Assuming you are an US citizen - you generally are required to report any income worldwide to the IRS.
To qualify for the foreign earned income exclusion, you should: -- Work and reside outside the United States for at least 330 days during the year. -- Meet either the Bona Fide or Physical Presence tests.If you qualify, you may exclude up to $85,700 (2007) $87,600 (2008) in foreign wages. To receive that exclusion - you should file either form 2555 or 2555EZ.
Here are forms you likely need:
There were changing in the law how the exclusion and housing allowance is calculated.
Please be aware that if your husband is self-employed - the exclusion above will not affect self-employment taxes - only income taxes.
Unfortunately - there is no proration for exclusion in you was abroad less than 330 days. You might qualify for exclusion if you spend some time in different country - for instance on vacation - but not in the US.
In case your foreign income is taxable abroad and in the US - you may claim a credit on your federal tax return.
Sorry if you expected a different answer.