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USTaxAdvising
USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1090
Experience:  US Taxation specialist.
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I am an independent software contractor. My client is a software

Resolved Question:

I am an independent software contractor. My client is a software company in Virginia that lets me work remotely. I receive 1099s from them.
If I spend full year overseas, do I qualify under the Foreign Earned Income Exclusion (which enables me to "deduct" 90k+)?
Submitted: 1 year ago.
Category: Tax
Expert:  USTaxAdvising replied 1 year ago.

USTaxAdvising :

Hello, Thank you for using justanswer. I can assist you with your questions today.

USTaxAdvising :

Yes, basically the source of your income is irrelevant for the foreign earned income exclusion.

USTaxAdvising :

It is the place of your residence that is the qualifying factor.

USTaxAdvising :

If you reside abroad and meet either the physical presence test or bona fide residence test then you should qualify for the foreign earned income exclusion and be able to exclude up to 97,600 of income from your federal tax return.

USTaxAdvising :

here is a good link to the IRS website that is very helpful - http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion

USTaxAdvising :

I hope this provides the clarity you were looking for. Please let me know if you have any follow up questions and I will get back to you as soon as I can.

USTaxAdvising :

best regards,

Customer:

one more question

USTaxAdvising :

certainly

Customer:

i want to clarify the physical presence test - if i spend a year in several countries staying in hotels what other factors are involved for me know i qualify for this?

Customer:

What would make me not qualify?

USTaxAdvising :

Well if you never passed the bona fide residence test or the physical presence test

USTaxAdvising :

You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.

Customer:

so would i in my situation?

USTaxAdvising :

If you lived abroad for more than year and are a bone fide residence of foreign country then you would pass the test

Customer:

if i travel and stay in hotels am i a bona fide resident

Customer:

define that

USTaxAdvising :

Basically the foreign country has to be your home.

Customer:

is it possible to be in a foreign for a year and for it not to be my home?

Customer:

i had no home in the US that year

USTaxAdvising :

Sure, if you never established residency like getting a driver's license etc,

USTaxAdvising :

Income is not a driving factor.

USTaxAdvising :

It is your residence that drives the determination

Customer:

so then i was not a resident of any country for a year? no home in the US or away

Customer:

any other definitions of residence besides for driver;s license

Customer:

Will IRS think i was a resident or not?

USTaxAdvising :

Well most likely the facts will lead to foreign residence.

USTaxAdvising :

I would like you to visit this link and have a read through - http://taxes.about.com/od/taxhelp/a/ForeignIncome_2.htm

USTaxAdvising :

It lays things out pretty simply.

USTaxAdvising :

Basically if you do not call the US home any more, and have established residency in a foreign country then you would most likely qualify for the bona fide residence test. If you don't think you would pass the foreign residence test then you could also pass the "physical presence test" - you don't have to meet both requirements, just one.

USTaxAdvising :

I am really sorry but I have to step out for about 2 hours. If you have any follow up questions please post them and I will get back to you as soon as I can.

USTaxAdvising :

Best regards,

Customer:

thank you! you are very clear

USTaxAdvising, CPA
Category: Tax
Satisfied Customers: 1090
Experience: US Taxation specialist.
USTaxAdvising and 3 other Tax Specialists are ready to help you

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