Foreign earned income exclusion

[Bonnie]

Customer has been overseas since Aug 08 and we filed an extension for 08 and did his return after the year was up to qualify him for the exclusion. He made a couple trips home in April and Aug of 2009 but was within the 330 days out of country to qualify for the exclusion. Now he's wanting to come home again for Christmas. If he does and uses the calendar year of 2009 as his qualifying period he will not be out of country for the 330 days for 09, So to get around this he's wanting to stay until Aug 2010 and not come home again until then and use Aug 09-Aug 2010 as his qualifying period for 2009. Is this possible? In reading the regulations it just states he must be present in a foreign country for 330 days in 12 consecutive months. Is this ok to do so he can come home again at Christmas or will another trip back in Dec disqualify him?

Thanks for any help and thoughts on this.

[travis bickle]

you are correct

Customer has been overseas since Aug 08 and we filed an extension for 08 and did his return after the year was up to qualify him for the exclusion. He made a couple trips home in April and Aug of 2009 but was within the 330 days out of country to qualify for the exclusion. Now he's wanting to come home again for Christmas. If he does and uses the calendar year of 2009 as his qualifying period he will not be out of country for the 330 days for 09, So to get around this he's wanting to stay until Aug 2010 and not come home again until then and use Aug 09-Aug 2010 as his qualifying period for 2009. Is this possible? In reading the regulations it just states he must be present in a foreign country for 330 days in 12 consecutive months. Is this ok to do so he can come home again at Christmas or will another trip back in Dec disqualify him?

Thanks for any help and thoughts on this.

The 12-month period does not have to be a calendar year, merely any 12 consecutive months. The good part is that the months can overlap from one year to the next (e.g., a client uses Jan to Dec 2008. Then next year they use Sep 2008 to Aug 2009, etc). This seems to be too good to be true when you consider you are dealing with the IRS (because of this alone, I ALWAYS have to look this up for every client each time -- "It's too good to be true")

Remember, when you count your 330 days, travel days to/from US do not count [but you sound like you already know this].

And, last but not least, congratulations. It sounds as if you have a client who discusses tax issues with YOU before they commit the deed.

[Kram BergGold]

bona fide residence test

for 2009 try using bona fide residence test.

[Bonnie]

The 12-month period does not have to be a calendar year, merely any 12 consecutive months. The good part is that the months can overlap from one year to the next (e.g., a client uses Jan to Dec 2008. Then next year they use Sep 2008 to Aug 2009, etc).

If we use Aug 09- Aug 2010 does this lessen the amount of exemption he qualifies for? In other words to get the full exemption of 91,400 does he have to use a calendar year? Or will he still get the full amount of the exemption by using over lapping years? I know they get a % of the full exemption if they are only there part of a calendar year, so not sure how this would work in this situation.

[travis bickle]

No

. . . . If we use Aug 09- Aug 2010 does this lessen the amount of exemption he qualifies for? In other words to get the full exemption of 91,400 does he have to use a calendar year? . . . .

NO.

Review IRS pub 54 - pages 11 through 22 specifically address the Foreign Earned Income and Housing: Exclusion - Deduction

Pages 15ff are replete with examples that will help you