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

foreign earned income exclu-

my foreign earned income in-

can also write to the Internal Reve-

intending to remain there for an in-

sion. Can I figure the exclusion

clude my U.S. dividends and the

nue Service, International Section,

definite or prolonged period and, to

for the period I resided abroad?

interest I receive on a foreign

P.O. Box 920, Bensalem, PA

that end, you are making your

bank account?

19020-8518.

home in that country. Considera-

No. You are not entitled to any ex-

tion is given to the type of quarters

14) In 2003, I qualified to exclude

clusion of foreign earned income

No. The only income that is foreign

occupied, whether your family went

my foreign earned income, but I

since you did not complete your

earned income is income from the

with you, the type of visa, the em-

did not claim this exclusion on

qualifying period under either the

performance of personal services

ployment agreement, and any

the return I filed in 2004. I paid all

bona fide residence test or physical

abroad. Investment income is not

other factor pertinent to show

outstanding taxes with the re-

presence test. If you paid foreign

earned income. However, you

whether your stay in the foreign

turn. Can I file a claim for refund

tax on the income earned abroad,

must include it in gross income re-

country is indefinite or prolonged.

now?

you may be able to claim that tax as

ported on your Form 1040.

To claim the foreign earned in-

a deduction or as a credit against

come exclusion or foreign housing

It is too late to claim this refund

your U.S. tax.

3) My company pays my foreign

exclusion or deduction under this

since a claim for refund must be

income tax on my foreign earn-

test, the period of foreign residence

filed within 3 years from the date

6) Can a resident alien of the

ings. Is this taxable compensa-

must include 1 full tax year (usually

the return was filed or 2 years from

United States qualify for an ex-

tion?

January 1 – December 31), but

the date the tax was paid, which-

clusion or deduction under the

once you meet this time require-

ever is later. A return filed before

bona fide residence test or the

Yes. The amount is compensation

ment, you figure the exclusions and

the due date is considered filed on

physical presence test?

for services performed. The tax

the deduction from the date the res-

the due date.

paid by your company should be

idence actually began.

Resident aliens of the United

reported on Form 1040, line 7 and

Meeting the

States can qualify for the foreign

on Form 2555, Part IV, line 22(f) (or

3) To meet the qualification of

Requirements

earned income exclusion, the for-

on Form 2555-EZ, Part IV, line 17).

“an uninterrupted period which

of Either the Bona Fide

eign housing exclusion, or the for-

includes an entire taxable year,”

Residence Test or the

eign housing deduction if they meet

4) I live in an apartment in a for-

do I have to be physically pres-

Physical Presence Test

the requirements of the physical

eign city for which my employer

ent in a foreign country for the

presence test. Resident aliens who

pays the rent. Should I include in

entire year?

are citizens or nationals of a coun-

1) I recently came to Country X to

my income the cost to my em-

work for the Orange Tractor Co.

try with which the United States has

ployer ($1,200 a month) or the

No. Uninterrupted refers to the

and I expect to be here for 5 or 6

an income tax treaty in effect can

fair market value of equivalent

bona fide residence proper and not

years. I understand that upon

also qualify under the bona fide

housing in the United States

to the physical presence of the indi-

the completion of 1 full year I will

residence test.

($800 a month)?

vidual. During the period of bona

qualify for an exclusion or de-

fide residence in a foreign country,

duction under the bona fide resi-

7) On August 13 of last year I left

You must include in income the fair

even during the first full year, you

dence test. Is this correct?

the United States and arrived in

market value (FMV) of the facility

can leave the country for brief and

Country Z to work for the Gordon

provided, where it is provided. This

temporary trips back to the United

Not necessarily. The law provides

Manufacturing Company. I ex-

will usually be the rent your em-

States or elsewhere for vacation, or

that to qualify under this test for the

pected to be able to exclude my

ployer pays. Situations when the

even for business. To preserve

foreign earned income exclusion,

foreign earned income under the

FMV is not included in income are

your status as a bona fide resident

the foreign housing exclusion, or

physical presence test because I

discussed in chapter 4 under Ex-

of a foreign country, you must have

the foreign housing deduction, a

planned to be in Country Z for at

clusion of Meals and Lodging.

a clear intention of returning from

least 1 year. However, I was reas-

person must be a “bona fide resi-

those trips, without unreasonable

signed back to the United States

dent of a foreign country or coun-

5) My U.S. employer pays my sal-

delay, to your foreign residence.

and left Country Z on July 1 of

tries for an uninterrupted period

ary into my U.S. bank account. Is

this year. Can I exclude any of

which includes an entire taxable

this income considered earned

4) I am a U.S. citizen and during

my foreign earned income?

year.”

in the United States or is it con-

2007 was a bona fide resident of

If, like most U.S. citizens, you

sidered foreign earned income?

Country X. On January 15, 2008, I

No. You cannot exclude any of the

file your return on a calendar year

was notified that I was to be as-

income you earned in Country Z

basis, the taxable year referred to

If you performed the services to

signed to Country Y. I was re-

because you were not in a foreign

in the law would be from January 1

earn this salary outside the United

called to New York for 90 days

country for at least 330 full days as

to December 31 of any particular

orientation and then went to

States, your salary is considered

required under the physical pres-

year. Unless you established resi-

Country Y, where I have been

earned abroad. It does not matter

ence test.

dence in Country X on January 1, it

since. Although I was not in

that you are paid by a U.S. em-

would be more than 1 year before

Country Y on January 1, I was a

ployer or that your salary is depos-

Foreign Earned Income

you would be a bona fide resident

bona fide resident of Country X

ited in a U.S. bank account in the

of a foreign country. Once you have

and was in Country Y on Decem-

United States. The source of sal-

1) I am an employee of the U.S.

completed your qualifying period,

ber 31, 2008. My family remained

ary, wages, commissions, and

Government working abroad.

however, you are entitled to ex-

in Country X until completion of

other personal service income is

Can all or part of my government

clude the income or to claim the

the orientation period, and my

the place where you perform the

income earned abroad qualify

household goods were shipped

housing exclusion or deduction

services.

for the foreign earned income

directly to my new post. Am I a

from the date you established bona

exclusion?

bona fide resident of a foreign

fide residence.

6) What is considered a foreign

country for 2008, or must I wait

country?

No. The foreign earned income ex-

for the entire year of 2009 to be-

2) I understand the physical

come one?

clusion applies to your foreign

presence test to be simply a mat-

For the purposes of the foreign

ter of being physically present in

earned income. Amounts paid by

earned income exclusion and the

a foreign country for at least 330

Since you did not break your period

the United States or its agencies to

foreign housing exclusion or de-

days within 12 consecutive

their employees are not treated, for

of foreign residence, you would

duction, any territory under the sov-

months; but what are the criteria

this purpose, as foreign earned in-

continue to be a bona fide resident

ereignty of a country other than the

of the bona fide residence test?

of a foreign country for 2008.

come.

United States is a foreign country.

To be a bona fide resident of a

Possessions of the United States

5) Due to illness, I returned to the

2) I qualify for the foreign earned

foreign country, you must show

are not treated as foreign coun-

United States before I completed

income exclusion under the

my qualifying period to claim the

bona fide residence test. Does

that you entered a foreign country

tries.

Page 40

Publication 54 (2008)

Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2008 Page 40

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