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CGCPA
CGCPA, CPA
Category: Tax
Satisfied Customers: 3738
Experience:  over 40 years experience in tax matters
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I moved to Asia in July 2008 to attend university. I didnt

Customer Question

I moved to Asia in July 2008 to attend university. I didn't take a job until 2010 when I finished my studies. I do not pay taxes in the country I live, so I am wondering how to proceed to file taxes in the US. Can you advise?
Submitted: 3 years ago.
Category: Tax
Expert:  CGCPA replied 3 years ago.

Welcome to Just Answer. I am here to help you resolve your tax and finance concerns. Please feel free to ask anytime you need extra help.

US citizens are taxed on their world wide income regardless of where it is earned. You should file your return using forms available at the IRS website www.irs.gov I will get the link to the forms and instructions and return momentarily.

Customer: replied 3 years ago.
I am aware of that. My next question is that can I file for foreign earned income exclusion if I don't pay taxes in the country I reside outside of the US?
Expert:  CGCPA replied 3 years ago.

First, here is the link for the instructions so you can determine which forms you will need.

http://www.irs.gov/pub/irs-pdf/i1040.pdf

Yes, you can take the foreign earned income exclusion. You will not be entitled to the foreign tax credit since you did not pay taxes on the income to the other nation.

CGCPA, CPA
Category: Tax
Satisfied Customers: 3738
Experience: over 40 years experience in tax matters
CGCPA and 3 other Tax Specialists are ready to help you
Customer: replied 3 years ago.
Just to clarify .... you can take the exclusion even if you don't pay tax in the foreign country, but you just can't get a tax credit?
Expert:  CGCPA replied 3 years ago.
Exactly.
Customer: replied 3 years ago.
Ok, next question.... my understanding is that in order to get the foreign earned income exclusion you need to fit one of the two categories, either bona fide resident or physical presence. If I setup a rental home in the foreign country since JUly 208, can I claim bona fide resident for 2009 taxes, and continue it into the 2010 taxes? I currently still live abroad and only have returned by to the US in April 2010 & July 2010 for personal travel associated with my wedding there. In both cases I have returned to my normal life abroad afterwards.
Expert:  CGCPA replied 3 years ago.
You do qualify. You have satisfied the tests by your residency.
Customer: replied 3 years ago.
Ok, are there any loop holes that would disqualify me? I read about the parameters that govern the IRS excepting the bona fide residency, one being the "Statement to foreign authorities". Can you explain this further?
Expert:  CGCPA replied 3 years ago.
There are no loopholes. Many myths exist and this is one of them. Your passport shows when you were in the US and when you were not. Keep it in a safe place. Your rental agreement shows where you live.
Customer: replied 3 years ago.
what about the "statement to foreign authorities"? I don't understand this clause.
Expert:  CGCPA replied 3 years ago.
It is just an inquiry form to verify that you live and are employed there. Not anything to be worried about.
Customer: replied 3 years ago.
So if I didn't receive one, what does that mean? Do you have to get something from the foreign government, or does it not matter? Can the IRS require you to present something?
Expert:  CGCPA replied 3 years ago.

Many people are unduly afraid of the IRS. While they will investigate the returns of known criminals and suspected terrorists they do not bother regular citizens. While all of us stand the risk of an audit, if you are doing things properly you need not be afraid of the IRS. The only requirement of you is to properly file your returns. The inquiries are made by the IRS themselves if they suspect foul play and there is nothing for you to do except to properly file your returns.

Customer: replied 3 years ago.
for the bona fide residence test, does it matter if you only work 2 months out of the year in which you are filing for? iF I make a residence in the foreign country and then start working later, does this matter?

Also when I fill out the 2555ez form for line 1B, do I just put Jan1st even if I began the stay there the previous year?
Expert:  CGCPA replied 3 years ago.
You enter the date you began the foreign residency. Exactly when you began work does not matter. Only the dates of residency, the foreign source of the income, and the income amounts count.
Customer: replied 3 years ago.
Do I enter all income even if I received income as a reimbursable, or should I take out the reimbursables and just list the sum of my general salary?
Expert:  CGCPA replied 3 years ago.
Expense reimbursements are not income. They are merely repaying you for expenses you incurred on behalf of your employer. They should not be considered income. Your income will consist of salary, interest, dividends, and any business profits you received.

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