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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22618
Experience:  Taxes, Immigration, Labor Relations
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I signed a 1 year renewable contract with State Department

Resolved Question:

I signed a 1 year renewable contract with State Department working in Diplomatic security in Afghanistan. I was out of the country (USA) 330 days. My tax guy says I can not claim 330 because they gave me a W-2 form (instead of 1099). The contract I signed refers to me as the "Contractor" throughout the document. What gives? Do I not qualify for the 330 exemption even if I signed an awarded competitive contract for Personal Services?
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
Unfortunately - your tax preparer is correct.
See for reference IRS publication 54 - www.irs.gov/pub/irs-pdf/p54.pdf


To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements.


1.Your tax home must be in a foreign country.


2.You must have foreign earned income.


3.You must be one of the following.


(a)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.


(b)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.


(c)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.



The issue in your situation - that your income is not considered as foreign earned income - see page 16:
Foreign earned income does not include the following amounts.


--The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer.


--Pension or annuity payments you receive, including social security benefits.


--Pay you receive as an employee of the U.S. Government.


--Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract.


--Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5.


--Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income.
Sorry if you expected differently.

LEV :

So far wages you receive as an employee of the U.S. Government - are not classified as a foreign earned income for purposes of claiming the foreign earned income exclusion.

Customer:

pretty black and white. There are 15 guys that do what I do worldwide. They are telling me they all do the 330. Guess they be audited eventually. Guess I owe Uncle Same $7,000.

LEV :

Sorry if you expected differently.
Generally - such situations when employees of the US Government are claiming the foreign earned income exclusion may be easily determined by the IRS computer system.
The possibility to get caught is very high. So your tax prepare is correct when advised you not to claim exclusion.

Customer:

Thank you Lev. Getting ready to retire and dont need this hanging over me head. Appreciate the advice now from 2 experts. Thats all I need from you.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22618
Experience: Taxes, Immigration, Labor Relations
Lev and other Tax Specialists are ready to help you

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