24% bracket.



> Questions:
> 1. To calculate AGI, would I simply take my total income from the job over the year (ie, no adjustments needed for it being classified as "net of tax" salary by the org)?


AGI is before the standard deduction, so yes.


> 2. There is a retirement account that I must contribute in and they provide a company match. Since this isn't a qualified plan (I assume, how can I validate this?), is it correct that I would need to count both my contributions and company contributions as part of AGI? If so, what happens after I return to the US and I transfer the funds onshore to a US account?


Technically speaking, if this is considered a non-qualified plan, then you would need to report the earnings on the fund each year and pay US tax on that. You might want to ask a tax adviser for details, as it may depend on exactly how the retirement plan works. (I.e. if it is a "defined contribution" vs. a "defined benefits" plan).


> 3. Is it correct that since I am employed by an organization rather than self employed, I will not be liable for self-employment tax even if the organization doesn't issue a W2?


You won't got a W2 from any foreign employer, so that's not the issue. You shouldn't owe self-employment tax in any event, since you are covered by the "international social security" system. But when filing your US taxes, most filing systems (TurboTax, et al) will have a separate FEC document you fill out in lieu of a W2. If you file on paper, you just use the figures you get from your employer like all the other expats do.



> 4. If I don't pay more than ~$17k in rent over the year, there is no benefit to the foreign housing exclusion, correct? Only on marginal amounts above that?


Someone with more experience will jump in here, but I suspect you're correct.



> 5. Any other obvious considerations I am missing?


The main one is the nature of the retirement plan. If it's really a fund (like an IRA just not "qualified") then you'll have to report your balances on an FBAR report every year, and report the relevant income made on the investment on a couple of different tax forms - most significantly a form 8938 (when the balance reaches the threshold). But if there are any other US citizens working at the agency, they'll be able to point you in the right direction.


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## mdb111 (Feb 18, 2020)

Thank you bev, this is extremely helpful. As I said, I'm just trying to validate my initial assumptions understanding there will be more detail I'll have to dig in to. Glad I can join the honorable ranks of US citizens dealing with the mess of international organization tax issues


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## Moulard (Feb 3, 2017)

Bevdeforges said:


> Technically speaking, if this is considered a non-qualified plan, then you would need to report the earnings on the fund each year and pay US tax on that. You might want to ask a tax adviser for details, as it may depend on exactly how the retirement plan works. (I.e. if it is a "defined contribution" vs. a "defined benefits" plan).


Not necessarily. If treated as an employee's trust (helpfully not actually defined under the IRC) then so long as you were not a "highly remunerated individual" then you could treat any employer contribution as income in the year that it was vested. Then the distribution (less the portion that has already been taxed) when that happens.

Unhelpfully, employer contributions would not be treated as earned income even though it is likely a direct proportion of your earned income and tied to you salary.




> Someone with more experience will jump in here, but I suspect you're correct.


I don't know the exact values but there is a minimum (the 17k mark you mention) and a maximum (fixed at 30% of the FEIE - so just shy of 32k this year). Note that there is also a daily limit too based on location. If your eligible housing expenses are between those amounts you can exclude them.


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