Working Remotely for a US Employer While Abroad: Tax Basics

If you work for a US employer remotely from abroad, your salary is still US-source income reported on a W-2, but you may be able to exclude it from US income tax using the Foreign Earned Income Exclusion if you qualify under the Physical Presence or Bona Fide Residence test. Your employer may or may not stop withholding US income tax once you establish foreign residency: some employers adjust withholding based on your expected FEIE, while others continue to withhold as if you were in the US and you claim the refund at tax time. Your employer may also face a corporate tax or payroll nexus issue in the country where you're working, since an employee physically present in a country can sometimes create a taxable presence for the employer, which is one reason some employers are cautious about approving long-term remote work abroad. Self-employment tax still applies to wages from a US employer unless a totalization agreement with your host country applies. State income taxes from your pre-move state may also continue if you have not cleanly broken residency there before going abroad.