U.S. taxation of employees of foreign governments and international organizations - YouTube video text script

Hello, everyone, and welcome to today’s webinar, U.S. Taxation of Employees of Foreign Governments and International Organizations. I see it’s the top of the hour, so we’re going to go ahead and get started. So, I want to first say that we are glad that you guys have joined us today. My name is Candace Harden. I’m a Senior Tax Analyst with the Internal Revenue Service, and I will be your moderator for today’s webinar.

So, today’s webinar is slated for approximately 120 minutes. So, about 2 hours, and this webinar offers two IRS continuing education credits. So, participants earn two IRS CE credits and a related certificate of completion by attending the live broadcast of the webinar for at least 100 minutes or an hour and 40 minutes after the official top of the hour start time and answering at least four polling questions during the live broadcast. The polling question example to test your pop-up blocker will count as an attendance check towards the polling questions response requirement.

So, before we begin, if there is anyone in the audience that is with the media, we ask that you please send an email to the address on the slide. Be sure to include your contact information and the news publication that you’re with. Our Media Relations and Stakeholder Liaison staff will assist you and answer any questions you may have. As a reminder, this webinar will be recorded for future posting, but please note, continuing education credits or certificates of completion are not offered if you view any version of our webinar after the live broadcast.

We hope that you won’t experience any technology issues, but if you do, this slide shows helpful tips and reminders. We posted a technical help document that you can download from the Materials section that is located on the left side of your screen. It provides the minimum system requirements for viewing this webinar, along with some best practices and quick solutions. If you completed and passed your system- check and are still having problems, I want you to try one of the following. You can, number one, close the screen where you’re viewing the webinar and relaunch it; or two, you can click on settings on your browser viewing screen and select HLS.

You should have received today’s PowerPoint in a reminder email, but if not, no worries, you can download it by clicking on the Materials dropdown arrow, which is located on the left side of your screen, as shown on this slide. To receive our survey at the end of the presentation, you need to have your pop-up locker disabled. We’ve also included several technical documents that describe how you can allow pop-up blockers based on the browser you are using on the Materials Tab.

Closed captioning is available for today’s presentation. If you’re having trouble hearing the audio through your computer speakers, please click the Closed Captioning dropdown arrow, which is located on the left side of your screen. This feature will be available throughout the webinar.

If you have a topic-specific question today, please submit it by clicking the Ask Question dropdown arrow to reveal the text box. Type your question in the text box and click Send. Please make sure that you click Send. Very important, please do not enter any sensitive or taxpayer-specific information. So, please do not enter any personal information, any social security numbers, or anything like that. We want to make sure that your information stays safe and secure.

During the presentation, we’ll take a few breaks to check in and engage with you. At those times, a polling-style feature will pop up on your screen with the question and multiple-choice answers. Select the response you believe is correct by clicking on the Radio button located next to your selection and then click Submit. If you do not get the polling question, this may be because you have your pop-up blocker on. So, please take a moment to disable your pop-up blocker now, so you can answer the question. We want to make sure that you get your credit.

We’ve included several technical documents that describe how you can disable pop-up blockers based on the browser you are using. We have documents for Chrome, Firefox, Microsoft Edge, and Safari for those who have Mac computers. You can access them by clicking on the Materials dropdown arrow, which again is located on the left side of your screen.

But now, we’re going to take some time and test the polling feature. Here’s your opportunity to ensure that your pop-up blocker is not on, so you can receive the remaining polling questions throughout today’s presentation. This example polling question will count towards the polling questions requirement to earn the CE credit. So the question is, do you know who your local stakeholder liaison is? Select A if yes; B, no; or C, what is the stakeholder liaison? Go ahead and take a moment and click the Radio button that corresponds to your answer. And while you’re doing that, I’ll go ahead and repeat the question. Do you know who your local stakeholder liaison is? A, yes; B, no; or C, what is the stakeholder liaison?

I’ll go ahead and give you a few more seconds to make your selection. Okay. So, we’re going to go ahead and stop the polling now. Let’s see how the majority of you responded. I see the majority of you, about 90% of you, chose letter A, so great.

Again, before we begin, I want to welcome you all to today’s webinar. And before we move along with our session, let’s make sure you’re in the right place, okay? So today’s webinar is titled, U.S. Taxation of Employees of Foreign Governments and International Organizations. Again, this webinar is scheduled for approximately 120 minutes or 2 hours from the top of the hour.

So, now, let me introduce you to our wonderful, esteemed panel of speakers. Today, we are joined by Senior Revenue Agent, Bethany Krause; Emma Sadikovich, and Cathy Bishop, with the Large Business and International Division, or our LB&I Division. They are all technical specialists for the International Individual Compliance Jurisdiction to Tax Practice Network responsible for facilitating and coordinating the identification and development of issues on examinations involving U.S. tax residency status and the taxation of U.S. individuals living and/or working outside of the United States.

So, we’ll start with Bethany. Bethany previously worked numerous examinations as a revenue agent in LB&I IIC. Bethany has expertise in a variety of topics, including residency status, the foreign earned income exclusion, taxation of individuals with income from U.S. territories, and employees of foreign governments and international organizations. She has developed and presented numerous training courses and workshops, presenting them within the IRS. Bethany has also developed and presented courses on behalf of the IRS to external audiences. Bethany holds a BS in Computer Science with a minor in Accounting and courses in Education.

Next up we have Emma. Emma has expertise in a variety of topics including the foreign earned income exclusion, expatriation, and taxation of individuals with income from U.S. territories. Emma is a certified public accountant with an inactive status and holds a BBA in Business Administration with an emphasis in Accounting and Finance. She also has a Master of Accounting and Juris Doctorate.

Last, but certainly not least, we have Cathy. Cathy has been with the IRS for 15 years. She previously worked numerous examinations as a revenue agent in SB/SE, including international issues. Cathy has expertise in a variety of topics, including residency status, the foreign earned income exclusion, taxation of individuals with income from U.S. territories and employees of foreign governments and international organizations. Cathy holds a BS in Accounting with a minor in Computer Technology and an MS in Accounting and Taxation.

Let’s go ahead and give a virtual welcome to Bethany, Emma, and Cathy. I’ll go ahead and turn it over to you Cathy to kick off the presentation. The floor is yours.

Thank you, Candace. So, welcome to this webinar on the U.S. Taxation of Employees of Foreign Governments and International Organizations. So, during today’s webinar, we will list the considerations in determining whether the compensation from a foreign government or international organization is subject to U.S. tax. We will describe the effect of U.S. tax residency status and/or visa type on U.S. taxation and explain the exemption under Internal Revenue Code 893, and we’re going to note the consequences of signing or not signing USCIS Form I-508.

So, generally, compensation for personal services performed for a foreign government at a foreign embassy, a foreign consular office, or a miscellaneous foreign government office, or for an international organization in the United States is U.S. source, not foreign source income under the Internal Revenue Code.

And before we go any further, let me define a couple of things. So, the term miscellaneous foreign government office refers to an office of a foreign government that is not an embassy or consulate and that meets certain requirements, including that it is created, controlled, and funded by that foreign government and does not engage in commercial activities. The term international organization is defined in the Internal Revenue Code 7701(a)(18) to mean any public international organization that the President of the United States has designated by Executive Order as being entitled to the privileges, exemptions, and immunities provided for in the International Organizations Act.

So, generally, an employee’s compensation received from a foreign government or international organization is subject to U.S. taxation unless specifically exempted under the Internal Revenue Code or by a provision of a treaty or other international agreement to which the U.S. is a signatory party, if one exists. So, a couple of weeks ago, we provided a webinar on residency status and if you did not get the chance to attend and would like to learn more about that topic, that session was recorded and is available for replay on the IRS YouTube page. And you can find this video and others at www.youtube.com/irsvideos.

