Publication 516 - U.s. Government Civilian Employees Stationed Abroad (Page 3 of 10) in pdf

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$10,000. Do not include accounts in a U.S. mili-

of the U.S. Government, the earnings you re-

Title II of the Overseas Differentials and

tary banking facility operated by a U.S. financial

ceive are paid by the U.S. Government. This is

Allowances Act.

institution.

true whether they are paid from appropriated or

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Subsection (e) or (f) of the first section of

nonappropriated funds. These earnings are not

File the completed form by June 30 of the

the Administrative Expenses Act of 1946,

eligible for the foreign earned income and hous-

following year with the Department of the Trea-

as amended, or section 22 of that Act.

ing exclusions or the foreign housing deduction.

sury at the address shown on that form. Do not

These allowances cover such expenses as:

attach it to Form 1040. If you are required to file

Other employment. If you are a U.S. citizen

Form TD F 90-22.1 but do not do so, you may

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or resident employed abroad by the U.S. Gov-

Certain repairs to a leased home,

have to pay a penalty of up to $10,000 (more if

ernment and you also receive income from a

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Education of dependents in special situa-

the failure to file is willful).

private employer or self-employment, you may

tions,

qualify to claim the exclusions or the deduction

Foreign Financial Assets

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Motor vehicle shipment,

based on this other income. To qualify, you must

meet either the bona fide residence test or the

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Separate maintenance for dependents,

You must file new Form 8938 to report the own-

physical presence test. Your spouse who is a

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ership of specified foreign financial assets if the

Temporary quarters,

U.S. citizen or resident alien may also qualify if

total value of those assets exceeds an applica-

he or she earns income in a foreign country that

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Transportation for medical treatment, and

ble threshold amount (the “reporting threshold”).

is paid by a private employer or is from

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The reporting threshold varies depending on

Travel, moving, and storage.

self-employment. If you are not a U.S. Govern-

whether you live in the United States, are mar-

ment employee, amounts paid by the United

Allowances received by foreign service employ-

ried, or file a joint income tax return with your

States or its agencies to you may qualify for the

ees for representation expenses are also tax

spouse. Specified foreign financial assets in-

exclusions or the deduction.

free under the above provisions.

clude any financial account maintained by a

Additional information. For more informa-

foreign financial institution and, to the extent

Cost-of-living allowances. If you are sta-

tion on the foreign earned income and housing

held for investment, any stock, securities, or any

tioned outside the continental United States or in

exclusions and foreign housing deduction, see

other interest in a foreign entity and any financial

Alaska, your gross income does not include

Publication 54.

instrument or contract with an issuer or

cost-of-living allowances (other than amounts

counterparty that is not a U.S. person.

received under Title II of the Overseas Differen-

You may have to pay penalties if you are

tials and Allowances Act) granted by regulations

Allowances,

required to file Form 8938 and fail to do so, or if

approved by the President of the United States.

you have an understatement of tax due to any

The cost-of-living portion of any other allowance

Differentials, and

transaction involving an undisclosed foreign fi-

(for example, a living and quarters allowance) is

nancial asset.

not included even if the underlying allowance is

Other Special Pay

For more information, see Form 8938 and its

included in gross income. Cost-of-living al-

instructions.

lowances are not included on your Form W-2.

Most payments received by U.S. Government

Federal court employees. If you are a fed-

civilian employees for working abroad, including

eral court employee, the preceding paragraph

pay differentials, are taxable. However, certain

also applies to you. The cost-of-living allowance

Foreign Income

foreign areas allowances, cost of living al-

must be granted by rules similar to regulations

lowances, and travel allowances are tax free.

approved by the President.

The following discussions explain the tax treat-

If you are a U.S. citizen or resident alien with

ment of allowances, differentials, and other spe-

American Institute in Taiwan. If you are an

income from sources outside the United States,

cial pay you receive for employment abroad.

employee of the American Institute in Taiwan,

you must report all that income on your tax

allowances you receive are exempt from U.S.

return unless it is exempt by U.S. law. This

Pay differentials. Pay differentials you re-

tax if they are equivalent to tax-exempt al-

applies to earned income (such as wages) as

ceive as financial incentives for employment

lowances received by civilian employees of the

well as unearned income (such as interest, divi-

abroad are taxable. Your employer should have

U.S. Government.

dends, and capital gains).

included these differentials as wages on your

Federal reemployment payments after serv-

If you are a U.S. citizen or resident

Form W-2, Wage and Tax Statement.

ing with an international organization. If

alien, you must report your pay from

Generally, pay differentials are given for em-

the U.S. Government on your U.S. re-

you are a federal employee who is reemployed

ployment under adverse conditions (such as se-

CAUTION

turn, even if you are working in a foreign country

by a federal agency after serving with an interna-

vere climate) or because the post of duty is

with which the U.S. has an income tax treaty in

tional organization, you must include in income

located in a hazardous or isolated area that may

any reemployment payments you receive.

force.

be outside the United States. The area does not

These payments are equal to the difference be-

Foreign earned income exclusion and for-

have to be a qualified hazardous duty area as

tween the pay, allowances, post differential, and

eign housing exclusion and deduction.

discussed in Publication 3. Pay differentials in-

other monetary benefits paid by the international

Certain taxpayers can exclude or deduct income

clude:

organization and the pay and other benefits that

earned in foreign countries. However, the for-

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Post differentials,

would have been paid by the federal agency had

eign earned income and housing exclusions and

you been detailed to the international agency.

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the foreign housing deduction do not apply to the

Special incentive differentials, and

income you receive as an employee of the U.S.

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Allowances or reimbursements for travel

Danger pay.

Government.

and transportation expenses. See How To

U.S. agency reimbursed by foreign coun-

Report Business Expenses, later, for a discus-

Foreign areas allowances. Certain foreign

try. If you are a U.S. Government employee

sion on whether a reimbursement or allowance

areas allowances are tax free. Your employer

for travel or transportation is included in your

paid by a U.S. agency to perform services in a

should not have included these allowances as

income.

foreign country, your pay is from the U.S. Gov-

wages on your Form W-2.

ernment and does not qualify for the exclusions

Tax-free foreign areas allowances are al-

Lodging furnished to a principal representa-

or the deduction. This is true even if the U.S.

lowances (other than post differentials) received

tive of the United States. If you are a princi-

agency is reimbursed by the foreign govern-

under the following laws.

pal representative of the United States stationed

ment.

in a foreign country, you do not have to include

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Title I, chapter 9, of the Foreign Service

Employees of post exchanges, etc. If you

in income the value of lodging (including utilities)

Act of 1980.

are an employee of an Armed Forces post ex-

provided to you as an official residence. How-

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change, officers’ and enlisted personnel club,

Section 4 of the Central Intelligence

ever, amounts paid by the U.S. government for

Embassy commissary, or similar instrumentality

Agency Act of 1949, as amended.

your usual costs of operating and maintaining

Publication 516 (April 2012)

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Publication 516 - U.s. Government Civilian Employees Stationed Abroad Page 3

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