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Christopher Phelps
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience:  CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
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taxes for US residents living outside the US

Customer Question

i would like to know how taxes are taken care if living in another country. and if there is a time period involved. also if one spouse is still living in the us. what is a hypothetical tax.
Submitted: 11 years ago.
Category: Tax
Expert:  Christopher Phelps replied 11 years ago.

U.S. citizens and permanent residents are taxed on their world wide income.  Thus, you will file your taxes as your would normally reporting all income from all sources.  However, for U.S. persons working abroad, you may become eligible to exclude some income or to receive a credit for any foreign income taxes paid on your earnings.


In order to use the foreign earned income exclusion (you may exclude up to $80,000 annually) you have to establish that your tax home is in a foreign country; and, you must establish a qualified residence in a foreign country through either the bona fide residence test or the physical presence test.


A "tax home" is generally established wherever your principal place of business is.  Thus, as long as your plae of employment is outside the U.S. (in a foreign country) and that your employment there is expected to continue for at least a year, then you have a "tax home" in a foreign country and you meet this test.


Bona fide residence is established if you live for an uninterrupted period that includes a full calendar tax year in a foreign country. 


The physical presence test may be met if you are present in a foreign country for 330 days out of ANY consecutive 12 month period.  


If you will not meet these tests, then yo may not exclude any foreign earned income from U.S. taxation.  However, you may be able to take as a credit any foreign income tax paid on the income you earned to the country in which you worked.


If you are out of the country on 4/15/2005, you receive an automatic two month extension to 6/15/05 to both file and pay your 2004 income taxes.  Please know that if you do owe income taxes and pay by 6/15/05, you will pay interest on the amount owed for the 2 month grace period.


Also, if your Company or firm is providing you with a housing allowance it may also be eligible for exclusion if you meet the above rules.

           
Christopher Phelps, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 2710
Experience: CPA, CFP, PFS, Tax Practitioner 21 Years, Member AICPA/CSCPA Tax/Financial Planning Committee Member
Christopher Phelps and 2 other Tax Specialists are ready to help you
Customer: replied 11 years ago.
Reply to Christopher Phelps's Post: thank you for your help this answers some of my questions about foriegn residency. this 330 days does it mean not reentering even for vistation.
Expert:  Christopher Phelps replied 11 years ago.
Its 330 days out of a 12 month period so you can come back for a total of 35 days without jeoardizing the exclusion. 

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