Now, a person’s residency status for U.S. tax purposes is very important, because the U.S. tax implications of U.S. citizens, dual citizens, green card holders, and non-immigrant visa holders working for a foreign government or an international organization in the United States, including whether their compensation is subject to income, social security, and Medicare taxes will vary depending on whether the individual is considered a resident or non-resident for U.S. tax purposes. And we will go into this in further detail shortly.

So, please note that foreign governments and international organizations are required to notify the State Department upon the arrival or appointment and termination of all persons that they employ, including locally employed staff and part-time employees and members of their families. So, they must also promptly report any changes in status to the State Department, such as when a non-immigrant visa holder employee acquires a green card or lawful permanent resident status or changes their position.

Employees of foreign governments may be able to exempt their foreign government compensation from U.S. income tax if they satisfy the requirements of any one of the following independent tax exemption provisions. And that’s the Vienna Conventions, Article 34 or 37 of the Vienna Convention on Diplomatic Relations; or Article 49 of the Vienna Convention on Consular Relations. An applicable article in a bilateral consular agreement or income tax treaty, or Section 893 of the Internal Revenue Code.

So, two things I want to make note of here. So, first of all, these provisions, which we will discuss in greater detail later in the presentation, do not apply to any other U.S. source income that is received by the employee. Secondly, these provisions generally do not apply to employees who are U.S. citizens or lawful permanent residents.

So, employees of international organizations, such as the World Bank or United Nations, may be able to exempt their international organization compensation from U.S. income tax if they satisfy the requirements of a provision, if one exists, in the agreement creating the international organization, which is sometimes referred to as the charter, or by satisfying the requirements of Internal Revenue Code 893. Again, such an exemption would apply only to the employee’s compensation, not to other U.S. source income. Also, such an exemption generally does not apply to U.S. citizens or lawful permanent residents.

We will now discuss how all this applies based on whether the individual working for a foreign government or international organization is a U.S. citizen, a U.S. lawful permanent resident, or is in the United States on a nonimmigrant visa. Now, Emma will go into detail on the taxation of a U.S. citizen working in the U.S. for a foreign government or international organization. Emma?

Thank you, Cathy. Foreign embassies and international organizations are not required to file Forms W-2 and withhold on their U.S. citizen employees for income, social security, and Medicare taxes. However, some embassies and international organizations may voluntarily issue Forms 1099 and gross up their U.S. citizen employees’ income in order to cover both income and self-employment taxes. This is usually done quarterly, so their U.S. citizen employees can make estimated tax payments since there is no withholding.

One foreign government that is doing this is Switzerland. The Senior Human Resources Specialist at the Swiss Embassy spoke with us about their reporting process and he said that he is open to discussing the process with the HR staff of other embassies. I will repeat this. This is really important. The Senior Human Resources Specialist at the Swiss Embassy is willing to discuss the reporting process with the HR staff of other embassies.

Under U.S. law, foreign governments and international organizations are not required to report compensation or withhold income and employment taxes with respect to their employees. As a result, U.S. citizen employees will generally do not qualify for any of the tax exemptions mentioned earlier, must report their earnings as wages and pay self-employment tax on them under the Self-Employment Contributions Act.

Self-employment tax is computed on Schedule SE and reported on Form 1040. However, such an individual is not self-employed for any other federal tax purposes. They may not claim deductions for expenses on Schedule C, are not qualified to establish a simplified employee pension plan, and there is no allowable deduction for contributions to any such plan. U.S. citizen employees will also be required to make estimated tax payments if they expect to have tax due at the end of the year, because their compensation is not subject to income tax withholding.

Estimated payments are made using Form 1040ES, estimated tax for individuals, forms are filed quarterly; April 15th, June 15th, September 15th, and January 15th. There is a penalty for failure to make estimated tax payments on a timely basis.

Now, it’s time for our first polling question.

I agree, Emma. So, our first polling question is, a U.S. citizen working in the U.S. for a foreign government or international organization is: A, considered self-employed for all purposes; B, considered self-employed for purposes of self-employment tax only; or C, neither A nor B? So based on the information that Emma just shared with us, I want you to click on the Radio button that you believe answers this question best. If you did not receive the polling question, please enter the letters A, B, or C, whichever one corresponds with your response in the Ask Question text box, okay? That response will be timestamped.

So to give you guys a little more time, I’m going to go ahead and repeat the question. A U.S. citizen working in the U.S. for a foreign government or international organization is: A, considered self-employed for all purposes; B, considered self-employed for purposes of self-employment tax only; or C, neither A nor B? So go ahead and pick your response. Click the Radio button for whichever one corresponds to the correct answer, or again, place letter A, B, or C in the text box if the polling question did not pop-up on your screen.

Please remember, in order for you to receive those two IRS CE credits, you need to answer at least four polling questions and participate in the live broadcast from the official start time, which was 1 p.m. Eastern time, or at least 100 minutes to earn two IRS CE credits, okay? The polling question example we did at the beginning of this presentation, again, it will count towards the requirement. I’m going to give you guys a few more seconds to make your selection or submit your answer in the Ask Question feature, and then we’re going to look at the results on the next slide.

Okay. So, we’re going to stop the polling now, and let’s share the correct answer on our next slide. And the correct answer is response B, okay, response B, considered self-employed for purposes of self-employment tax only. So, I see that 89% of you responded correctly. So that 11% didn’t get it right, we’re going to be checking for you on the next polling question. So, great job to those of you who selected the correct answer. It looks like we’re off to a good start. So, Emma, I’m going to go ahead and turn it back over to you.

Thank you, Candace. So, now that you know how a U.S. citizen working in the United States for a foreign government or international organization reports and pays U.S. income and self-employment taxes, you’re probably wondering how a U.S. citizen who’s working abroad for a foreign government for international organization is taxed. A U.S. citizen working outside the United States also reports their earnings from a foreign government or international organization as wages for U.S. income tax purposes but is not required to pay self-employment tax on them. Such an individual may be eligible to exclude foreign earned income under Section 911, if they meet all of the requirements.

If the individual works both within and outside the United States, the Revenue Ruling 67-153, which discusses the method for allocating the income for services performed within and outside the United States.

Generally, the same rules regarding reporting of compensation income and the payment of self-employment taxes that apply to a U.S. citizen apply to a dual citizen of the United States and another country. However, if the individual is a dual U.S.-Philippine citizen, they may be able to exempt their foreign government or international organization compensation from U.S. tax under Section 893. The requirements of Section 893 will be discussed later.

Bethany will now explain about the tax obligations of lawful permanent residents or green card holders working in the United States for foreign governments or international organizations. Bethany?

Thank you, Emma. An individual who is granted the right to permanently live and work in the United States is referred to as a lawful permanent resident. And such an individual usually would have what is called a green card that they’ve been issued by U.S. Citizenship and Immigration Services. Those who are lawful permanent residents or green card holders, we use the terms kind of interchangeably here, those individuals are subject to U.S. taxation on their worldwide income, regardless of whether they’re living in the United States or abroad.

Now, similar to a U.S. citizen, the compensation of a lawful permanent resident working for a foreign government or international organization in the United States is generally not going to be exempt from U.S. taxation. A green card holder must generally report those earnings as wages, but unlike the U.S. citizen, the green card holder is not subject to self-employment taxes on those earnings from the foreign government or international organization. And, furthermore, they may not even voluntarily pay self-employment tax on those.

I did see a question. I was scrolling through some of the questions already. Someone had asked about a green card holder who might have paid in for years and now realized they weren’t supposed to be. We at the IRS, while we do collect the money for social security, the decisions about, who’s covered, who isn’t, and how all that works are up to the Social Security Administration. So, if a person finds themselves in that position, if one of you are listening and you have a client who’s an employee of a foreign government or international organization and they were erroneously paying into self-employment tax as a green card holder.

