What Is IRS Publication 516?

IRS Publication 516 is a document published by the Internal Revenue Service (IRS) that details the income tax requirements for United States citizens working for the government in a foreign country. Tax rules applying to U.S. citizens working abroad are fairly similar to those followed by citizens working at home, though some expenses are treated differently.

The usual filing date for a U.S. tax return is April 15th.

Key Takeaways

  • IRS Publication 516 is for U.S. citizens working for the United States Government and stationed abroad.
  • It explains the tax treatment of certain allowances and expenses that they may receive.
  • The Publication's latest revision was in November of 2018.

Understanding IRS Publication 516 (U.S. Government Civilian Employees Stationed Abroad)

U.S. citizens are taxed on their worldwide income. Those working in territories considered U.S. possessions—Puerto Rico, American Samoa, the Virgin Islands, and the Commonwealth of the Northern Mariana Islands—are not subject to the guidelines in IRS Publication 516, and should use IRS Publication 570 (Tax Guide for Individuals with Income from U.S. Possessions).

If you are a U.S. citizen working for the U.S. Government, including the foreign service, and you are stationed abroad, your income tax filing requirements are generally the same as those for citizens and residents living in the United States. You are taxed on your worldwide income, even though you live and work abroad.

However, you may receive certain allowances and have certain expenses that you generally do not have while living in the United States. This publication explains:

  • Many of the allowances, reimbursements, and property sales you are likely to have, and whether you must report them as income on your tax return, and
  • Many of the expenses you are likely to have, such as moving expenses and foreign taxes, and whether you can deduct them on your tax return.

Note that If you have or had foreign financial assets, you may have to file IRS Form 8938 with your return.

Recent Changes to Publication 516

Publication 516 is revised from time to time as tax laws and regulations change. The latest such revision was made in November of 2018, which included the following modifications:

No Miscellaneous Itemized Deductions Allowed

You can no longer claim any miscellaneous itemized deductions, including the deduction for unreimbursed job expenses. Miscellaneous itemized deductions are those deductions that would have been subject to the 2%-of-adjusted-gross-income limitation.

Unreimbursed Employee Expenses

Only Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses can deduct certain expenses such as travel expenses, and other expenses connected to your employment. Due to the suspension of miscellaneous itemized deductions subject to the 2% floor under section 67(a), employees who do not fit into one of the listed categories cannot deduct employee business expenses.

Moving Expense Deduction Suspended, Except for Certain Armed Forces Members

Beginning in 2018, as part of a provision contained in the Tax Cuts and Jobs Act (TCJA) of 2017, the moving expense deduction for tax years after 2017, and before Jan. 1, 2026, is temporarily suspended, except if you are a member of the Armed Forces on active duty and, due to a military order, you move because of a permanent change of station.