Module 10

Question 1

A resident alien must:

Answer 1

A resident alien must meet either the lawful permanent resident test or the substantial presence test. Resident aliens are treated for tax purposes like U.S. citizens.

Question 2

Foreign earned income exclusion:

Answer 2

The maximum foreign earned income exclusion for 2025 is $130,000.

Question 3

Lawful permanent resident test:

Answer 3

Under the permanent resident test, aliens are considered residents for income tax purposes.
Permanent resident test requires individuals hold the Lawful Permanent Resident Card or Green Card.

Question 4

Nonresident alien FITW:

Answer 4

Nonresident alien FITW requires adding an additional amount to an employee’s taxable wages before applying the Wage Bracket or Percentage method.
The additional amount is not reported on Form W-2.

Question 5

Nonresident alien Form W-4 duties:

Answer 5

Nonresident aliens must submit a Form W-4 claiming single and printing NRA on the form. They cannot file exempt.

Question 6

Substantial presence test requirements:

Answer 6

Substantial presence test requires presence in the U.S. at least 31 days this year. The sum of the number of days this year, plus 1/3 of the days last year, plus 1/6 of the days two years ago must total at least 183 to qualify as a resident alien.

Question 7

Tax advantages for U.S. expatriates:

Answer 7

A U.S. citizen and resident alien can credit withheld foreign taxes from U.S. FITW. The foreign earned income and housing cost exclusions reduce taxable
income for U.S. citizens and certain resident aliens.

Question 8

Totalization agreements are:

Answer 8

Totalization agreements alleviate the double social insurance taxation when an employee is working in a foreign country.

Question 9

What does a tax treaty provide?

Answer 9

Tax treaties are designed to clarify each country’s taxing jurisdiction and avoid double taxation of income.

Question 10

What is Form 8233?

Answer 10

Form 8233, Exemption on Withholding from Compensation for Independent (and certain Dependent) Services of a Nonresident Alien Individual, is used by nonresident aliens to claim tax treaty benefits.

Question 11

What is a shadow payroll?

Answer 11

A shadow payroll is the process used to define host country tax withholding for an expat paid under a tax equalization plan from the U.S.

Question 12

What is a tax equalization plan?

Answer 12

Tax equalization plans are designed to make taxes a neutral factor in an expatriate’s compensation package. Expatriates will pay the amount of taxes that would be due in their home country.

Question 13

What is a tax protection plan?

Answer 13

A tax protection plan reimburses combined U.S. and foreign taxes that exceed the amount of tax the employee would have paid if working in the U.S.

Question 14

The bona fide residence test:

Answer 14

The bona fide residence test requires U.S. citizens and resident aliens to be residents of a foreign country for an uninterrupted period that includes at least one full tax year (January 1-December 31).

Question 15

The physical presence test:

Answer 15

The physical presence test for an expatriate requires being physically present in a foreign country for 330 full days in a consecutive 12-month period. The 330 full days do not need to be consecutive.