Foreign Earned Income Exclusion (FEIE)

[craigknowles]

I have a U.S. resident alien client (a dual status return being that it's their first year of being a green card holder) that did not meet the physical presence test (had less than 330 days in last calendar year) and also did not meet the bona fide residence test (a citizen of a country that does not have a tax treaty with the U.S.), however, ProSeries is still excluding their earned income on the 1040 where I feel like maybe it should have disallowed it.   Am I not understanding the tax rules around this or is the software not designed to pick up that it's less than 330 days in a foreign country so therefore not eligible for an exclusion?  Any help with this would be appreciated...after spending 2 hours on the phone with an Intuit rep, I did not get a satisfactory answer.

[sjrcpa]

I don't use ProSeries but I am sure it must be your input. Perhaps you entered the dates wrong.

Since you know they don't qualify for the foreign earned income exclusion, why enter data for that?

Just enter the taxable wages like any other wages. My 2 cents.

[itonewbie · Accepted solution]

The presumption is that your client was an NRA before acquiring the green card in 2023.  Your understanding of how §911 works is also not exactly correct.

But going back to your question, that is definitely the result of how the data was entered.

AFAIK, none of Intuit's tax products can prepare d/s returns.  So, what you have is just a plain old 1040 return (to which you will need to manually attach a F.1040NR statement).  PS doesn't know any better than that being a full year return.  When you make the wrong input for F.2555, PS would think that the taxpayer qualifies.

If your client is married, it is possible to elect joint filing for the couple to be subject to US tax as FY residents, which could sometimes help lower the overall liability.  Nevertheless, that's not always the best choice even when it could reduce the immediate year's liability because there are other implications.  In case you have not explored that with your client, that may be worth considering.