20110830_The-term-United States-person-means_U.S.

-Citizens-and-Resident-Aliens

Persons Employed Abroad by a U.S. Person

The term 'United States person' means:

1. A citizen or resident of the United States,

2. A partnership created or organized in the United States or under the law of the United
States or of any State,
3. A corporation created or organized in the United States or under the law of the United
States or of any State, or
4. Any estate or trust other than a foreign estate or foreign trust.

See Internal Revenue Code section 7701(a)(31) for the definition of a foreign estate and a
foreign trust.

U.S Citizens and Resident Aliens Federal Income Tax Withholding

In general, wages paid to a U.S. citizen or to a resident alien by a U.S. person for services
performed outside of the United States are subject to U.S. federal income tax withholding
except for:

 Certain combat zone compensation of members of the Armed Forces of the United
States;
 Certain compensation for agricultural labor (see IRS Publication 51, Circular A,
Agricultural Employer's Tax Guide);
 Compensation for domestic service in a private home (unless both the employer and the
employee agree to withholding);
 Compensation for service not in the course of the employer's trade or business
performed in any calendar quarter by an employee, unless the cash remuneration paid
for such service is $50 or more and such service is performed by an individual who is
regularly employed by such employer to perform such service;
 Compensation for services for an employer (other than the United States or any agency
thereof) if, at the time of the payment of such remuneration, it is reasonable to believe
that such remuneration will be excluded from gross income under section 911 (Refer to
International Taxpayer - Foreign Earned Income Exclusion or IRS Publication 54, Tax
Guide for U.S. Citizens and Resident Aliens Abroad). To claim this exemption from
withholding, a U.S. citizen employee should give his employer Form 673 Statement For
Claiming Benefits Provided by Section 911 of the Internal Revenue Code (PDF).

Important Note! A resident alien may not use Form 673 to exempt his wages from
withholding of U.S. federal income taxes, even though he anticipates that he may
qualify to claim the Foreign Earned Income Exclusion on his U.S. federal individual
income tax return;

 Compensation for services for an employer (other than the United States or any agency
 thereof) if, at the time of the payment of such remuneration, the employer is required by
the law of any foreign country or possession of the United States to withhold income tax
upon such remuneration;
 Compensation for services performed by a duly ordained, commissioned, or licensed
minister of a church in the exercise of his ministry or by a member of a religious order
in the exercise of duties required by such order;
 Compensation for services not in the course of the employer's trade or business, to the
extent paid in any medium other than cash;
 Compensation paid to or on behalf of an employee if (and to the extent that) at the time
of the payment of such remuneration it is reasonable to believe that a corresponding
deduction is allowable under section 217 for moving expenses (Refer to IRS Publication
521 Moving Expenses );
 Payment for any medical care reimbursement made to or for the benefit of an employee
under a self-insured medical reimbursement plan (within the meaning of section
105(h)(6) ) of the Internal Revenue Code;
 Any payment made to or for the benefit of an employee if at the time of such payment it
is reasonable to believe that the employee will be able to exclude such payment from
income under section 106 (Contributions by Employer to Accident and Health Plans);
 Compensation paid by an affiliate of an American employer if at the time of payment:
o It is reasonable to believe that the employee is entitled to an exclusion from
income under section 911 (Refer to International Taxpayer - Foreign Earned
Income Exclusion ), or
o The employer is required by the law of the foreign country to withhold income
tax on such payment.

Nonresident Aliens

As a general rule, wages earned by nonresident aliens for services performed outside of the
United States for any employer are foreign source income and therefore are not subject to
reporting and withholding of U.S. federal income tax.

References/Related Topics

 Federal Income Tax Withholding

 Internal Revenue Code Sections 3401, 3402, and 3403
 Income Tax Regulations 31.3401(a)-1 et seq; 31.3402(a)-1 et seq; and 31.3403-1.
 Internal Revenue Code Section 7701(a)(30) for the definition of a U.S. Person
 Revenue Ruling 75-485 on the U.S. and Foreign Payment of a U.S. Citizen-Employee
Abroad
 Revenue Ruling 92-106 on Withholding / Reporting on Wages for Services Performed
Within and Outside the United States
 Notice 2001-4, Section V(E) on Foreign Source Services Income

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury
Regulations, court cases, or other official tax guidance. References to these legal authorities
are included for the convenience of those who would like to read the technical reference
material. To access the applicable IRC sections, Treasury Regulations, or other official tax
guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax
Court case opinions issued after September 24, 1995, visit the Opinions Search page of the
United States Tax Court.