Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad

•

Revoking the Exclusion

period of 12 consecutive months that includes

A return amending a timely-filed return.

330 full days. If you qualify for the foreign earned

Amended returns generally must be filed

You can revoke your choice for any year. You do

by the later of 3 years after the filing date

income exclusion under the physical presence

this by attaching a statement that you are revok-

of the original return or 2 years after the

test for part of a year, it is important to carefully

ing one or more previously made choices to the

tax is paid.

choose the 12-month period that will allow the

return or amended return for the first year that

maximum exclusion for that year.

•

A return filed within 1 year from the origi-

you do not wish to claim the exclusion(s). You

nal due date of the return (determined

must specify which choice(s) you are revoking.

Example. You are physically present and

without regard to any extensions).

You must revoke separately a choice to exclude

have your tax home in a foreign country for a

foreign earned income and a choice to exclude

16-month period from June 1, 2007, through

You can choose the exclusion on a return filed

foreign housing amounts.

September 29, 2008, except for 16 days in De-

after the periods described above if you owe no

If you revoked a choice and within 5 years

cember 2007 when you were on vacation in the

federal income tax after taking into account the

again wish to choose the same exclusion, you

United States. You figure the maximum exclu-

exclusion.

must apply for IRS approval. You do this by

sion for 2007 as follows.

If you owe federal income tax after taking

requesting a ruling from the IRS.

into account the exclusion, you can choose the

1. Beginning with June 1, 2007, count for-

Mail your request for a ruling, in dupli-

exclusion on a return filed after the periods de-

ward 330 full days. Do not count the 16

cate, to:

scribed above if you file before IRS discovers

days you spent in the United States. The

that you failed to choose the exclusion. You

330th day, May 11, 2008, is the last day of

must type or legibly print at the top of the first

Associate Chief Counsel (International)

a 12-month period.

page of the Form 1040 “Filed pursuant to section

Internal Revenue Service

2. Count backward 12 months from May 10,

1.911-7(a)(2)(i)(D).”

Attn: CC:PA:LPD:DRU

2008, to find the first day of this 12-month

If you owe federal income tax after taking into

P.O. Box 7604

period, May 11, 2007. This 12-month pe-

account the foreign earned income exclusion

Ben Franklin Station

riod runs from May 11, 2007, through May

and the IRS discovered that you failed to choose

Washington, DC 20044

10, 2008.

the exclusion, you may still be able to choose

Because requesting a ruling can be complex,

the exclusion. You must request a private letter

you may need professional help. Also, the IRS

3. Count the total days during 2007 that fall

ruling under Income Tax Regulation 301.9100-3

charges a fee for issuing these rulings. For more

within this 12-month period. This is 235

and Revenue Procedure 2008-1.

information, see Revenue Procedure 2008-1,

days (May 11, 2007 – December 31,

Revenue procedures are published in the

which is published in Internal Revenue Bulletin

2007).

Internal Revenue Bulletin (I.R.B.) and in the Cu-

No. 2008-1.

4. Multiply $85,700 (the maximum exclusion

mulative Bulletin (C.B.), which are volumes con-

In deciding whether to give approval, the IRS

for 2007) by the fraction 235/365 to find

taining official matters of the Internal Revenue

will consider any facts and circumstances that

your maximum exclusion for 2007

Service. The I.R.B. is available on the Internet at

may be relevant. These may include a period of

($55,177).

To access Revenue Procedure

residence in the United States, a move from one

2008-1, enter Rev. Proc. 2008-1 in the search

foreign country to another foreign country with

You figure the maximum exclusion for 2008

different tax rates, a substantial change in the

box.

in the opposite manner.

tax laws of the foreign country of residence or

physical presence, and a change of employer.

1. Beginning with your last full day, Septem-

Effect of Choosing the Exclusion

ber 29, 2008, count backward 330 full

days. Do not count the 16 days you spent

Once you choose to exclude your foreign

in the United States. That day, October 20,

Foreign Housing

earned income, that choice remains in effect for

2007, is the first day of a 12-month period.

that year and all later years unless you revoke it.

Exclusion and

2. Count forward 12 months from October 20,

Foreign tax credit or deduction. Once you

2007, to find the last day of this 12-month

Deduction

choose to exclude foreign earned income, you

period, October 19, 2008. This 12-month

cannot take a foreign tax credit or deduction for

period runs from October 20, 2007,

In addition to the foreign earned income exclu-

taxes on income you can exclude. If you do take

through October 19, 2008.

sion, you can also claim an exclusion or a de-

a credit or deduction for any of those taxes, your

3. Count the total days during 2008 that fall

duction from gross income for your housing

choice to exclude foreign earned income may be

within this 12-month period. This is 293

amount if your tax home is in a foreign country

considered revoked. See Publication 514, For-

days (January 1, 2008 – October 19,

and you qualify for the exclusions and deduction

eign Tax Credit for Individuals, for more informa-

2008).

under either the bona fide residence test or the

tion.

physical presence test.

4. Multiply $87,600, the maximum limit, by

The housing exclusion applies only to

Earned income credit. If you claim the for-

the fraction 293/366 to find your maximum

amounts considered paid for with employer-

eign earned income exclusion, you will not qual-

exclusion for 2008 ($70,128).

provided amounts. The housing deduction ap-

ify for the earned income credit for the year. For

plies only to amounts paid for with

more information on this credit, see Publication

Choosing the Exclusion

self-employment earnings.

596.

If you are married and you and your spouse

The foreign earned income exclusion is volun-

each qualifies under one of the tests, see Mar-

Figuring tax on income not excluded. If you

ried Couples, later.

tary. You can choose the exclusion by complet-

claim the foreign earned income exclusion, the

ing the appropriate parts of Form 2555.

housing exclusion (discussed later), or both, you

Housing Amount

must figure the tax on your nonexcluded income

using the tax rates that would have applied had

When You Can

Your housing amount is the total of your housing

you not claimed the exclusions. See the instruc-

Choose the Exclusion

expenses for the year minus the base housing

tions for Form 1040 and complete the Foreign

amount.

Earned Income Tax Worksheet to figure the

Your initial choice of the exclusion on Form 2555

amount of tax to enter on Form 1040, line 44. If

Base housing amount. The computation of

or Form 2555-EZ generally must be made with

you must attach Form 6251, Alternative Mini-

the base housing amount (line 32 of Form 2555)

one of the following returns.

mum Tax — Individuals, to your return, use the

is tied to the maximum foreign earned income

•

Foreign Earned Income Tax Worksheet pro-

A return filed by the due date (including

exclusion. The amount is 16% of the exclusion

vided in the instructions for Form 6251.

any extensions).

amount (computed on a daily basis), multiplied

Page 20

Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction

Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2008 Page 20

Related Articles

Related forms

Related Categories