Have a Tax Question? Ask a Tax Expert
Hello and thanks you for using Just Answer. If an individual qualifies under the physical presence test for only part of the year, the exclusion is reduced on a daily basis. Stay in a foreign country dose not have to be continuous. Days of travel between foreign countries count as full days.
You will be physically present in Saudi Arabia 330 full days on June 2011. For tax year 2010, your present in Saudi Arabia for only 218. Your foreign earned income exclusion for 2010 is limited to $54,649 (218 / 365 x $91,500).
For tax year 2011 if you leave Saudi Arabia in July 30, 2011, your present in Saudi Arabia in 2011 will be only 211 days. You foreign earned income exclusion for 2011 will be limited to $52,895 (211 / 365 x 91,500)
You did not understand the question i asked
I understand your question. Let me give you a example: Skip moves to a foreign country on August 20, 2010, to start a new job and plans to continue working in the foreign country through the end of 2011. Skip is physically present in the foreign country for at least 330 full days during the 12-month period from August 20, 2010, through August 20, 2011. However, for tax year 2010, he is present in the foreign country for only 134 days. Skip's foreign earned income exclusion for 2010 is limited to $33,592 (134 days / 365 days x $91,500)
so what you are telling me is if I screwed up the physical presence by a few days. It is pro rated? I wont be held accountable for a HUGE payment?
You are correct. You will be in Saudi Arabia 330 full days. The amount of the credit will be pro rated in 2010 and 2011 on your tax returns.