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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3922
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Physical Presence Test--Overlapping 12 month periods

Customer Question

My question is about the Physical Presence test. I moved to Dubai on a 2 year teaching stint in August. My first full day here was August 20. I went home for 13 days at Christmas and I'm going home today until August 20th. This will put me over the 35 day limit for being in the US the past 12 months. I will be working in Dubai until the end of July 2014. I will be going home for 11 days this coming October but that is it. How can I overlap my 2, 12 month periods to qualify for the PPT exclusion?


 


Days in US (including travel): December 20, 2012--January 3, 2013, July 24, 2013-August 21, 2013. (upcoming) October 9, 2013--October 17, 2013.


 


I was thinking I could do:


 


one 12 month period from January 4, 2013-January 3, 2014. (8 days in US)


 


one 12 month period from August 1, 2013-July 31, 2014. (31 days in US)


 


I don't know if this is allowed since I am 'borrowing' days from the second 12 month period so  don't go over during the first 12 month period. If I just used the second period, would I be taxed on the dates in the first period?


 


Let me know if that would work.

Submitted: 1 year ago.
Category: Finance
Expert:  Rakhi Vasavada replied 1 year ago.

rakhivasavada :

Dear Friend,

Hello and welcome. Thank you for using Just Answer.

rakhivasavada :

I think, there is some confusion on your part. Let me try and clear out that for you.

Customer:

Yes, lots of confusion. Thank you.

rakhivasavada :

As you must be aware, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a consecutive 12-month period. In other words, you can only be present in the United States for a maximum of 35 days during that same 12-month period in order to qualify.

rakhivasavada :

Having said this, if you are going home today until August 20th, you will be over 35 days that you have mentioned yourself. Am I correct to understand this ? Please correct me if I am wrong.

Customer:

Yes you are correct.

rakhivasavada :

Fine..

rakhivasavada :

I am sorry, but in that case, the previous 12 months i.e. from last August to this August will NOT qualify you in the PPT test. In this 12-Months time, you have exceeded your 35 day time limit.

rakhivasavada :

Having said this, If you calculate from August 21st (I presume your will return to Dubai) until July 31st 2014, you would have stayed for 344 Days. Even if go home again for 11 days, it would be perfectly fine as that would be BELOW the 35 days limit. August 2013 July 2014 Year WILL QUALIFY you in the PPT test and not the year that you spent.

Customer:

Ok, I understand that. I will be here long enough for the aug 13/july 14 year to qualify. However, if I go home today, I will have to pay taxes on the past 12 months of income because I will be over the 35 day limit, correct?

Customer:

I thought that I could sort something out by overlapping 2 12 month periods. I'm guessing this is incorrect?

rakhivasavada :

Overlapping will not be possible. Regarding tax liabilities, let me double check, kindly remain online for a while...

rakhivasavada :

Yes, that is right. You will pay tax on the income in the US. You will not be able to exclude up to $97,600 in foreign earned income. In order to qualify, you should have either met the PPT or the Bonafide Residence Test which requires uninterrupted stay in a given calender year.

Customer:

ok, thank you for your help.

rakhivasavada :

You are welcome. It was pleasure assisting you.

rakhivasavada :

I am sure this would help.

You may please leave a positive rating if this helps as that is the only way we receive credit for assisting you. Alternatively feel absolutely free to revert with more queries if you have.

Warm Regards

Customer:

OK, thanks again.

Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3922
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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