# Switching fro FEIE to FTC and then back



## Snuffbox (Jan 24, 2016)

Hello,

I’ve tried researching this but, nothing I found quite fit my situation. Sorry if I missed it.

I need a clarification regarding the FEIE and FTC. I’ve read that if switching from one to the other you can’t switch back for 5 years. Here are my circumstances. 

For 2012, 2013, 2014, and parts of 2015 I worked for a U.S. Company in a foreign country in which both U.S. and Foreign Taxes were withheld from my pay.

For the years 2012, 2013, and 2014 I qualified for the FEIE (physical presence test). My tax returns were filed taking the FEIE and then the FTC on the amount that was not excluded. 

In 2015 I changed jobs and will not meet the physical presence test for the FEIE in 2015. I had approximately $10,000 withheld from my pay for foreign taxes. 

I started work for a new company, which is a U.S. Company located in a different foreign country, on 1-Dec-2015. With the new company foreign taxes are not withheld from my check. 

I’m expecting to meet the physical presence test for 2016 and plan to take only the FEIE as there will be no foreign taxes paid to get a credit for.

My question is if I don’t meet the requirements for FEIE in 2015 and take only the FTC for the $10,000 paid in foreign taxes in 2015, will this prohibit me from taking the FEIE in 2016?

Note: I understand I can claim the foreign taxes paid as an itemized deduction without claiming the FEIC or FTC; I just want to get the most credit I can for the foreign taxes paid without losing the ability to claim the FEIE for 2016 and future years.


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## Bevdeforges (Nov 16, 2007)

Why won't you qualify for the physical presence test in 2015? It sounds like you have been outside the US all that time. But even if you were back in the US for a few months and lost your eligibility for it, if you don't take the FEIE based on not being eligible, that doesn't count as having "changed" your election. You only have to have been outside the US for 12 consecutive months, not necessarily all within the same year. And you can change countries during that time.

So, if you really can't take the FEIE for lack of eligibility in 2015 that won't affect your ability to take it next time you qualify. It's only if you elect to not take it when you are eligible.
Cheers,
Bev


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## Snuffbox (Jan 24, 2016)

I was in the U.S. for 6 consecutive months in 2015, due to recertification’s and additional training. I generally come back to the U.S. only twice a year for 2 weeks each, to recert and see some of my family. I’m still stumped as to if only taking the FTC in 2015 on my full foreign income, if that would be considered a “switch” to FTC, thus not being able to switch back to the FEIE for 5 years.

This is the IRS statement that has me a confused.
Once you choose to exclude either foreign earned income or foreign housing costs, you cannot take a foreign tax credit for taxes on income you exclude. If you do take the foreign tax credit, one or both of the choices may be considered revoked. However, you can choose to take the foreign tax credit on any amount of foreign income which has not been excluded under the foreign earned income exclusion or the foreign housing exclusion.

So, if I don’t meet the requirements and don’t take the FEIE for 2015, I can just take the FTC on my full foreign income (wages) since none of it was excluded by claiming the FEIE. This would not be considered revoking my FEIE since I wasn’t eligible to take the FEIE. Then for 2016 just start back using the FEIE.


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## Bevdeforges (Nov 16, 2007)

Let's just for the sake of argument assume you spent March through August in the US. OK, for that year, you can still use the FEIE for your January and February foreign salary (because your physical presence period began in the prior year and ran for 12 consecutive months. Now, for the current year, you begin a new physical presence period in September, when you left the US again. And as long as you stay out of the country until September, you can still take the FEIE for your foreign income. But, like in your first year overseas, you'll have to extend your filing deadline until September, when you have been outside the US for a full 12 consecutive months.

Yes, you will pay US tax for your salary during the six months you were in the US (and make sure you've had enough withheld because interest on any amounts due will start from the April 15th filing deadline). But if you'll be outside the US again for the full 12 consecutive months, you don't have to give up the FEIE election at all!
Cheers,
Bev


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