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Merlo
Merlo, Accountant
Category: Tax
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Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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I have been working in Iraq since April of 2008. I will be

Resolved Question:

I have been working in Iraq since April of 2008. I will be returning to the US in Dec of 2009. I would have returned after my one year contract was up, but due to the state of the economy I was unable to find a job. So I elected to stay until December until a job came available. So my question is will I have to pay taxes on all of the income I have made since April of 2009? Or is their away I can claim Bona Fid residence if I stay until Dec 31 2009?
Submitted: 5 years ago.
Category: Tax
Expert:  Merlo replied 5 years ago.
Hello robert,

Will you continue to work and have earned income in Iraq until you leave there in Dec of 2009?

Customer: replied 5 years ago.
Yes
Expert:  Merlo replied 5 years ago.
Hello again robert,

There is no need for you to claim bona fide residence in order to take advantage of claiming the Foreign Earned Income Exclusion, which is currently $91,400 for the 2009 tax year.

You have already more than met the physical presence test. Under the physical presence test, once you have been physically present in a foreign country for at least 330 days in any 12 month period, you have met the test and are eligbible to claim the exclusion. The exclusion does not just apply to your 12 month qualifying period, but also to any months that you continue to stay in that country, as long as you do not have a break in your stay where you leave that country and come back to the US for more than 30 days before returning to the foreign country.

In other words, if you have been in Iraq since April of 2008, and you have not come back to the US for visits which were more than 30 days combined, then you have already satisfied the rules for the physical presence test, and that will apply to your entire time in Iraq, not just the first 12 months.

If you now stay in Iraq for the entire year of 2009, then you will be allowed to claim the entire exclusion amountof $91,400. If you come back to the US sometime before the end of 2009, you would still be allowed to claim a prorated excusion for the days you were there in 2009 based on the percentage of days you were actually still present in that country.

Once you have satisified the physical presence test and you have been in the foreign country for 330 days in a 12 month period, you do not start over with a new qualifying 12 month period each time. You continue to qualify for the exclusion as long as you remain in that country.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you robert.



Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience: 25+ years tax consulting. Specializing in returns for US citizens living abroad
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