Can anyone help with foreign income exclusion? Bees?

[Zee]

I posted this plea for help some time ago, but there were no responses. I have a son moving to the UK for a job around December 1st. I've just begun to read Pub 54, and have a few questions (probably more when I complete the readings).

I'm very concerned that my son will end up owing a lot of taxes because of not planning properly and accurately calculating (and paying) estimated taxes. My understanding is he'll be paid in UK pounds. I assume they will deduct UK taxes, and UK social security taxes.

He'll be traveling extensively in Europe, and often to the US on business trips.

1. Since his income must be reported in US dollars and the exchange rate fluctuates daily, how is this calculated. Does he need to use the exchange rate each payday? If so, that's lots of record-keeping he won't be good at.

2. If he's required to pay UK social security taxes, will US social security taxes also need to be paid? I don't think so, but I'm not sure.

3. I assume if he's still outside of the US traveling on business, those days still count in the 330 days, right? What about business trips to the US? Are those considered part of the 330 days, or not? I think not. If not, that's one of my real concerns because it sounds like he'll have to spend quite a bit of time in NYC.

I sure hope I can find someone on this board that can help me through this thing maybe with some simple examples. I've done a search and looked at some previous postings.

HELP!

[erchess]

Conversions

The only part of this I can help you with a little is currency conversions. The IRS will provide a rate near the end of the taxable year that can be used. I do not know whether any other rate can be used.

Also will he be paid in Great British Pounds or in Euros? The tax principles work the same either way but obviously the conversion rates could be different unless the GBP is tied to the Euro which for all I know is possible. I'm not even sure the GBP is a valid currency any more. (I mean try spending a US Gold Certificate. The same people who collect coins might like to buy it from you but you can't buy groceries or pay the rent with it and if someone gives it to you in exchange for your labor you have barter income.)

[travis bickle]

Believe it or not,

I posted this plea for help some time ago, but there were no responses. I have a son moving to the UK for a job around December 1st. I've just begun to read Pub 54, and have a few questions (probably more when I complete the readings).

I'm very concerned that my son will end up owing a lot of taxes because of not planning properly and accurately calculating (and paying) estimated taxes. My understanding is he'll be paid in UK pounds. I assume they will deduct UK taxes, and UK social security taxes.

He'll be traveling extensively in Europe, and often to the US on business trips.

1. Since his income must be reported in US dollars and the exchange rate fluctuates daily, how is this calculated. Does he need to use the exchange rate each payday? If so, that's lots of record-keeping he won't be good at.

2. If he's required to pay UK social security taxes, will US social security taxes also need to be paid? I don't think so, but I'm not sure.

3. I assume if he's still outside of the US traveling on business, those days still count in the 330 days, right? What about business trips to the US? Are those considered part of the 330 days, or not? I think not. If not, that's one of my real concerns because it sounds like he'll have to spend quite a bit of time in NYC.

I sure hope I can find someone on this board that can help me through this thing maybe with some simple examples. I've done a search and looked at some previous postings.

HELP!

you don't need any help. You have already been doing your homework and your message hits all the salient points.

#1 - F2555 itself says to use the exchange rate in effect when the income is received, or constructively received. Quite frankly,I would just look up in a news paper what the average exchange rate was per month and go with that. Tell your son to do that and staple it to his paystubs. If he does not want to "bother" doing that, that's his decision.

#2 - No.

#3 - Per pub 54, the 330 days MUST be in a FOREIGN country. And, the IRS says they must be "24 hour days", i.e., if you arrive at 00:15 on December 1, that day does not count -- you were "only" there 23 hours and 45 minutes [please do not shoot the messenger]. Also, travel over international water while going to/from the United States does not count towards the 330 days [pub 54, page 14] So, if he left a country at 23:45 on Feb 1, that day does not count [not 24 hours] and the traval time over the ocean does not count towards the 330 days.

Your son has to decide which he likes better, the income exclusion [with record keeping] or his job.

[Zee]

#3 - Per pub 54, the 330 days MUST be in a FOREIGN country. And, the IRS says they must be "24 hour days", i.e., if you arrive at 00:15 on December 1, that day does not count -- you were "only" there 23 hours and 45 minutes [please do not shoot the messenger]. Also, travel over international water while going to/from the United States does not count towards the 330 days [pub 54, page 14] So, if he left a country at 23:45 on Feb 1, that day does not count [not 24 hours] and the traval time over the ocean does not count towards the 330 days.

Thanks for the response. I haven't digested the 24 hour day requirements. Would he 24 hour requirement traveling back to the US
for business work the same when counting the travel time over the international water? That is, would the time over international water not be included as time away? Or, is the time over international water always assumed to be time in the US?

[travis bickle]

Pub 54 and F2555 help here.

Thanks for the response. I haven't digested the 24 hour day requirements. Would he 24 hour requirement traveling back to the US
for business work the same when counting the travel time over the international water? That is, would the time over international water not be included as time away? Or, is the time over international water always assumed to be time in the US?

In Pub 54, -- on page 14 -- it reads that the time while over international water WHILE TRAVELLING TO/FROM THE USA does not count.

On F2555 itself, on page 2 it reads
"If you traveled abroad during the 12-month period entered on line 16, complete columns (a)–(f) below. Exclude travel between foreign countries that did not involve travel on or over international waters" [emphasis added].

So, if your son travels from London to the Philippines, the time he spends over international waters does count towards the 330 days, because he is NOT going to/from the USA

Since the 12 month period [for counting the 330 days] can start ANYTIME, sit down and map things out with your son; have him take 3 weeks vacation in Europe, then 3 weeks vacation in Canada at the tail end of the 12 months. Heck, have him begin the 12 month period with a 3 week vacation in Canada. It matters not to the IRS.