Now, all other green card holders in this country and even people who don’t have green cards, I mean, it’s a very odd rule and I want to point that out. This is a very unusual situation when you’re working for a foreign government or an international organization. Most people in the United States, regardless of whether they’re a green card holder or they’re just living here, they do have to pay, if they’re employed, their employer has to remit employment tax on them. And if they’re self-employed, they have to pay self-employment tax. So, this is very specific information here to employees of foreign governments and international organizations.

And for those individuals, if they are a U.S. citizen, they are required to pay self-employment tax and they’re not self-employed for any other purpose, okay? But they do have to pay self-employment tax. And on those earnings and the green card holder. Interestingly enough, not only is not subject to U.S. self-employment tax on those wages from the foreign government or international organization, but they are actually prohibited from participating in the program. And so, if that’s happened to you and you have questions about that, you would need to direct those to the Social Security Administration and see what could be done about that.

Yeah, from an IRS point of view, if there are open years that the statute’s still open, you might be able to amend those. If you feel you did those tax returns wrong and remitted things, you shouldn’t have. That’s another option. But I would also recommend you talk to social security. And unfortunately, I’m not sure how far back you can get the money back, other than what we consider open years here at the IRS. But I would suggest you bring it up to Social Security Administration and contact someone there.

There are also situations, they’re not as common, but there are situations that we’ve heard about where an individual is a U.S. citizen and there’s totalization agreements between the United States and the country of which they’re a citizen also. So, they’re a dual citizen of the U.S. and another country for whose embassy they’re working at or for whose consulate they’re working at. So, sometimes a dual citizen of the U.S. and the foreign government for which they’re working is in a bit of a pickle, because there’s in place, what’s called a totalization agreement, a Social Security Agreement between the U.S. and the other country.

And in some instances, the individual knows they will never go back to that country. And under that country’s rules, you don’t collect unless you live there, which is not like the United States. In the United States, if when I retire, I want to go live in a foreign country, I can still get my social security check. But not every country does that, sends the money outside their country. So, some of those people I understand have dialogued with social security and been able to work it out with the two countries in a way that is more beneficial to them, whereby now these are not green card holders, these are U.S. citizens.

My understanding is a green card holder cannot participate at all, and I’ve never heard of a scenario where they could in U.S. social security program. And by that, I mean, a green card holder working for a foreign government or international organization cannot participate on those wages. Now, if you are a green card holder working at a foreign embassy or something, and you’re driving an Uber, or you’ve got some side business going on, you certainly would be required to pay self-employment tax on that income, okay, or a side job or whatever.

So, I want to make it real clear, this is a very small subset here. But, if you find yourself in a situation where you need to reach out to social security, from what I understand, they’ve been helpful for people in the past to try to iron out some of the wrinkles and just see what you can do based on your scenario. And, again, we’re the IRS, so we can’t really speak to that, but I would encourage you to reach out to them.

Okay. As was mentioned earlier, the foreign governments and international organizations are not required to report income or withhold taxes with respect to their employees. So, if you’re a green card holder and you expect to have income tax due at the end of the year you’d be required to make estimated tax payments.

And I also want to stop here for a minute and just mention, again, that if anybody on this call is in the HR department of a foreign country or international organization and you’re interested in voluntarily issuing Forms 1099 Miscellaneous to your employees, so that they do know better how to file their taxes. If you’re interested in that, there are some organizations, international organizations, and foreign governments that actually voluntarily do this.

And one of those foreign governments that’s currently doing that is the Swiss. And the gentleman there who is the senior HR specialist there has informed me and encouraged me knowing we were having this webinar. And if he’s listening today, I’m saying hi to you. I told him I stopped short of sharing, I guess, years at the IRS. We guard people’s privacy. So, I would have a very hard time saying a name, a person’s name on this webinar. So, I told him I’m sorry. I’m not going to give out the name. But I understand you guys are all kind of in the same neighborhood in D.C. And I think that a lot of folks know each other.

So, if you would like to contact the senior HR specialist at the Swiss Embassy, if you yourself are an HR staff member looking to do that for your employees, he said he’d be more than happy to dialogue with you on that and share some of the best practices he discovered as he went down that path for his employees. So just a plug for that. If anybody wants to do that, please feel free to reach out to him. And thank you to him for his willingness to work with folks on that.

And if you should do that, it’s real important that it’s a 1099 Miscellaneous. Even though that might seem counterintuitive, it’s not going to be a W-2 and it’s not going to be a 1099-NEC. It should be on a miscellaneous. And there’s reasons for that.

And as was mentioned earlier, I was mentioning about the fact that the green card holder would also need to make estimated tax payments for the income tax that they anticipate being due. And those are due quarterly on Form 1040ES. And the due dates are April 15, June 15, September 15, and January 15. And I know that’s not exactly quarterly, but those are the due dates. The due dates don’t fall as evenly as quarters would, but that’s the way it works. And there is a penalty for failing to do so in a timely manner. So, it’s important that you do that.

Okay. And I believe that it might be time now for our next polling question.

Absolutely, Bethany. Thank you so much for that interesting information. So, our second polling question is a true or false? Okay, a little different from the first polling question. So, the statement is, a lawful permanent resident or green card holder working in the United States for a foreign government or international organization must generally report their compensation as wages. So, if you think that that statement is true, you’re going to select A. Or if you think that that statement is false, you’re going to select B. Okay, go ahead and take a moment, click the Radio button next to the answer that best responds to the question. And also again, if you do not receive that polling question, that pop-up, okay, please go ahead and enter the letter A or B that corresponds to your response in the Ask Question text box.

Okay, so while you’re doing that, I’m going to go ahead and quickly reread the statement. A lawful permanent resident or green card holder working in the United States for a foreign government or international organization must generally report their compensation as wages. Is that A, true; or B, false? I’ll go ahead and give you guys a few more seconds to make your selection or submit your answer in the Ask Question box.

Okay. We’re going to go ahead and stop the polling now and let’s share the correct answer on the next slide. And the correct answer is A, true. And I see that 88% of you responded correctly. Now, we’re 1% down from our last polling question, so I’m going to need you guys to kick it up in gear. So, we can get a higher response rate, but that is still a great response rate. We thank you guys for your attention.

And Cathy, I think you’re up next, so I’m going to go ahead and turn the floor over to you.

Yes. Thanks, Candace. Okay. So, under U.S. immigration law and Department of State rules, the only nonimmigrants that are authorized to be employed by a foreign embassy, foreign consulate, a miscellaneous foreign government office, or a foreign government mission to an international organization in the United States are those individuals that are admitted in A-1, A-2, G-1, G-2, or G-3 visa status. So, please be aware that individuals with A-3 or G-5 visa statuses, they are not foreign government or international organization employees but rather are personal or domestic employees of foreign government or international organization officials. And they are paid from the private funds of such foreign government or international organization official.

So, only nonimmigrants admitted to the U.S. under a G-4 visa are authorized to work for an international organization. So, please note here that individuals admitted under any other class of non-immigrant visa such as an H or L class visa, they are not permitted to work for a foreign government or international organization in the United States.

So, under U.S. tax law, a nonimmigrant present in the United States in A or G visa status with the exception of A-3 or G-5 status is considered a foreign government related individual, a category of exempt individual whose days of physical presence in the United States do not count for purposes of the Substantial Presence Test.

So, the term foreign government related individual means an individual or a member of the individual’s immediate family who is temporarily present in the United States as a full-time employee of an international organization by reason of diplomatic status or by reason of a visa other than the visa that grants lawful permanent residence that the secretary of the treasury determines represents full-time diplomatic or consular status.

So, please note that an exempt individual is not someone who is exempt from U.S. income tax. Rather the term exempt individual only refers to an individual who is exempt from counting days of physical presence for purposes of determining the U.S. residency status under the Substantial Presence Test.

