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CLIENT HAD FOREIGN INCOME DOESN'T QUALIFY FOR PHYSICAL OR BONAFIDE TEST

WALLSTREET3
Level 3

Client is trying to minimize US taxation, but doesn't qualify both tests, been in that country for only 217 consecutives days, so if form 2555 doesn't help, where do I report the taxes he paid in the foreign country?  How can I reduce the taxes for that foreign income?

 

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Accepted Solutions
sjrcpa
Level 15

File the 2019 return when he has hit 330 days in the foreign country. He'll get a prorated foreign income exclusion for 2019, provided he meets the other requirements (tax home?)

The more I know, the more I don't know.

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8 Comments 8
Accountant-Man
Level 13

Foreign taxes paid on income also taxed by the US goes on Form 1116.

** I'm still a champion... of the world! Even without The Lounge.
Accountant-Man
Level 13

Does he qualify for a partial exclusion? Will he qualify some time in 2020?

https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-physical-pre...

** I'm still a champion... of the world! Even without The Lounge.
WALLSTREET3
Level 3

He is planning to stay a total of two years, so yes he will work 2020 in that country.  He is a US legal Resident, so he's got a permit of two years to work abroad

 

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sjrcpa
Level 15

File the 2019 return when he has hit 330 days in the foreign country. He'll get a prorated foreign income exclusion for 2019, provided he meets the other requirements (tax home?)

The more I know, the more I don't know.
WALLSTREET3
Level 3

Should I ask for an extension to file, and then when the 330 days are over,  do the efiling?

sjrcpa
Level 15

Yes. But consider whether claiming the foreign tax credit yields a better result, too. Work the return both ways.

The more I know, the more I don't know.
blh1218
Level 2

My client began getting foreign earned income on June 18, 2022, do I have to file for an extension throu June 2023 in order to qualify for the foreign Earn Income exclusion?

 

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TaxGuyBill
Level 15

@blh1218 wrote:

My client began getting foreign earned income on June 18, 2022, do I have to file for an extension throu June 2023 in order to qualify for the foreign Earn Income exclusion?


 

Yes, you can't file a tax return claiming the Physical Presence Test until they have actually met that 330-day test (so they may qualify in May).