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Tax.appeal.168
Tax.appeal.168, Tax Accountant
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hello i am currently working in Afghanistan as a linguist.

Customer Question

hello

i am currently working in Afghanistan as a linguist. i was hired by DOD (department of defense). and i was told that $95000 of my salary will be tax free if i spend 330 days out of states. i came to Afghanistan on the 11th November 2011 than i went to states for vacation in May 2012 for 22 days and now i am going on the 10th of Dec 2012 for 25 days. i already completed the 330 days. So does this affect my tax free?
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.
Welcome, THANK YOU for using Just Answer. My goal is to help make your life...a little...LESS taxing.

In brief, if you already met the 330 days in a12 month period, you should qualify for the exclusion, as the days do not have to be consecutive. SEE BELOW:

You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The 330 qualifying days do not have to be consecutive. The physical presence test applies to both U.S. citizens and resident aliens.

REFERENCE SOURCE:

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion---Physical-Presence-Test

------------------------------------------------

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

  • A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,

  • A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or

  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

Changes in the Foreign Earned Income Exclusion

The maximum amount of the Foreign Earned Income Exclusion under Internal Revenue Code (IRC) section 911 is now indexed to inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, Section 515 of the Tax Increase Prevention and Reconciliation Act of 2005 (P.L. 109-222) amends the computation of the Maximum Housing Amount Exclusion under IRC section 911. (Refer to Notice 2010-27)

 

REFERENCE SOURCE:

 

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion

 

------------------------------------------------------

 

Please let me know if I can be of further assistance to you regarding this matter.

 

Thank you agin for using JUST ANSWER.

 


 

Customer: replied 1 year ago.

thank you. And what form do i have to fill up for that?

Expert:  Tax.appeal.168 replied 1 year ago.
Hello again,

It is the Form 2555. Also in the event that you earn income that exceeds the exclusion amount, that you pay taxes on, you may qualify for the Foreign tax credit as well. For this you would complete the Form 1116. Link to both forms/instructions below.

Form 2555/instructions:

http://www.irs.gov/pub/irs-pdf/f2555.pdf
http://www.irs.gov/pub/irs-pdf/i2555.pdf

-------------------------------------------------

Form 1116/instructions:

http://www.irs.gov/pub/irs-pdf/f1116.pdf (2011 Form)
http://www.irs.gov/pub/irs-pdf/i1116.pdf (2011 Instructions)

Please note that for the Form 1116, the 2012 form/instruction does not appear to be available yet.
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 2566
Experience: Nearly 30 years of varied tax industry exp. Tax Biz owner
Tax.appeal.168 and other Tax Specialists are ready to help you
Expert:  Robin D. replied 1 year ago.

Hello I am a different expert.

If you are a U.S. Government employee paid by a U.S. agency to perform services in a foreign country, your pay is from the U.S. Government and does not qualify for the exclusions or the deduction. This is true even if the U.S. agency is reimbursed by the foreign government.

Certain taxpayers can exclude or deduct income earned in foreign countries. However, the foreign earned income and housing exclusions and the foreign housing deduction do not apply to the income you receive as an employee of the U.S. Government.

Now if you are not an employee and you do not receive a W2 form the US government or any agency and you are an independent contractor then all the info the other expert told you is true. BUT, if you are an employee of the US government you are not allowed the exclusion.

This is not new and you can find this information in IRS 516

http://www.irs.gov/publications/p516/ar02.html

Its is listed under the heading Foreign Income.

 

Most payments received by U.S. Government civilian employees for working abroad, including pay differentials, are taxable. However, certain foreign areas allowances, cost of living allowances, and travel allowances are tax free. Pay differentials you receive as financial incentives for employment abroad are taxable. Certain foreign areas allowances are tax free. Your employer should not have included these allowances as wages on your Form W-2.

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