So, generally, an individual present in the United States under an A or G visa, again other than A-3 or G-5 class visa, will be considered a foreign government-related individual whose days of physical presence do not count for purposes of the Substantial Presence Test, resulting in them being treated as non-residents for income tax purposes for as long as they maintain their A or G visa status.

An individual who is present in the United States under an A-3 or G-5 visa as a personal employee, attendant, or domestic worker for either a foreign government or international organization official is not considered a foreign government-related individual, and they must count all days of presence in the United States for purposes of the Substantial Presence Test.

So, if present in the United States for 183 days or more, an A-3 or G-5 visa holder, they will be considered a resident for federal income tax purposes subject to U.S. tax at graduated rates on worldwide income in the same manner as a U.S. citizen or green card holder. So, various tax options, each independent of the other, may permit an A or G visa employee to exempt their foreign government compensation from federal income tax.

So, each of the tax exemptions listed has specific requirements that must be satisfied in order for the nonimmigrant visa holder’s foreign government compensation to qualify for exemption from U.S. tax. So, the first consideration is to look at Articles 34 or 37 of the Multilateral Vienna Convention on Diplomatic Relations, or Article 49 of the Multilateral Vienna Convention on Consular Relations. And next, we consider the applicable bilateral consular convention, if one exists. And for further information on needs, you can contact the Department of State Office of Foreign Missions.

So, if the compensation doesn’t qualify for exemption under any of these provisions that I’ve mentioned, then the next step is to check the tax treaty, if one exists. In Publication 901, U.S. Tax Treaties is a good resource for this purpose. You can also find the treaties themselves at IRS.gov and we’ll share that web address at the end of this webinar. So, the final consideration is whether Internal Revenue Code Section 893 is applicable. So, stay tuned and we’ll talk more about that shortly.

So, now that I’ve talked about exemptions that may be available to nonimmigrant visa holders employed by foreign governments, let’s turn our attention to those nonimmigrant visa holders employed by international organizations which, as I mentioned earlier, can only be G-4 visa holders. So, a G-4 visa holder working for an international organization in the United States may be able to exempt their wages from U.S. tax if they satisfy the requirements of either a provision, if one exists, in the international agreement, or charter creating the international organization, or IRC 893.

So, to claim the exemption, an international organization employee must be able to demonstrate that they meet the requirements of either the international organization agreement provision, or Internal Revenue Code Section 893. And they must know the number of the executive order designating the organization as an international organization, and the article number of the international organization agreement tax exemption provision, again, if one exists.

So, as mentioned earlier, the tax exemptions available under international agreements, including international organization charters, they generally do not apply to U.S. citizen and lawful permanent resident employees of foreign governments and international organizations. However, sometimes the fact that U.S. citizens and permanent residents are excluded from the tax exemption is not set forth within the actual provision of the agreement, but in a U.S. Senate reservation. And accordingly, it is critical to review the international agreement and any reservations carefully to determine whether the provision is applicable to the particular foreign government or international organization employee, and this can be very complex.

So, for example, Section 18(b) of the Convention on Privileges and Immunities of the United Nations provides that salaries and emoluments paid to UN officials are exempt from taxation. So, when the agreement was ratified by the United States Senate, it was subject to certain reservations. And one of those reservations is that immunity from taxation does not apply with respect to U.S. nationals and lawful permanent residents. So, if after reviewing and considering any applicable treaties or international agreements, no relief can be found, then the next step is to look at Internal Revenue Code Section 893 and see if it’s applicable to that employee.

And Emma will now explain more about that. Emma?

Thank you, Cathy. Section 893 applies only to wages, fees, or salary earned as a foreign government or international organization employee. This exemption does not apply to independent contractors. Common law rules apply to determine whether an individual is an employee or an independent contractor. The exemption under U.S. tax law applies only to current foreign government employees and not to former employees. Pensions received by former employees are not exempt from tax under Section 893.

Candace, this looks like a good time for another polling question.

I agree. So, we have another true or false question, okay? For the first two questions, we were in the 80% range. So, I’m hoping we can get up to the 90%, maybe even 100%, okay? So here is the statement. IRC Section 893 applies to both employees and independent contractors working in the U.S. for foreign governments and international organizations. Is that statement A, true; or B, false? So, based on the information that was just shared, do you think that response is true or false?

I’ll go ahead and repeat that for those of you who may need a little more time. So, we have IRC Code Section 893 applies to both employees and independent contractors working in the U.S. for foreign governments and international organizations. You can select A for true or B for false. So go ahead and take a moment to click that Radio button that best answers the question. Again, if you do not receive the polling question, okay, you don’t receive that pop-up with the polling question, please enter only the letter A or B in the Ask Question text box. And, again, responses are timestamped. So, I’ll go ahead and give you guys a few more seconds to make your selection or submit your answer in that Ask Question feature.

All right. We’re going to stop the polling now and let’s share the correct answer on the next slide. And the correct answer is B, false. And guess what? 91% of you responded correctly. So, we have a few of you who kind of got on the right answer bandwagon, so great, great, great response rate. Let’s go ahead and keep it up.

Emma, it looks like I’m turning it back over to you, so I will hand you the floor.

Thank you, Candace. So, we already mentioned that the exemption under Section 893 does not apply to independent contractors. It also does not apply to an employee of a controlled commercial entity, or if services are primarily in connection with a commercial activity of a foreign government within or outside the United States. A controlled commercial entity is an entity that is 50% or more owned by a foreign government that is engaged in commercial activity within or outside the United States.

Section 893 also does not apply to NATO employees, because NATO is a political and military alliance, not an international organization. However, the wages of NATO employees may still qualify for tax exemptions under the provisions of the NATO Status of Forces Agreement and the NATO Headquarters Protocol Agreement.

To qualify for the exemption under Section 893, a foreign government employee must meet all three of the following requirements. The employee must not be a U.S. citizen, or if a U.S. citizen must also be a citizen of the Philippines. The employee must perform services of a similar character to those performed by U.S. government employees in foreign countries, and the employee must be able to show that the foreign government grants an equivalent tax exemption to U.S. government employees performing similar services in its country.

Section 893 tax exemption is broader in scope, send the exemptions available to foreign government employees under the Vienna Convention, in that it applies to all foreign embassy and consul employees, including those with permanently resident in status and miscellaneous foreign government office employees. The term permanent resident in status refers to green card holders and also to A and G visa status employees, where the foreign government does not pay the employees transportation costs to and from the United States.

Internally, the State Department refers to these A and G employees as P and A, and P/G visa holder employees. Collectively, both categories are often referred to as local hires. Unlike a foreign government employee, an employee of an international organization must satisfy only one requirement to qualify for the Section 893 tax exemption. It must not be a U.S. citizen, or if they’re a U.S. citizen, they also be a citizen of the Philippines. The similar service and tax reciprocity requirements that apply to employees of foreign governments do not apply to employees of international organizations.

Now, let’s talk about the similar services and tax reciprocity requirements. Although Section 893(b) requires the Secretary of State to certify to the Secretary of the Treasury which countries meet the similar services and tax reciprocity requirements, the certification is not a prerequisite to the tax exemption. So, in cases where the State Department has issued an 893(b) certification, the IRS will apply the certification to all tax years for which the facts and laws are the same as those on which the certification was based.

In cases where the State Department is not issued an 893(b) certification or it is not applicable to the foreign government employee in question, the employee has the burden of proof to establish the IRS that the similar services and tax reciprocity requirements have been met. Please note that while the State Department has issued a number of 893(b) certifications in the past, those certifications are applicable only to foreign embassy and consular employees, not miscellaneous foreign government office employees.

