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Ed Johnson
Ed Johnson, Tax Preparer
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Income earned overseas in 2007 but paid in 2008 while staeside.

Resolved Question:

Income earned overseas in 2007 but paid in 2008 while staeside. Should it be treated as tax exempt or since I exceeded the limit in 2007 I should continue payingtax on the money. All hours were worked in a foreign land the previous year.
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

Dear dkeys,

 

The tax you earn overseas is not "tax exempt;t". We have to be certain of the language so that we know the process you have to use.

 

Instead you are required to file a return reporting world wide income.

 

you are entitled to what is called a foreign earned income exclusion. YOu can claim this exclusion when you file your tax return based on either actual per anent residence overseas, or by using the physical presence test.

 

Most people use the physical presence test because it is based on the number of days spent overseas

 

So if you were physically present in a foreign country for 330 days of any 12 month period, then you could clam the foreign earned income exclusion on that year's tax return. In this case, your 2007 tax return.

 

There is another issue. You state you had earned income overseas in 2007, that was paid in 2008. This statement needs more clarification.

 


What do you mean that it was paid in 2008. When did you receive the check? OR when was the money paid into your direct deposit?

 

If the money was received by you or paid to you in any for in 2007, say a check on December 23d, or a deposit to your account on December 31st, the IRS will consider t his constructively received in 2007, regardless if you actually got the money. This is also true if the check was postmarked to you during 2007. In these instances it then should be included in your 2007 tax return.

 

If the money was actually paid to you in 2008, then it should then be included in your 2008 tax return.

 

Remember, it is not the money that is tax exempt. It is that you are given an income exclusion. Because we, as tax payers, are normally on cash basis, calender year tax schedules, we are required to count the money in the year constructively received.

 

Money received in 2008, would be included in the 2008 tax return, regardless of where you were when you performed the personal serves for which it was paid.,

 

If in 2008, you did not meet at least the physical presence test overseas, you would not be able to exclude this from taxes.

 

 

Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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