What is the purpose of payroll tax form 673?

The purpose of payroll tax form 673 is to claim exemption from withholding on foreign earned income. This form is specifically designed for U.S. taxpayers who are working abroad and qualify for the foreign earned income exclusion under the Internal Revenue Code. By submitting this form to their employer, eligible employees can inform the employer that they are exempt from federal income tax withholding on the income earned outside the United States.

This form allows taxpayers to benefit from the foreign earned income exclusion without necessarily having to pay federal income tax on that income during the withholding period. It is a significant benefit for individuals who meet the qualifications and provides them the ability to manage their tax liabilities effectively while living and working outside the country.