Today, no certifications have been issued by the State Department covering miscellaneous foreign government office employees. For further information regarding the foreign countries to which the State Department has previously issued an 893(b) certification, and their current validity, contact the Department of State’s Office of Foreign Missions. Although Section 893 does not specifically exclude lawful permanent residents from eligibility for the tax exemption like U.S. citizens, generally green card holder employees will not be eligible for the tax exemption by reason of U.S. immigration law.

Section 247 of the Immigration and Nationality Act requires individuals for green card holders at the time of their initial employment with a foreign government or international organization or who subsequently acquire lawful permanent resident status, while working are required to have their immigration status adjusted to that of a non-immigrant A or G visa holder unless they execute a waiver, USCIS Form I-508 to give up all privileges and immunities associated with their occupational status, including any exemption from U.S. tax with respect to their foreign government or international organization compensation.

Under Section 247 of the Immigration and Nationality Act, individuals who are lawful permanent residents at the time of their initial employment with a foreign government or international organization, or who subsequently acquire lawful permanent resident status by working must sign the waiver. In other words, they must sign USCIS Form I-508.

Foreign governments and international organizations are required to notify the State Department when they hire a lawful permanent resident or when an employee becomes a lawful permanent resident. Form I-508 is a three-part form. The original is retained by USCIS, while the other copies are provided to the State Department and IRS. Failure to sign USCIS Form I-508 within 10 days of receiving notice from USCIS will result in the employee’s immigration status being adjusted by USCIS from lawful permanent resident immigrant status to A or G non-immigrant visa status.

For further information about immigration consequences of not signing and filing Form I-508, please contact USCIS directly. Signing USCIS Form I-508 allows the employee to retain their green cards but will result in them losing all privileges and immunities associated with their occupational status under U.S. law, including any tax exemption applicable with respect to their foreign government or international organization compensation. Once a green card holder employee signs and files Form I-508 waiver, it will no longer be eligible to claim the tax exemption under Section 893.

And now, it’s time for our fourth polling question. Candace?

Thank you, Emma. Welcome back, everybody, to are you smarter than the IRS? Hopefully, you guys are ready for your next polling question, which is our fourth polling question. And that question states, this is another true or false, okay? So the statement is, signing USCIS Form I-508 disqualifies one from claiming the exemption under IRC Section 893. Select A, if you think that’s true, or B, if you think that’s false. So go ahead and take a moment, think about the information that Emma just shared with us, and select the response that you think best answers the question.

So, I will go ahead and repeat the statement and give you guys a little more time to think about it. So, the statement is, signing USCIS Form I-508 disqualifies one from claiming the exemption under IRC Section 893. So select A if you think that’s true, or B for false. Now, if you do not get that pop-up with the polling question, go ahead and put your response in that Ask Question text box, you’re going to enter either A or B in that box, depending on what you think the response is, okay? And, again, your response is timestamped. So, I’ll give you guys a few more seconds to make your selection, and then we’ll go ahead and look at the correct answer on the next slide.

All right. Let’s see what the correct answer is, and the correct response is A. Let’s see how many of you got the correct answer. Hopefully it’s higher than 91%. Okay. So, we see 81% of you responded correctly. Okay. Lower than the last time, but still a good response rate. So, we will give you guys an A for effort.

So, Emma, it looks like you’re going to be continuing on, so I’ll go ahead and turn the floor back over to you.

Thank you, Candace. Compensation received by a green card holder employee prior to the date of signing the USCIS Form I-508 is eligible for exemption from tax under Section 893 provided the similar services and reciprocal exemption requirements of Section 893 are satisfied. Compensation received on or after the date of signing the Form I-508 is not eligible for exemption from tax under Section 893. Signing Form I-508 has no effect on any tax exemption derived under an international agreement such as a tax treaty, consular agreement, international organization charter that is not dependent on the provisions of the Internal Revenue Code.

And Bethany will go over a few examples that illustrate this concept. Bethany?

Okay. Thank you, Emma.

Bethany’s line is disconnected. I’m reaching out now.

Emma, I think we’ve lost Bethany, but can you go ahead and continue on with the next slide?

Yes. So, looking at example one, Oscar is in the United States on an A-2 visa. He’s an administrative/technical staff employee at a foreign conflict. And Oscar recently applied for a green card. As part of the application process, he signed USCIS Form I-508. Under the bilateral consular – I believe Bethany is back. Bethany?

Bethany, are you back with us?

Yes, I’m back. Sorry about that. Yeah, something happened to the phone and it kicked me out. And thankfully, they let me back in real quick. I’m sorry, where did you leave off that, Emma?

We’re talking about the effects of signing USCIS used on example one.

So, we’re still on the first slide, it sounds like, right? Slide 63, okay, good. Okay. So, and I apologize if I’m repeating some of what Emma just said, but Oscar is here in the United States on an A-2 visa. And you’ll notice the names that we’re choosing in these examples are fictitious names and they match that, I don’t know what you call that alphabet, but Oscar, Charlie, Papa, Romeo, Juliet, that alphabet. So that’s where these came from. The IRS dictates sometimes, sometimes it has to be the names of flowers, sometimes it has to be the names of various things, and I guess 1-year it was that.

So, Oscar is in the United States on an A-2 visa. And he’s an administrative or technical staff employee at a foreign consulate. And Oscar recently applied for a green card. Now, as part of that application process, an individual signs the Form I-508. So that’s what Oscar has done.

Now, under the bilateral consular agreement between the foreign country and the United States, the official emoluments, salaries, wages, or allowances received by a consular employee as compensation for their services at a consulate are exempt from United States tax unless that individual is a national of the receiving state and not also a national of the sending state. So, in this case, the receiving state is the United States. And the sending state is whatever country, Oscar happens to be working for. So, since Oscar is not a U.S. national, and since the signing of the Form I-508 has no effect on a bilateral consular agreement, Oscar’s wages from the foreign government are still exempt from U.S. tax.

Okay, let’s look at another example. Here we have Juliet, who’s in the United States on a G-4 visa, working for the World Bank. Juliet recently applied for lawful permanent resident status, and as part of that process, signed USCIS Form I-508. Article 7, Section 9(b) of the Articles of Agreement of the World Bank provides that “salaries and emoluments paid by the bank” to its employees who are “not local citizens or local nationals” are exempt from taxation. Now, because Juliet is not a U.S. citizen or national, and because signing the Form I-508 has no effect on tax exemptions in international agreements that are not dependent upon the Internal Revenue Code, Juliet’s World Bank wages are exempt from U.S. taxation.

Okay, let’s look at one more example. Here we have Sierra. Sierra works for a foreign embassy in the United States as an administrative or technical staff employee. Sierra has an A-2 visa and has never applied for a green card but is considered by the State Department to be a local hire. And being a local hire is equivalent to having “permanently resident-in” status for purposes of the Vienna Convention. Sierra is not able to find relief under the Vienna Conventions, nor under the applicable bilateral consular agreement.

The foreign country for which Sierra is working does not have an income tax treaty with the United States. Now, if Sierra can show that the similar services and tax reciprocity requirements of Code Section 893 were met, then Sierra’s wages could be exempt from U.S. tax under Code Section 893.

Now, let’s look at our final example. And here we have Charlie, a lawful permanent resident, who is working in the United States for the UN. When Charlie began employment with the UN, Charlie signed a USCIS Form I-508. And the tax exemptions provided another Vienna Conventions do not apply to international organizations and their employees. While there is a tax exemption under the convention on privileges and immunities of the UN, it does not apply to U.S. citizens and lawful permanent residents by reason of a Senate reservation, so sort of like a side note.

The only potential tax exemption that could be available to Charlie would be Internal Revenue Code Section 893. However, because Charlie signed the USCIS Form I-508, Charlie’s UN wages are not exempt from U.S. tax under Code Section 893.

And Cathy, I think now you’re going to share some resources. Thank you.

