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In order for Reliant to accurately report your taxes to the IRS, you must notify us when:
Failure to notify Reliant of either of these, may result in issues when you file your taxes. |
Filing Your Taxes
All US Citizens are required to file federal taxes even if they are residing overseas and are not subject to federal income tax. When you are residing overseas, you get an automatic extension until June 15 for filing. We highly recommend you hire someone to help with filing your taxes once you are overseas
Federal Income Taxes
There are federal income tax benefits for those who have established residency overseas. Please talk to a tax professional to understand the best option for your situation.
Foreign Earned Income Exclusion (FEIE) - exempts income you earn for work overseas (includes Reliant salary) from federal income tax.
Foreign Tax Credit - gives you a tax credit for taxes you pay to a foreign government.
If you do not expect to owe federal income tax, and do not want Reliant to withhold it from your paycheck, you must indicate that on your W-4.
See Tax Info & Forms (Link to Federal W4) for specific guidance on how to fill out your W-4 in this situation.
State Income Taxes
Most likely, you will not owe state taxes while residing abroad. Regardless, Reliant does not withhold state taxes from your paycheck after you launch to the field.
Exceptions:
- Some states have their own law regarding your state tax status while working abroad. Even if your state requires you to continue paying state tax, Reliant will not withhold state taxes from your paycheck. You must pay the state tax department directly. You can accommodate for this extra expense in your salary/SGW.
- i.e. Alabama has complex laws regarding this topic. If your permanent residence is in Alabama, please talk to a tax professional. You may still be exempt from paying state tax if you can prove you are doing religious work. However, if you are on Reliant's legal entity for secure locations, we are unable to provide you with religious work documentation.
- Furlough/Home Assignment
- Employees of Reliant are subject to state tax when in the US for more than 90 days.
- Employees of Reliant's legal entity are subject to state tax when in one state for more than 14 days.
Social Security (FICA)
You will continue to pay social security (FICA) after launching overseas.
Exceptions:
- If you submit an ordination certificate, Reliant will not withhold FICA. See - Working with Reliant as a Commissioned or Ordained Minister
- If you have opted into the social security program in a foreign country that has a Totalization Agreement with the US. In this case, you will need to provide Reliant documentation before we stop withholding FICA from your paycheck.
If you are moving to a country that has a Totalization Agreement, Reliant will assume that you are staying in the US system unless you tell us otherwise. As soon as we know your launch date, Reliant will request a certificate on your behalf that can be presented to a foreign tax office in order to exempt you from paying into their system. Per most agreements, you will need to exit the country for 6 months, every five years, to continue to be able to opt out of the foreign system.
Foreign Taxes
Reliant expects all employees to understand their tax liability in a foreign country. Your best resource for navigating this is your field supervisor and/or other expats in the area. We also highly recommend working with a local accountant that can guide you through the process.
Note: If you are paying foreign taxes to a local government, talk to your tax professional about claiming the Foreign Tax Credit.
Ministerial Benefits (i.e. Parsonage)
Do I need to notify the IRS or the state government for tax purposes when I move to an international location?
No, you do not need to notify the Federal IRS or state tax system when you move to an international location. However, Reliant must be notified any time you travel to or from the US so that we can report your taxes accurately. Use the Travel Notification Form for notifying us of all travel outside your home country.
Once you are Released to Assignment and have moved to your location, Reliant makes note that you are in a foreign location and don't have to pay state taxes.
What about payment of state taxes?
Since you are no longer residing in one of the 50 states, Reliant does not pay taxes for you. If for any reason you need those paid, you'll need to ask Reliant for that. If you have state tax obligations after you leave the U.S., you may need to attend to those on your own.
- Note, when you return on furlough, we keep you listed as a foreign residence because furlough is a temporary work assignment. It is not a relocation of residence. So, our default is to NOT pay state taxes during furlough. Contact Reliant if you have an obligation that's different from this.
Am I responsible for reporting and paying U.S. Federal Income Taxes while living an international location?
A U.S. citizen is ALWAYS responsible to report and file their tax returns EACH year, no matter where they live. When residing outside of the U.S., the deadline for filing is June 15.
What is the Foreign Earned Income Exclusion?
Many who live outside of the U.S. for more than a year qualify for the Foreign Earned Income Exclusion; this greatly reduces the amount of tax that needs to be paid for many people. You may qualify. In 2019, an eligible foreign worker can exclude up to $105,900 of income from federal income taxes. Read about the Foreign Earned Income Exclusion and speak with your tax advisor for more details. Be sure to submit an accurate W-4 form to Reliant to avoid having too much federal income taxes withheld from each paycheck and receiving a large income tax refund when living on a needs-based salary.
