Foreign Earned Income Credit -- still confused

[appelman]

According to Pub. 54:

"Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements.
Your tax home is in a foreign country.
You meet either the bona fide residence test or the physical presence test."

A client has worked and had his tax home in a foreign country for all of 2013. However, because of taking too many trips back home, his period of physical presence does not begin until July 1, running through June 30 of 2014. Is only his earned income from July 1 through December 31 considered foreign earned income in 2013?

[Burke]

The 2013 instructions say the 12-month period can begin or end in a year other than 2013. This can mean a previous year or a future year. If you use 7/1/13 to 6/30/14, and then it turns out that the physical presence test is not met for one reason or the other in 2014, you would have to amend 2013, is my understanding.

[appelman]

Not quite my question.

Assuming everything goes as planned, if your physical presence period started July 1 of 2013 (and you have no other such period covering the 1st half of the year), are you limited to excluding only the 2013 foreign income for the 2nd half of the year on your 2013 return?

Incidentally, regarding Burke's comment, it may be even worse than that. I have seen references that say you can't file your return until the end of the 12-month period, which would pose some problems if a period ended later than October 15 of the following year.

[Burke]

Assuming everything goes as planned, if your physical presence period started July 1 of 2013 (and you have no other such period covering the 1st half of the year), are you limited to excluding only the 2013 foreign income for the 2nd half of the year on your 2013 return?

I believe that is correct. See your original post. It is for income "you receive for services during a period in which you meet the.....requirements."

[New York Enrolled Agent]

Assuming everything goes as planned, if your physical presence period started July 1 of 2013 (and you have no other such period covering the 1st half of the year), are you limited to excluding only the 2013 foreign income for the 2nd half of the year on your 2013 return?

Incidentally, regarding Burke's comment, it may be even worse than that. I have seen references that say you can't file your return until the end of the 12-month period, which would pose some problems if a period ended later than October 15 of the following year.

If I understand your question correctly, I think you need to use Form 2350 and file the tax return after the physical presence test is met.

[appelman]

I missed that form!

It's actually more Burke's question than mine, but it's good to know about that form. Thanks. I think Burke has confirmed what I had suspected to be the case (sob!).

[Burke]

NYEA is correct. If you file a timely return and have not yet met the physical presence test, then you must pay the tax on that income, and THEN amend later with Form 2555 once the test is met. (Pub. 54) Or, you can, alternatively, file Form 2350 which can give the TP an extension up to 12/15/xx to file which should cover the period of time needed to meet the test.