Yes, Bethany. So, we’ve given you a lot of information, but we have here some valuable resources. And a great place to start is Chapter 10, and that’s Employees of Foreign Governments and International Organizations, and that’s in Publication 519, U.S. Tax Guide for Aliens. And then also Publication 901, U.S. Tax Treaties. And here is a link to pages for individual taxpayers with international aspects to their returns. And here are some additional resources that may be helpful. Here’s a link to the Treaties A-Z that includes links to all of the treaties between the U.S. and other countries, and those are listed in alphabetical order. And we have the numbers for Taxpayer Assistance both from inside and outside the United States.

And this does conclude the presentation portion of today’s webinar, so I’ll turn it back over to you, Candace.

Thank you, Cathy. Again, we have come to the end of our presentation session, and now we are about to kick off our live Q&A, okay? So, I’ll be moderating the Q&A session, but before we start, I definitely want to thank everyone for attending. I want to thank you for your patience during our technical difficulties. We truly appreciate it. We want to thank you for staying engaged during our presentation, which was titled U.S. Taxation of Employees of Foreign Governments and International Organizations, okay?

So earlier on, I mentioned that we want to know what questions you have for our presenters. Again, a lot of information was shared today. Some you may understand, some you may not understand, some you may want to try to relate to your own personal situation. So, this is going to be your opportunity to ask those questions. If you have not submitted your questions, there is still time. There’s still a limited amount of time, but there’s still time. So, what you need to do is go ahead and click on the dropdown arrow next to the Ask Question field and type in your question. And please, please make sure to click Send, okay? If you don’t click Send, we will not get the question.

Okay. So, Bethany, Emma, and Cathy are going to stay on with us to answer your questions. And one more thing before we begin, we want to say we may not have time to answer all of the questions submitted, because we’ve already been flooded up to this point with a whole lot of questions. So, we know we’re not going to be able to get to everyone’s questions, but we’re going to try to get to as many as time will allow. So, we’re going to try to be concise with those responses, but brief, okay? So, we can try to hit as many as we can.

So, let’s go ahead and get started with our questions.

So, I see the first question. I’m going to give this to Bethany, because I think this is in regards to something that you spoke about. So, it says, I am a consular employee and a dual citizen of the United States and the foreign government for which I am working. I am exempt from U.S. income taxes on my compensation from the consulate. Under the terms of the totalization agreement between the foreign government and the United States, I’m supposed to be covered by the foreign government’s social security system. What if I do not plan to ever go back there and would rather be covered by the United States Social Security Administration? Bethany, are you still with us?

I think I was on mute. Yeah, I’m sorry. I’m on mute. Did you say this was a green card holder?

This is a dual citizen. There’s a consular employee and a dual citizen of the United States and the government for which they’re working.

Okay. And, yeah, I spoke to that a little bit earlier too, I think, that if a person’s in a situation like that where they’re a dual citizen of the U.S. and another country and they know they’re not going back there and under the totalization agreement, the deal is that they have to pay to that country that they’d rather pay to the U.S., they should probably go talk to social security. I would not start paying him without talking to them, because you can’t. You have to talk to them, meaning, you don’t want to be in a position where you paid in money with no good reason.

So, you would want to go talk to them individually about your specific case. And I do know that a couple of years ago when we were in Washington, D.C., going to different embassies and doing some presentations, that someone on the HR staff at an embassy told me that they did do that. They were positioned in that same way. They had that same dilemma, and they did go to social security with it. And they were pleased with the way that worked out.

So, again, if you’re a U.S. citizen and a citizen of the other country, and as I mentioned earlier, it’s one of those countries that perhaps you don’t get to collect at all, and that was the situation here. She told me that when she retired here in the U.S., anything she paid into that other country would not be forthcoming, because that country does not mail checks outside the country for retirees from their social program. So that’s why she went to social security and worked something different out with them.

And I want to give that caveat now too. We aren’t able to speak much to social security other than what we’ve told you so far today. And, by the way, I saw a question where someone said, does self-employment tax, is that the same as social security? Yes, self-employment tax is comprised of social security and Medicare taxes. And so that’s what we mean when we refer to self-employment tax. And usually when you’re working for an employer, for most people, I’m not talking about this population, but if I’m working at some company here in the U.S., the employer remits employment tax on my behalf, and they take part of it out of my check. And so half of it comes from me, and half of it comes from the employer, right?

But if you’re working for a foreign government or international organization, they are not required to do that and you are considered self-employed, so if you’re a U.S. citizen solely for purposes of self-employment tax, social security, and Medicare tax. And I mean along those lines somebody asked about a simplified employee pension plan. I mean I think we covered that you cannot do that if you are with your wages from the foreign government or international organization, those do not qualify for a self-employed pension plan.

But somebody had typed into the questions that they have a job, a second job, a second form of employment and its self-employment and they wondered well the answer to that is subject to the limitations understanding that the only self-employment income that you can consider self-employment income for purposes of a SEP plan is the income that is not coming from your foreign government or international organization work, the work that you’re doing there.

So if you are, for example, selling Avon or something, or driving an Uber or what have you on the side, that income is normal self-employment income and it gets the same treatment as any normal self-employment income here in the U.S., meaning it does qualify you to have a Schedule C and other things, but only for that income, okay, the income from the activity other than working for a foreign government or international organization.

Okay. Thank you, Bethany. I actually do have a follow-up question that kind of correlates with what you just talked about. And the question is, if an individual is exempt from U.S. income tax on their foreign government compensation under the terms of the consular agreement, is that also extended to the state income tax?

Yeah, we can’t speak to state income tax. There’s 50 different states and what their specific rules are, I don’t know. So, unfortunately, that’s something you’d have to take up with your state income tax or state revenue department and they would be able to help you with that.

Okay. Thank you. Let’s see, Cathy, I see a question that I think relates to something that you spoke to. So, what is the difference between lawful permanent resident and green card holder?

Okay. Thanks, Candace. Yeah, so there is no difference between a lawful permanent resident and a green card holder, those terms are synonymous. So, a green card is just the physical identification card that serves as proof of this status, but there’s no difference between these two terms.

Thank you. Let’s see. Okay, Emma, I think this was something you spoke about. The question says, do U.S. citizens working outside of the U.S. have to pay self-employment taxes?

Yes, generally U.S. citizens working outside the United States have to pay self-employment taxes. However, a U.S. citizen is working outside the United States and who has earnings from a foreign government or international organization as wages is not required to pay self-employment tax on such income.

Okay. Thank you. And Emma, I’m going to pick on you again, because another question just rolls in and it looks like it’s related to something that you talked about. The question is, does the exemption from U.S. income tax for foreign government employees under the Vienna Convention also apply to state income taxes or only to federal income taxes?

So, we’re not able to address the effect of the Vienna Convention on state income taxes. Each state has their own tax rules. However, if you have questions with respect to state income taxes, you may want to contact the Department of Revenue in your state to address this particular question.

Okay. Thank you. I think that’s kind of similar to what Bethany was stating on one of the previous questions. And speaking of Bethany, I have another question for you. And that question is, how do I find if tax treaties exist with a given country and where can I find them if they do?

Okay. That’s a good question. And I also saw one that kind of ties in with that where someone wondered about the definition of an international organization. I think there was a slide that did speak to the international organization definition. But if you’re wondering where to find a list of international organizations, or where to find a list of treaties, the State Department has that information on their website. They have a comprehensive and it’s pretty big booklet called Treaties in Force. However, we also have income tax treaties. So, if it’s an income tax treaty, IRS.gov has a page called Treaties A-Z. So, if you go to that page, you can see the tax treaties there.

Now, it’s important to know that when you’re looking at these treaties, sometimes you’ll see more than one item there. Sometimes you’ll see a treaty and you’ll see protocols to the treaty, which are like amendments. So, you would need to make sure you’re tracing it through properly. So, if you see a treaty and then the treaty was amended twice, you have to see what changed during those two protocols, as they call them.

