Foreign Earned Income Exclusion

[Bill Tubbs]

I thought this could be elected or not elected each year, but Pg 19-20 of Pub 54 apparently shoots that down big-time!

"Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it."

"If you revoked a choice and within 5 years again wish to choose the same exclusion, you MUST APPLY FOR IRS APPROVAL." [emphasis added]

So... client moved to England in Sep 2005. Was figuring on filing F2350 to extend her 2005 return until after she will pass the physical presence test. I guess this year maybe we not elect to exclude the foreign earned income. That way next year we could easily choose whether to exclude or not -- if we would choose to exclude for 2006, then we could amend 2005 to also exclude for 2005 -- but if we exclude for 2005 but then not for 2006 (we'd actually have to revoke the exclusion) and then we couldn't re-elect to exclude unless we applied for IRS approval.

Any thoughts, y'all?

Bill

[Unregistered]

Presumably you will file a 2350 for 2005 as most folks do, while you wait for a qualifying period. Wherein the problem?

[JON]

I am

missing something. If you can qualify why would you not. When you can not qualify then you are stuck. Unless you have some other NOL why would you not want to exclude income from your income tax return?????

[Unregistered]

I agree; the only reasons why I sometimes choose not to exclude are to claim refundable child credit or if the individual has a vunerable green card and claiming the exclusion puts this at risk with Homeland Security.