I have a client who is an expat. He qualifies for FEIE and Housing Exclusion.
Starting in 2019 all his pay will be from U.S. employee in U.S. dollars. In the past he was paid partially in dollars by U.S. company and partially in RMB by Chinese subsidiary company.
1. He needs to submit a new W-4 and wants to know what he should claim.
2. I know what his salary will be for 2019 and projected his what his tax liability will be.
Until recently I wasn't aware of Form 673 Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911. Is anyone familiar with how this form works?
My understanding is:
If you expect to qualify for FEIE you provide employer with this form and your withholding should be adjusted accordingly.
Example:
Weekly gross pay: $5,321 ($276,692 annually) His FEIE + Housing exclusion will be $137,844. You would divide $137,844 by 52 to get $2,650. $2,650 should be subtracted from $5321 and the resulting $2,671 is what his federal tax withholding should be based on.
I projected his tax liability for 2019 will be about $28,600 so I know he needs $550/week of federal income tax withheld.
Based on a payroll calculator Married 0 would result in $383 withholding so he would need an additional $167 withheld.
If we just go with the W-4 in order to have only $550 of income tax withheld on gross pay of $5,321 he'd have to claim Married 24? Would that be correct? As you can tell I don't do payroll.
Believe me I keep telling client to email your boss and have somebody simply call your payroll provider!
I figured I'd make this post to see if any of you all are familiar with Using form 673 in conjunction with W-4.
Thanks in advance and Happy Holidays1