And if you find that difficult, there are places, and for a layperson, I mean, if you’re an accountant, you probably have access to professional platforms where you can look for what we call integrated versions of the treaty. And that’s something where someone was smart enough to take it and incorporate all the changes and say, this is the treaty as amended through this date. So that’s handy.

But, if you go to your local library, if you don’t have that, I would go to your local library. I’m sure a librarian there would be able to give you a printout of an integrated version of the applicable treaty. And when it comes to consular agreements, those can be hard to find too. But if you go to Department of State’s list of Treaties in Force, then you can see what the applicable consular agreement may be and go to your local library and ask them to print that out. And because if you’re a layperson without access to a professional platform, it’s not going to be easy to find. But it is doable and thank goodness for the librarians. They do help us with things like that.

I hope that answers some of that. And also, yeah, the international organizations that you can also find, I believe it’s on Department of State’s website, that there’s a list of international organizations.

Thank you, Bethany. So this next question, I believe, is going to be for Cathy. Okay, so we know that Puerto Rico is a beautiful vacation spot. We know that. But the question is, is Puerto Rico considered a foreign government?

Okay. So, yeah, today’s webinar, we were focusing on foreign governments and international organizations. And this does not include U.S. possessions or some people call them territories like Puerto Rico. The territories and possessions, they have their own tax rules, their own exceptions, it’s a different animal. So, no, the rules and the items that we have discussed today do not pertain to Puerto Rico or any other U.S. territories.

Great. Thank you, Cathy. Bethany, you are pretty popular today with your information. I think I have another question for you. And the question is, could you explain if a spouse of a NATO to official working foreign embassy has to pay taxes in the U.S. or in the home country? And I can repeat that if you need to.

Okay. So, it sounds like you said the spouse of a NATO member?

Correct.

It’s a little hard to understand the wording on that question, but the person working, I’m going to assume that what they’re saying is the person who’s working at the embassy is the spouse of the NATO member. But regardless, I guess, let me just say this that in an individual who is a NATO member with NATO 1, 2, 3, 4, 5, or 6. So, the NATO member, if they are in the U.S. solely for purposes of performing their official duties with NATO, then they can exclude their days of presence in the United States.

For purposes of the Substantial Presence Test, and that’s under Article 10, Paragraph 1 of the NATO Status of Forces Agreement. And that article also speaks to taxation, that members of a force or civilian component of NATO are exempt from taxation in the receiving states. So, if they’re in the United States and they came here from elsewhere, if they were sent here by another country and they’re here in the U.S., then it would be here that they’re exempt in the receiving state on the salary, paid to them as such members by the sending state, meaning the foreign country that sent them here, okay?

Now, as far as other family members who are present under a NATO visa, but are not themselves a NATO member, they are not considered foreign government related individuals and they have to count all of their days of presence in the United States for purposes of the Substantial Presence Test. And as far as the taxation of their income from, I think, it was a foreign embassy, that’s what they said. As far as that goes, that would be determined under any applicable agreements.

And I do want to, Erika, if it’s okay, I want to take a few minutes because it’s a lot of information that we’ve covered and it can seem kind of overwhelming, because there’s so many different angles. I think everyone attending is beginning to realize that there’s several very important components here. One of them is who is that employee? Who are you? A U.S. citizen, a green card holder, an actual diplomat with diplomatic status, or somebody with some other kind of visa who’s not a U.S. individual. It can also matter whether you were hired locally or not, meaning if you were already here when you started working or not for the embassy or the consulate or foreign government component. So, that’s important, your residency status, whether you were hired locally or not, and then also which country the person’s working for and whether or not they’re a citizen of the country that’s employing them can also come into play. So there’s a lot.

But to try to simplify it, I was thinking about it the other day, and to make it as simple as possible if an individual is a U.S. citizen. That would be the first question I would ask someone, are you a U.S. citizen? And if the answer to that is yes. Then, my next question would be, are you a dual citizen of the United States and any other country? And if the answer to that is no. Then, regardless of whether you’re working for an embassy or a consulate, your wages are going to be subject to U.S. income tax. So I hope that helps simplify a whole bunch right there. If you’re a U.S. citizen and you’re not a citizen of any other country, then your compensation from a foreign government is going to be subject to U.S. income and self-employment tax.

Now, if you are a dual citizen of the U.S. and another country, my next question would be, is the country Canada? If it is, I looked at all of our treaties in the last couple of weeks. Canada appears to be the only one whereby the dual citizen can be exempt working at the embassy. So, if you’re working for an embassy and you’re a U.S. citizen, and it’s Canada, then you would have an out under the treaty.

If you’re a dual citizen of the U.S. and the Philippines, you would have an out under Section 893 of the code if you’re working at an embassy, or working for a consulate office, either one, working for a foreign government. So, if you’re working for a foreign government and you’re a U.S. citizen, you hope you’re a citizen of Canada or the Philippines if you want to escape U.S. taxation on that.

And then, if the answers to those questions were no, if the person told me, well, no, I was working for a consulate, I wasn’t working for any other government component, just a consulate. Then I would say, okay, were you a citizen of the country of whose consulate you’re working at? And if the answer to that’s yes, you would have to look and review the consular agreement. Some of them, definitely not all of them, maybe not even most of them, but some of the consular agreements between the U.S. and foreign countries allow an exemption from U.S. taxation if the individual is a citizen of that other country. Most often, many times it doesn’t. If you’re a U.S. citizen, you often still will have to pay tax, but you have to look carefully at the consular agreement, and those are complex, and there are different ones for each country. So, if you’re a consular employee, you’ve got to dig a little harder.

Now, that was about the U.S. citizen, so I hope what I made clear was, if you’re a U.S. citizen and you’re not a dual citizen of the U.S., and you don’t have citizenship in any other country, regardless of whether you’re working for whatever part of the foreign government you’re working for, you’re going to be taxed. But, if you are a dual citizen of Canada or the Philippines, you could have an out. If you are a green card holder, then the question becomes, are you a citizen of Canada employed by the Canadian government? And I also wanted to note, it has to be you working for the Canadian government, when I said that about the U.S. citizen.

And same thing with the green card holder. You’re a green card holder, you’re working for the Canadian government, and you’re also a citizen of Canada, then you would have an out under that treaty. If you are a green card holder and a citizen of China working here in the U.S. for the Chinese government, you would get an out under the treaty. And the old USSR treaty is still in force for a number of countries. And if you are a green card holder and a citizen of a country for which it is still in force, and again, you can check on Treaties in Force on the State Department’s website. I believe those people also have an out under the treaty, the dual Chinese-U.S. citizen does not get that. So that doesn’t apply to a U.S. citizen, but it would to a green card holder. So, I hope that clears some of it up.

And if you’re working for a consulate, then if you are a citizen of the government for whose consulate you’re working for, there’s a chance, you can look at the agreement. And in some instances, some consular agreements, you don’t have to be a citizen of that country. So, you would want to look closely at the consular agreement if you’re a consular employee.

Anyway, I hope that helped clear some of this up or just make things a little more simple, I hope.

I hope so as well. This is Lindsey, could I jump in for a sec? So I think that the point you made is absolutely right on spot on for the people on the audience who are employees from yours and Emma’s and Cathy’s presentation today. This is a very complex area. This is Lindsey Stellwagen. I am Special Counsel International on D.C. office. My office litigates a lot of these cases that we have many years. Bethany’s team has reached out across the D.C. area and indeed the country to provide training and information to people trying to get this right. But it is complicated. A lot of the embassies, international organizations and consulates, HR departments are excellent sources of information.

