Stevenson G. Smith, CPA
September 12, 2012
When a U.S. citizen works in another country, that person is often subject to different
taxation, or even double taxation, compared to someone who both lives and works in the U.S.
Tax equalization, also spelled as tax equalisation, is the process of accounting for
those differences so that a third party, such as an employer, can compensate the worker in such a way that
working abroad will have little or no effect on the worker.
The process involves:
Calculating the hypothetical tax that the worker would pay if he or she simply lived and worked in the
Calculating the actual tax, and
Calculating the compensation the worker needs to receive to ensure that all taxes above and beyond the
hypothetical (including the taxes on the new compensation intended to offset taxes) will have no net
tax impact on the worker, thus sheltering the worker from the extra taxes paid because they are living
This is most commonly seen when multinational corporations assign employees to work oversees
and offer the tax equalization as an incentive.
As you might imagine, the laws and calculations involved are exceedingly complex, so you
need not just any CPA, but a CPA experienced in tax equalization. We at Stevenson Smith have decades
of mastery of expatriate taxes, international taxation, and tax equalization.
Call us at (801) 234-4202 anytime during business hours (8 to 5 Mountain Standard Time) to set up a
free consulation, or you can simply request a call from Steve using the convenient form below: