My partner (26) and I (31) just moved to Denmark from the US for my job. We are both US citizens. I'm working for a Danish employer. While we are here, she will still be working remotely for her employer in the US making ~$75,000/yr. We are trying to figure out the tax implications of all of this, and needless to say it is quite confusing. My situation seems slightly more manageable, but hers is very confusing. We are in the process of looking for professionals in both countries who can assist us, but I also wanted to post here to get an idea of what we should be considering with regards to her taxes.
– Her employer is asking for her new address. Is it ok to have a foreign address on the W2/W4 forms?
– Her employer said to maybe just put her parents' address (which is in the US) instead of the foreign address. Would this make it difficult for her to claim the foreign tax credit later when she goes to file in the US?
– If she puts her parents' address on the documentation, would that mean she also has to pay that state's taxes in addition to the federal?
– If she has a foreign address on her paperwork will she need to file state taxes for the income earned while abroad?
My understanding of the situation overall is that at the end of all of this, she will be paying Danish taxes, and she will receive a US federal income tax credit for that amount. She will still be on the hook for US social security taxes, but the totalization agreement between the two countries means she will be credited the pension fund payments on the Danish side. Is this generally correct?
Advice on Paying US Taxes While Working Abroad
byu/StinkyAndSpeedy intax
Posted by StinkyAndSpeedy
1 Comment
It almost certainly will be illegal under Danish law for them to work like this. Employers in Denmark will require taxes to be withheld, employer payroll taxes to be paid, and local labor laws to be followed. Having an employee in Denmark would open them to business regulation and taxation as well. Do they even have a work visa to legally work in Denmark?
The employer might be willing to take on that risk if they don’t operate at all outside the US, but it’s still illegal. Some might hire them as an independent contractor, but this would make them self employed in Denmark.
The US doesn’t care from a tax perspective though. You meet the criteria for the FEIE or not. If you’re having tax withheld in a state, you can file a return to get that back if you don’t live/work there, but it may be bureaucratic to explain that to state tax authorities, especially if it’s an aggressive state like CA or NY.