Im currently overseas and have been since Jan 5th. I'm a contractor and planned on staying here for a full year to earn the tax free benefit. Just recently the government ended our contract early and we lost our government contract. I will miss the 330 day mark for the tax free year by 45-60 days. Someone told me that because of the contract loss I could still qualify as this was not because of my doing. I read this paragraph? However, the minimum time requirement can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions, and that you had a tax home in the foreign country and were a bona fide resident of, or physically present in, the foreign country on or before the beginning date of the waiver. Do I qualify for this? the company is sending out letters to us stating we were let go do to our contract ending and not for our own personal choice. Would this work to get me tax free for part of thie year? http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion---Physical-Presence-Test
Welcome to the site. I'm PDtax, and will be helping you today.
The general rule is 330 days, but you don't have to be at your job for all of that time, just out of the USA to qualify. consider staying where you are, or going on a long vacation for the remaining days, to qualify for the exclusion.
from IRS: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion---Physical-Presence-Test:
330 Full DaysGenerally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during the 12-month period. You can count days you spent abroad for any reason. You do not have to be in a foreign country only for employment purposes. You can be on vacation time.You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. Also, if you are present in a foreign country in violation of U.S. law, you will not be treated as physically present in a foreign country while you were in violation of the law. Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income.However, the minimum time requirement can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions, and that you had a tax home in the foreign country and were a bona fide resident of, or physically present in, the foreign country on or before the beginning date of the waiver.
I see you have entered the chat. Given the short period you need to meet to qualify, that seems to me like a pretty good option.
Unless where you are working qualifies as an adverse condition, this may be the best you can do (other than getting another overseas assignment).
I also assume you are not a US government employee; these rules don't apply to you.
Thanks for asking at Just Answer. Ask any follow up you need, or leave positive feedback to close out your question. I'm PDtax.
Before I rate this question and give you credit can you please just go over what qualifies as the waiver portion of the tax law? You basically stated word for word what the website already states and your advice of staying is not possible but also advice I already know of course. We are being FORCED TO LEAVE because the government terminated our contract earlier than expected. If this didnt happen we all would of completed our full year of service. Our company is providing a letter stating this and others have tax guys telling them they qualify for the waiver? The waiver portion if vague at best so I guess i'm asking more about that section? Staying in country without a contract is impossible. Staying in a foreign land for an extended vacation is possible but not if we are wanting to feed our families back home. Is there any work around to get a partial tax free year as per the waiver? Thanks. I'll rate your answer and get you credit for this but I did ask for HIGH DETAIL. Thank you very much in advance.