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

turn, Form 1040X, accompanied

1) I recently came to Country X to

No. Uninterrupted refers to the

7) On August 13 of last year I left

work for the Orange Tractor Co.

the United States and arrived in

by Form 2555 (or 2555 – EZ), for a

bona fide residence proper and not

Country Z to work for the Gordon

and I expect to be here for 5 or 6

to the physical presence of the indi-

refund of any excess tax paid.

Manufacturing Company. I ex-

years. I understand that upon

vidual. During the period of bona

b) You can postpone the filing of

pected to be able to exclude my

the completion of 1 full year I will

fide residence in a foreign country,

your tax return by applying on Form

foreign earned income under the

qualify under the bona fide resi-

even during the first full year, you

2350 for an extension of time to file

physical presence test because I

dence test. Is this correct?

can leave the country for brief and

to a date 30 days beyond the date

planned to be in Country Z for at

temporary trips back to the United

you expect to qualify under either

least 1 year. However, I was reas-

Not necessarily. The law provides

States or elsewhere for vacation, or

the bona fide residence test or the

signed back to the United States

that to qualify under this test for the

even for business. To preserve

and left Country Z on July 1 of

physical presence test, then file

foreign earned income exclusion,

your status as a bona fide resident

this year. Can I exclude any of

your return reflecting the exclusion

the foreign housing exclusion, or

of a foreign country, you must have

my foreign earned income?

of foreign earned income. This al-

the foreign housing deduction, a

a clear intention of returning from

lows you to file only once and

person must be a “bona fide resi-

those trips, without unreasonable

No. You cannot exclude any of the

saves you from paying the tax and

dent of a foreign country or coun-

delay, to your foreign residence.

income you earned in Country Z

waiting for a refund. However, in-

tries for an uninterrupted period

because you were not in a foreign

terest is charged on any tax due on

that includes an entire taxable

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

country for at least 330 full days as

the postponed tax return, but inter-

year.”

2000 was a bona fide resident of

required under the physical pres-

est is not paid on refunds paid

Country X. On January 15, 2001, I

If, like most U.S. citizens, you

ence test.

within 45 days after the return is

was notified that I was to be as-

file your return on a calendar year

filed. (If you have moving expenses

signed to Country Y. I was recal-

Foreign Earned Income

basis, the taxable year referred to

that are for services performed in

led to New York for 90 days

in the law would be from January 1

orientation and then went to

two years, you can be granted an

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

to December 31 of any particular

Country Y, where I have been

extension to 90 days beyond the

Government working abroad.

year. Unless you established resi-

since. Although I was not in

close of the year following the year

Can all or part of my government

dence in Country X on January 1, it

Country X on January 1, I was a

of first arrival in the foreign coun-

income earned abroad qualify

would be more than 1 year before

bona fide resident of Country X

for the foreign earned income

try.)

you could qualify as a bona fide

and was in Country Y on Decem-

exclusion?

resident of a foreign country. Once

ber 31, 2001. My family remained

14) I am a U.S. citizen. I have

you have completed your qualifying

in Country X until completion of

lived abroad for a number of

No. The foreign earned income ex-

the orientation period, and my

period, however, you are entitled to

years and have only recently re-

clusion applies to your foreign

household goods were shipped

exclude the income or to claim the

alized that I should have been

earned income. Amounts paid by

directly to my new post. Can I

housing exclusion or deduction

filing U.S. income tax returns.

the United States or its agencies to

qualify as a bona fide resident of

from the date you established bona

How do I correct this oversight in

their employees are not treated, for

a foreign country for 2001, or

fide residence.

not having filed returns for these

this purpose, as foreign earned in-

must I wait for the entire year of

years?

come.

2002 to qualify?

2) I understand the physical

presence test to be simply a mat-

File the late returns as soon as pos-

2) I qualify under the bona fide

Since you did not break your period

ter of being physically present in

residence test. Does my foreign

sible, stating your reason for filing

of foreign residence, you would

a foreign country for at least 330

earned income include my U.S.

late. For advice on filing the re-

continue to qualify as a bona fide

days within 12 consecutive

dividends and the interest I re-

turns, you should contact either the

resident for 2001.

months; but what are the criteria

ceive on a foreign bank ac-

Internal Revenue Service repre-

of the bona fide residence test?

count?

sentative serving your area or the

5) Due to illness, I returned to the

Internal Revenue official who trav-

United States before I completed

To be a bona fide resident of a

No. The only income that is foreign

my qualifying period to claim the

els through your area (details can

foreign country, you must show

earned income is income from the

foreign earned income exclu-

be obtained from your nearest U.S.

that you entered a foreign country

performance of personal services

sion. Can I figure the exclusion

consulate or Embassy). You can

intending to remain there for an in-

abroad. Investment income is not

for the period I resided abroad?

also write to the Internal Revenue

definite or prolonged period and, to

earned income. However, you

Service, International Section, P.O.

that end, you are making your

must include it in gross income re-

No. You are not entitled to any ex-

B o x

9 2 0 ,

B e n s a l e m ,

P A

home in that country. Considera-

ported on your Form 1040.

clusion of foreign earned income

19020-8518.

tion is given to the type of quarters

since you did not complete your

3) My company pays my foreign

occupied, whether your family went

qualifying period under either the

15) In 1996 I qualified to exclude

income tax on my foreign earn-

with you, the type of visa, the em-

bona fide residence test or physical

my foreign earned income, but I

ings. Is this taxable compensa-

ployment agreement, and any

presence test. If you paid foreign

did not claim this exclusion on

tion?

other factor pertinent to show

tax on the income earned abroad,

the return I filed in 1997. I paid all

whether your stay in the foreign

you may be able to claim that tax as

outstanding taxes with the re-

Yes. The amount is compensation

country is indefinite or prolonged.

a deduction or as a credit against

turn. Can I file a claim for refund

for services performed. The tax

To claim the foreign earned in-

your U.S. tax.

now?

paid by your company should be

come exclusion or foreign housing

reported on line 7 of Form 1040

exclusion or deduction under this

6) Can a resident alien of the

It is too late to claim this refund

and in item 22(f) of Part IV, Form

United States qualify for an ex-

test, the period of foreign residence

since a claim for refund must be

2555 (or line 17 of Part IV, Form

clusion or deduction under the

must include 1 full tax year (usually

filed within 3 years from the date

2555 – EZ).

bona fide residence test or the

January 1 — December 31), but

the return was filed or 2 years from

physical presence test?

once you meet this time require-

4) I live in an apartment in a for-

the date the tax was paid, which-

ment, you figure the exclusions and

eign city for which my employer

ever is later. A return filed before

Resident aliens of the United

the deduction from the date the res-

pays the rent. Should I include in

the due date is considered filed on

States can qualify for the foreign

my income the cost to my em-

idence actually began.

the due date.

earned income exclusion, the for-

ployer ($1,200 a month) or the

eign housing exclusion, or the for-

fair market value of equivalent

3) To meet the qualification of

Meeting the

eign housing deduction if they meet

housing in the United States

“an uninterrupted period which

Requirements

the requirements of the physical

($800 a month)?

includes an entire taxable year”

of Either the Bona Fide

presence test. Certain resident

do I have to be physically pre-

Residence Test or the

aliens can qualify under the bona

sent in a foreign country for the

No. You must include in income the

Physical Presence Test

entire year?

fide residence test.

fair market value (FMV) of the facil-

Page 38

Chapter 7 How To Get Tax Help

Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 38

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