Foreign Earned Income Exclusion

[dlm9]

I have a U.S. citizen client who worked in Hong Kong from 2/6/17 to 4/14/18. She then transferred to Manila from 4/15/18 to present. How do I report this on her tax return? Do I make two Form 2555's? How do I do that?  I gave her Foreign Earned Income Exclusion in 2017 as she met Physical Presence Test 2/2017 thru 2/2018. Please help, I'm loss at how to make her 2018 return.

[itonewbie]

Same employer but on consecutive assignment? You could report these on the same F.2555 based on BFR (which would be same as overlapping 2 PPT periods), provided these did not entail extension(s) of short term assignments and your client have a tax home in both HK and the Philippines.

[dlm9]

Hello itonewbie,

Yes same employer.  When she was in Hong Kong, she rented a flat and when she moved to the Philippines, she has a home there. Sorry, I don't know what BFR and PPT stand for. Kind of new at doing this form.  So for the Hong Kong assignment, I was giving her Housing allowance since she paid for her flat, but don't I have to prorate # of days she was in HK. And from April 15 on, she works in Manila. I can put incomes on one Form 2555?  And I fill up Physical Presence section from what dates? Feb 6, 2017 to present?

[itonewbie · Accepted solution]

PPT stand for physical presence test and BFR, bona fide residence.

HK has the world's highest limit for housing exclusion, so the housing exclusion will be to be figured based on the amounts applicable to different parts of the year for HK vs Manila.

When I referred to tax home, I don't mean a physical home but a tax home as defined under §162.

To better understand the concepts and application of §911, you may find Pub 54 and the instructions for F.2555 helpful, for a start.

[dlm9]

Hello itnewbie,

Thanks for your reply.

Guess I have to go read up on the pub's again. But since I'm using Proseries, I'm wondering about the entries on the worksheet that goes on form 2555.  I still don't have a clearcut answer to my question but I'll just read for now.

[itonewbie]

NP. Please see my initial response on how the form could be prepared for both assignments and my second response on the treatment of housing exclusion.

If you have further questions after reading the Pub and instructions, please let us know.