The current international SGW assumes you will not be liable for federal income taxes. The default is for Reliant to pay Federal Income Tax according to what you have submitted on your W-4 during New Staff Training.
Withholding from your paycheck happens regardless of whether you make a budget category in your Support Goal Worksheet for Federal Income tax or not. Part of the reason that is done is because most missionaries begin their employment while still in the U.S., and taxes would be due on that employment. In addition, those who qualify for the exclusion receive the money back in their tax return, and it becomes “salary.”
- If you don’t want to pay Federal Income Tax, you may ask the Payroll Department for that. They will guide you in updating the necessary forms (mainly your W4).
- Similarly, if you want a specialized amount withheld, you may work with Payroll to do that.
How do I qualify for Foreign Earned Income Exclusion?
Reliant strongly urges all missionaries to consult a tax specialist regarding these matters. IRS tax forms 2555 and 2555EZ guide the qualification and reporting of this exclusion.
In most cases, a foreign worker first establishes foreign residency using the Physical Presence Test. Physical Presence requires the worker to reside and work outside the US 330 days within a year. Once a foreign worker establishes residency, they are "Bona Fide Residents". A Bona Fide Resident is no longer required to pass the Physical Presence test and stay in US for longer than 35 days. Their residence began when they first started their foreign residence.
Do I lose the Foreign Earned Income Exclusion when I return for Furlough?
Furlough is a temporary work assignment in the US. It does not constitute a change in residence in most circumstances. Therefore, it does not interrupt "Bona Fide Residence" of someone utilizing the Foreign Earned Income Exclusion.
IRS form 2555 will ask how many days you worked in the US, and you will need to report that. Technically, earnings for work in the US are taxable ; however, due to the standard deduction level, a Reliant missionary rarely owes more tax during a furlough.
Does accepting parsonage as an Ordained Minister lower the person's Social Security and Medicare tax liability?
No, the parsonage allowance only relates to Federal Income Tax obligations. If the staff member is participating in Social Security and Medicare, they would still have to pay Social Security and Medicare (15.3% total) on the parsonage which is a portion of their total taxable income.
If you are ordained or commissioned, you may be eligible to receive parsonage.
For many international staff who qualify for the Foreign Earned Income Exclusion, the parsonage does not typically lower their tax liability since the Foreign Earned Income Exclusion exempts them from paying federal income taxes on any earned income under $105$112,900 000 (for tax year 20192022).
401k and Reliant
Reliant does offer an employer match. Reliant matches up to 5% of your salary in a contribution (if you contribute at least that much through payroll deductions – i.e., a match). The source of the employer match is from funds raised to the MTD account that funds your ministry (so you have to raise the match). Reliant allows you to choose whether funds are contributed “Pre-Tax” or Roth. Naturally the match is never post-tax, although there is a conversion process if you want your employer match converted to Roth funds. You can find more information at 401(k) Retirement Plan.
Who can I talk to for help with tax decisions?
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Reliant can not make recommendations about tax decisions, so it is the missionary's responsibility to seek that input from a financial advisor or tax specialist. Below is a tax specialist that other international missionaries with Reliant have consulted:
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What U.S. banks are recommended for international missionaries to use?
If you are employed under Reliant's legal entity for secure locations, you are not considered a "religious worker" and are not eligible for ministerial benefits, even if you have been ordained/commissioned in the past.
For more information, see Parsonage
Retirement Savings - Roth IRAs
Roth IRAs are retirement contributions that are taxed now, instead of when you withdraw the funds at retirement age. (Traditional 403b contributions are exempt from taxation now, but taxed when you withdraw them).
International workers who claim the Foreign Earned Income Exclusion on their tax filings, may NOT be eligible for Roth contributions. Please consult a tax professional for more information.
Tax Help!!!
Reliant strongly encourages all international workers to see help filing their taxes. See Professional Tax Services for a list of providers that other Reliant workers have utilizedMultiexcerpt
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Missionaries are free to use any bank they'd like! In the event that a missionary is looking for bank recommendations, below are banks Reliant has heard of that market toward international missionaries.
Schuyler Francine, Associate Vice President - Schuyler.Francine@eccu.org
For secure encrypted transmittal of documents, use https://securemail.eccu.org/dropoff/to/schuyler.francine@eccu.org
ECCU Everyday Cashback credit card (no annual fee & no international transaction fees)
https://international.schwab.com/public/international/us_investing/us_expat_essentials
You must have a US address on file for Charles Schwab to send mail to, you must alert Charles Schwab you are "traveling abroad" (and give your ministry location) but that notification only extends for 1 year so you have to re-new it each year.