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Merlo
Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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My son is in Afghanistan as a Biometric Tech. working for an

Resolved Question:

My son is in Afghanistan as a Biometric Tech. working for an army contractor. He asked me to try and find out if he had to be "in country" for a full 365 days before he would get the tax credit for working over there or if he could leave after 330 days when he had been working for the company a full year.
Vickie L. McGill
Submitted: 3 years ago.
Category: Tax
Expert:  Merlo replied 3 years ago.

Hello JA Customer,

 

The foreign earned income exclusion is available to taxpayers who work overseas and remain out of the United States for a period of at least 330 days in a 12 month consecutive period. So your son would not have to be overseas for 365 days to qualify for this credit.

 

If at any time he has come home to the US for vacations or other reasons, the days he came back to the US do not count towards the time spent out of the country. As an example, if your son arrived in Afghanistan on June 1st, 2009, he would have to remain out of the country until at least April 26th, 2010. That would complete his 330 day requirement in a 12 month consecutive period. The 12 months do not have to be all in the same calendar year. However if during that period he came back to the US at any point for a visit, then the days spent in the US would not count as being out of the country, so those additional days would have to be made up by extending his stay overseas.

 

 

Thank you JA Customer

 

 

Customer: replied 3 years ago.

Just want to clarify that the days he came home to the states for R&R do not count towards his time spent out of country? Also he is in a combat zone and working as a civillian for the army. He joined his company on Sept. 8 for a 1 yr. contract but did not arrive in Afghanistan until Nov. 8. so do I understand right that his 330 days in Afghanistan would start on Nov. 8th.

Expert:  Merlo replied 3 years ago.

Hello again Vicki,

 

It is correct that his time spent out of the country does not start until November 8th, the day he arrived in Afghanistan. It does not go by the day he signed the contract. It goes by the days he was actually physically outside of the United States.

 

If he has come home to the US since going over there on November 8th, the days he spent here in the US cannot be counted towards his 330 day requirement. If he arrived in Afghanistan on 11/08/2009 he would have to stay there until at least October 4th, 2010 to fulfill the 330 days requirement. If during that time he came home to the US for 10 days, then he would need to extend his stay overseas by that 10 days, and could not leave until October 14th to still fulfill his 330 day requirement.

 

 

Thank you Vicki

 

 

 

Customer: replied 3 years ago.

One tax article says the first $91, 400 would be tax free but still have ss and medicare taxes taken. Is this what would be available after the 330 days.

Expert:  Merlo replied 3 years ago.

Hello again Vickie,

 

The tax free limit for the 2010 tax year has increased to $91,500. He would only receive the full amount if the 330 days that he was overseas was all in the same calendar year. Here is another example of how it works.

 

Let's say that your son went overseas on July 1st, 2009 and stayed there until July 1st, 2010 for a full year. Even though he was there for the required time of at least 330 days in a 12 month period, those days were not all in the same calendar year. He spent 6 months there in 2009 and 6 months in 2010. What that means is that he could claim 50% of the credit on his 2009 income and 50% of the credit on his 2010 income. The credit in 2009 was $91,400, so for the 2009 tax year he could claim half of that amount, or a total of $45,700. So his first $45,700 in foreign earnings for 2009 would not be taxable. It is correct that the wages are still subject to SS and Medicare taxes.

 

Since you son arrived in Afghanistan on November 8th, 2009, he would satisfy his 330 day requirement if he stays there until October 4th. But just because he satisfies the 330 day requirement does not mean he would get the full credit of $91,500 for the 2010 tax year. He would get a prorated portion for the actual days he was out of the country in 2010. The days he was out of the country in 2009 only go towards satisfying his 330 day requirement in a 12 month consecutive period, but they do not count towards the credit. He would only be credited for being out of the country for the days he was gone in the 2010 tax year. So if during 2010 he was gone for 10 months, basically he could claim 10/12ths of the credit, or a total of $76,250. If he wants to claim the entire credit of $91,500 for 2010, then he must remain out of this country for the entire 365 days in the 2010 tax year.

 

 

Thanks

 

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