Eligibility

This section is only applicable to U.S. Taxpayers.

If you are a U.S. citizen or resident alien living outside the United States, your worldwide income is subject to U.S. income tax, regardless of where you live. Taxes must be paid as you earn or receive income during the year, either through withholding or estimated tax payments. If you did not pay enough tax throughout the year, either through withholding or by making estimated tax payments, you may have to pay a penalty for underpayment of estimated tax. Generally, most taxpayers will avoid this penalty if they owe less than $1,000 in tax after subtracting their withholdings and credits, or if they paid at least 90% of the tax for the current year, or 100% of the tax shown on the tax return for the prior year, whichever is smaller. Please refer to the Internal Revenue Service Publication 505, Tax Withholding and Estimated Tax for additional information.

For those Center employees who meet the criteria of the Internal Revenue Service for living and working outside of the U.S., AIARC will withhold federal income taxes excluding FICA from your monthly pay during the year based on the information submitted by you in Forms W-4, 673, and the Salary Reduction Agreement (SRA) at the beginning of the calendar year. These forms allow you to manage the tax amount withheld from your monthly pay. If AIARC does not receive the completed forms at the time of your payroll enrollment, AIARC will withhold taxes as if you are single with no withholding allowances, in accordance with the guidelines of the Internal Revenue Service (IRS).

The general purpose of each form is described below:

Form W-4 (Employee’s Withholding Certificate)

Use IRS Form W4 to help determine the appropriate level of federal tax withholding for the year or use this form to claim “exempt” from withholding altogether. This form is divided into five steps, reviewing your marital status, number of dependents, etc. Depending on your circumstances, steps two through four may or may not apply to you.
In order to keep your “exempt from withholding” status, you must complete a new form every year as required by the Internal Revenue Service.

Form 673 (Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion(s))

Use Form 673 to determine if you are eligible for an exemption from U.S. income tax withholding on wages earned abroad because of the foreign-earned income exclusion and the foreign housing exclusion. For more information, refer to Publication 54.

• This form will guide you through two tests to establish your eligibility for this exemption – the bona fide residence test or the physical presence test. For more information, refer to Publication 54.
• This form will also guide you in estimating the amount of your exclusion from taxable income, which relates to foreign earned income and foreign housing costs.

AIARC will use the information in this form to adjust monthly withholding from your pay to account for these two exclusions from taxable income. You are required by the Internal Revenue Service to complete this form each year. For information about foreign income exclusions, please refer to the Internal Revenue Service Publication 54 , Tax Guide for U.S. Citizens and Resident Aliens Earned Abroad.

403 (b) Salary Reduction Agreement (SRA) Form

You may be able to reduce your taxable income by making voluntary (employee) contributions to the 403 (b) U.S. Retirement Plan. Use the SRA Form to authorize a new voluntary contribution or to confirm a continued voluntary contribution from your monthly pay. Please note that the Internal Revenue Service establishes maximums for contributions that can be made each calendar year for employer and voluntary contributions. Based on the information that you provide, AIARC will perform the maximum contribution tests to determine if your requested voluntary contribution amount will exceed the allowable limit. For more information about the limits on retirement contributions, please refer to the 403(b) Contribution Limits.

If you have any doubt about your eligibility for exemption or about the appropriate withholding for you, it is recommended that you seek professional tax advice.

Please note that if the Internal Revenue Service issues a notice to AIARC to withhold taxes for a specific amount and/or timeframe because the Internal Revenue Service has determined that you have not submitted the appropriate tax withholding, AIARC will comply with the Internal Revenue Service notice. It will be your responsibility to resolve any withholding or tax issues directly with the Internal Revenue Service.