How do I stop my U.S. employer from withholding federal tax on wages I plan to exclude with the FEIE?

File Form 673 (Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion) with your U.S. employer to stop federal income tax withholding on wages you expect to exclude under the Foreign Earned Income Exclusion. Without it, your employer withholds at normal rates, and you wait until filing to claim a refund.

How Form 673 works:

• You certify that you expect to qualify under either the Physical Presence Test or the Bona Fide Residence Test
• Your employer stops withholding federal income tax on wages up to the FEIE cap ($130,000 for 2025)
• The form does not stop FICA (Social Security + Medicare) withholding, which continues unless a totalization agreement applies
• It does not stop state withholding, which requires a separate state-specific process

When to file Form 673 vs. adjust your W-4:

Risks to manage:

• If you fail to qualify for the FEIE (e.g., return to the U.S. early and miss the 330-day threshold), you owe the full tax plus potential underpayment penalties
• If your income exceeds the FEIE cap, the excess is still subject to U.S. tax and should have estimated payments or W-4 withholding
• Form 673 must be renewed each year; it does not carry forward automatically

For more on FEIE qualification and filing, see our Foreign Earned Income Exclusion guide. If you’re a Corporate Expat, Greenback can help coordinate your employer withholding with your expat tax strategy.