But you have to be very wary of the tax advice that you may be getting from your cubicle partner or your layman or somebody on your team, because they could be in completely different status. You may have somebody with an A visa. You may have somebody who’s with NATO. You may have somebody from a different country than you or has a different immigration status than you. And so, I would urge everyone to take a close look at the IRS information and then their HR department. And if they still have questions, they are not finding clarity and certainty to perhaps consider going to see a tax practitioner, someone who has experience in this area. And it’s important that they have experience in this area, because it is complex and many practitioners haven’t had exposure to it.

So I would just say we sympathize, but there is a lot of information out there. There has been a lot of litigation. And some of these questions have been cleared up by the courts. But seek advice from a tax practitioner and not your best friend. Thanks.

All right. Thank you so much, ladies. Thank you, Lindsey. We thank you for popping in. Lindsey is actually with our Counsel Department, so we thank you for giving us some legal clarification with the information that Bethany shared with us. So, we are actually at the point where we’re going to have to start wrapping up. That is all the time that we have for questions. I want to thank Cathy, Emma, and Bethany for answering the questions, sharing the knowledge and expertise that they have. Also, thank you again, Lindsey, for stepping in.

But before we start to wrap up today’s webinar, guess what? We have one final polling question. So, I need you guys to not let me down on this one, because it’s fairly easy, so we should get 100% on this one. So, our last polling question is actually an attendance check. So, please select the Radio button on the screen. And if you do not receive the polling question, or if you don’t get the pop-up, go ahead and add only the letter A as your response in the Ask Question text box. And we’re going to make sure that your response is timestamped. So, I would give you guys a few more seconds to go ahead and click on that Radio button or put the letter A in the Ask Question box. Hopefully we should get 100% rate on that. If not, I have some questions for you all, okay?

All right. So, we are going to stop polling now. We want to thank you for your responses and participation with our polling questions. And before we close out today’s session, Cathy, can you go ahead and share some key points that you want our attendees to remember from today’s webinar?

Yes, Candace, I sure can. So to wrap up, generally, U.S. citizen employees of foreign governments and international organizations must report their earnings as wages and pay self-employment tax. Lawful permanent residents or green card holders must generally report such earnings as wages, but are not subject to self-employment tax on them. And a non-immigrant visa holder’s foreign government or international organization compensation is subject to U.S. income tax unless the individual qualifies for an exemption under the terms of an applicable international agreement or IRC 893. In signing Form I-508, when applying for a green card results in losing any tax exemption applicable with respect to foreign government or international organization compensation, but has no effect on any tax exemption derived under an international agreement.

Turning it back over to you, Candace.

Thank you, Cathy. Those were some great key points. And I want to thank you for sharing that information with us. So, we are planning additional webinars for the rest of the year, just like the one that you attended today. So, to register for the upcoming webinars, please visit IRS.gov, keyword search webinars. When you go on to IRS.gov, there’s a box up to the top right. You’re going to type in webinars in that search bar and make sure to press enter. You’re going to go to the page, and when that landing page comes up you’re going to select the webinars for tax practitioners or if you’re interested in a webinar for small business, you’re going to select webinars for small businesses, okay?

When appropriate, we will offer certificates and CE credit for upcoming webinars. We also invite you to visit the IRS YouTube page at www.youtube.com/irsvideos. There, you can view available recorded versions of our webinars and other key video messaging once posted. Again, continuing education credits or certificates of completion are not offered if you view an archived version of any of our webinars, okay? So if you did not attend the live webinar and you go back to watch your recording, please do not expect to receive a certificate or CE credit.

I want to give another big thank you to our presenters, Emma, Cathy, and Bethany for another great webinar. I also want to thank you all for joining us today and for participating in are you smarter than the IRS with me as your show host, and also for listening in on our webinar. We hope that the information that was shared is useful to you, that you are able to take it back and apply it to your clients or your own personal situation. The webinar again today was titled U.S. Taxation of Employees of Foreign Governments and International Organizations.

Remember, if you attended today’s webinar for at least 100 minutes after the official start time and answered at least four polling questions during the live broadcast, you will receive a certificate of completion for two IRS CE credits. Now, if you attended for at least 50 minutes after the official start time and answered at least three polling questions during the live broadcast, you will receive a certificate of completion for one IRS CE credit, okay? So, if you didn’t get to say the whole time, there still is an opportunity for you to receive one credit.

Remember, the polling question example that we did at the very beginning of the webinar will count towards the minimal question response requirement. It is important for you to know that certificates of completion will be emailed to the registration email address of the qualifying participants as a PDF attachment. The email will come from the email address seen on this slide. Please add this email address to your contacts to ensure you receive the email with a certificate attached. If you don’t have the email address, there is a possibility that the email may end up in your spam or your junk file. And we don’t need you guys emailing us back saying, “Hey, I didn’t receive my certificate. I didn’t receive the email.” So please, please, please make sure that you go in and add this email address to your contact to make sure that the email comes directly into your inbox.

If you qualify for IRS continuing education credit for this webinar and registered with your valid first name, last name, and PTIN as it appears in your IRS PTIN account, your CE credit will be posted in your IRS PTIN account. I have to reiterate, the information must match; if the information does not match, you will not see that CE credit pop-up in your account. So, please make sure that that PTIN matches the PTIN that is related to the PTIN account that you’re looking to see that CE credit in. If you are eligible for continuing education from the California Tax Education Council, your credit will be posted to your CTEC account as well.

Now, we would appreciate if you would take a few minutes to complete a short evaluation before you exit. We want to know how we did today. If you’d like to have more sessions like this one, go ahead and let us know. If you have thoughts on how we can make the sessions or webinars better, please let us know that as well. Okay. We have tough skin. We will not be offended by any negative response. We want to give all the feedback. So please, please, please make sure that you are given that feedback.

If you have any requests for future webinar topics or pertinent information that you’d like to see in an IRS fact sheet, tax tip, or FAQ, Frequently Asked Questions, on IRS.gov, then please include your suggestions in the comments section of the survey. Click the survey button on the right side of your screen to begin. If it doesn’t come up, check to make sure that your pop-up blocker is disabled, okay?

It has definitely been my pleasure to be here with you on behalf of the Internal Revenue Service and our presenters. Again, my name is Candace Harden. I’m a Senior Tax Analyst with the Internal Revenue Service. And I want to thank you for attending today’s webinar. It’s important for the IRS to stay connected with the tax professional community, our individual taxpayers, industry associations, as well as our federal, state, and local government organizations. You definitely make our jobs a lot easier by sharing information that allows for proper tax reporting.

Thanks, again, for your time and attendance. We hope that you found the information valuable. Going back, if you qualify for the CE credits, okay, and you have not received your certificate or your credit by September 22nd, okay, this is important, please make sure you email us at the following email address. And I think that they have the slide back up, but if they don’t, the email address is CL.SL.Web.Conference.Team@IRS.gov, okay? I’m going to repeat that again, CL.SL.Web.Conference.Team@IRS.gov, please wait until September 22nd before you email, okay? If you email us before September 22nd, then you’re probably not going to get a response until after September 22nd, so please do not email us before that date.

If you’re interested in finding out who your local stakeholder liaison is, and everyone should be interested, we want you to visit IRS.gov or send an email to the address shown on this slide and we’ll send you that information, okay? This email address can also be used for the next couple of weeks by designated human resource staff at various embassies to submit some of these specific or individualized questions that we couldn’t answer during today’s Q&A session. Emails received from identified HR staff will be accepted and appropriately routed until September 30th. Any messages after this date will no longer be captured for consideration by the web conference team, okay? But, if you’re sending anything after September 30th, we will not be responding back. So, if you have any questions, please drop those questions through your HR staff as soon as possible.

Again, we want to thank you. It has been our pleasure to present this information to you. We thank you for your time, your attendance, and your patience, and we will see you next time. You may exit the webinar at this time.