Marshall Islands - Foreign Income???

[rkamp]

I have a client in the US Army with a W-2 showing $84,035 income. He prepared the return offsetting all of the income on a Form 2555.
I don't see how this can be considered foreign wages??? Am I missing something?

Thanks for your assistance.

Rick

[Roland Slugg]

You say he is a client ... yet he prepared his own return? In what capacity, then, is he a client?

The FEIE was probably an error. Although the Marshall Islands are now an independent country, if he was working there as an employee of the United States government, I don't believe he is eligible to exclude the income. (Code §911(b)(1)(B))

[Corduroy Frog]

It is Foreign Income

I worked on an Army Contract for logistic support of Kwajalein Island (part of the Marshalls).

The guy running the payroll had fits. Firstly, the salary paid to contractor-employees was in fact
subject to the foreign income exclusion. However, they first had to QUALIFY by being on the
island for the specified length and calendar year qualifiers.

There was considerable consternation in December, as employees tried to pick and choose when
to receive their bonuses, vacation pay, or severance. Getting paid in the wrong calendar year
could mess up their exclusion for such pay, and also provide proof that they were (or were not)
on the Island for a portion of a particular calendar year.

[rkamp]

Doing this year's return

You say he is a client ... yet he prepared his own return? In what capacity, then, is he a client?

The FEIE was probably an error. Although the Marshall Islands are now an independent country, if he was working there as an employee of the United States government, I don't believe he is eligible to exclude the income. (Code §911(b)(1)(B))

The client brought me last year's return and he had the income excluded using Form 2555. He had prepared his own return for last year.