# FBAR Filing



## Clivejive

Hi there everyone! I am a U.K. citizen and my wife is a U.S. citizen. We live in the U.K. We have just realised that we should be filing IRS tax returns and it is best for us if we choose to file jointly. I am aware of the fact that a non resident alien married to a U.S. citizen may choose to file as married, filing jointly. However, my question refers to the FBAR filing situation. Obviously as a U.S. citizen my wife has to file, but as I am only being treated as a resident for federal income tax purposes only, do I have to file FBARs also?

Hope someone can help me with this!

Clive


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## Bevdeforges

It's not necessarily best for you to file jointly. It really depends on your situation (not to mention how you're defining "best.") If you file jointly, you are electing to be treated as resident in the US for the entire tax year, which I suppose would make you a "US taxpayer" and thus subject to FBAR requirements. You will need to have either a US SSN or an ITIN.

If your wife files separately, you won't have to report your income to the IRS, and your wife will only report accounts in her name or those you hold jointly with her.
Cheers,
Bev


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## Clivejive

Thanks Bev! We need to file jointly because we own a property in Florida which is rented out. By filing jointly I am no longer regarded as a foreign owner. I am treated the same as a U.S. Citizen or U.S. resident which is better for us. I emailed FBAR today and one of their lawyers told me that a nonresident alien who chooses to be taxed as a U.S. resident is not a resident for FBAR purposes. I believe that means that I don't have to file FBAR but hope that someone on this forum can confirm or deny based on their own experience!


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## Moulard

A Non-Resident who is making an election under § 6013 (g) or (h) does not have to file an FBAR. 

The long version of the answer….

When you choose to have a non-resident partner treated as a resident for the purposes of filing a joint return you are making an election under § 6013 (g) or (h) 

A nonresident alien individual with respect to whom this subsection is in effect for the taxable year shall be treated as a resident of the United States for the purposes of chapters 1 and 24 of Title 26.

Chapters 1 and 24 are about Income and Withholding Taxes.

The statutory authority for the FBAR is Title 31 USC 5314

FinCEN clarified in the preamble to the regulations (31 CFR 1010.350(b)) that an election under IRC 6013(g) or (h) is not considered when determining residency status for FBAR purposes.


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## Clivejive

Excellent - thank you so much for putting my mind at rest!


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## Moulard

In case you were wondering... 

There is no specific form used to make the election under IRC § 6013(g). 

The election is made by attaching a statement to a joint Form 1040 for the 
first taxable year in which the election is to be in effect. The statement should include: 

A declaration that the election is being made and that the individuals meet the necessary
requirements (e.g., that one spouse is a U.S.citizen or resident)

The name, address, and taxpayer identification number (TIN) of each spouse;

Two signatures; the statement must be signed by both persons making the election

... Assuming that you are not a zombie... in which case the executor of your estate would have to sign on your behalf...and yes.. the IRS has regulations for zombies...

So if you haven't done so already, you will need to file for a TIN before filing the joint return.

No idea how long that takes to get a TIN these days, but remember it is easy to get an extension to 15 Oct (automatically approved form based request). Beyond that you need to write a letter .. but waiting on a TIN seems a reasonable reason reason to me.

Depending on your circumstances you could back date this 6013 election too.

If the election is made with a joint amended return, the amended return should be
made on Form 1040 or 1040A, and the word ‘Amended’ should be written clearly on the front of the return. Amended returns also need to be filed for any subsequent year in which either of the spouses filed a return.

Once made, the election is in effect for all subsequent years except for years for which the election is suspended or terminated. So in short you only have to do it the once.

Bev in another thread has highlighted that TINs expire after a few years these day.. So you will just need to make sure you do what ever is required to ensure that it does not.

You may also want to read https://www.law.cornell.edu/uscode/text/26/1411

A nonresident alien is not treated as a resident alien under IRC § 6013(g) for purposes of certain U.S. taxes on income

If relevant I gather you can make a similar declaration under IRC § 1411 as you make under 6013(g)


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## Clivejive

Thanks again, Moulard!

I was a green card holder on a previous stay in USA so I do actually have a Social Security Number, which the IRS have told me would still be valid, despite the fact that I abandoned my green card status after returning to the UK.

Can I test your knowledge further and ask you about Social Security Tax on self employment income. My wife, I would think, would be liable to pay Social Security and Medicare tax on her self employed income and we will need to get a certificate of coverage from the U.K. government for her.

I am not sure about my liability, though! Once again by filing jointly, I am treated as a U.S. resident for federal tax purposes but would I also be liable to pay the Social Security and Medicare taxes unless I get a certificate of coverage also?

Hope you can help, and once again thank you for all the valuable information!

Clive


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## Bevdeforges

If you are enrolled in and paying into the UK social insurances system, then you should not have to pay US "self-employment tax" (which is social security and Medicare - just both parts, employer and employee).

This is covered under the Social Security treaty between the US and UK. https://www.ssa.gov/international/Agreement_Pamphlets/uk.html

If you're paying into one of the systems, you do NOT have to pay into the other. The certificate of coverage is merely what you would need to produce if your status is questioned by the IRS. In practice, this very rarely happens.
Cheers,
Bev


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## Clivejive

Thanks very much Bev! Yes, we are both paying Class 2 National Insurance and we are covered by the UK Social Security system.

Are you saying that we do not have to file a certificate of coverage with our Form 1040? If so, do we just attach an explanatory note or just state "Covered by U.K. " on the tax return!

Thanks again!

Clive


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## Bevdeforges

As far as I know, you don't have to file the certificate of coverage with your tax returns. You just need to be eligible to get one (possibly in a hurry) if you get a note from the IRS saying that they want to see one.
Cheers,
Bev


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## Clivejive

O.K. Great - thanks Bev!


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## celticweb

If it helps, I enquired about this certificate when I was in the same position as you, just finding out that I needed to file a tax return. This was in the beginning of 2016. There is a UK address on the US social security website that one was supposed to write to get the certificate. When I enquired in the UK, I was told this address had changed.
The new address is 
NIC and EO
HM Revenue and Customs
BX9 1AN

Unless this has changed again, if you want to enquire about a certificate, i would write here.


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## Moulard

The only reason I had the FBAR stuff at easy access is that I had researched it recently.

Alas I can't help on the self-employment tax. I expect that it will be covered in one or other or both of the totalisation agreement and dual taxation treaties between the UK and the US... 

I expect that to do things right you would have to complete all the self-employment related forms, calculate the self-employment tax and then take a treaty position to exempt yourself from it.

Depending on how many companies you worked with and whether or not any were concurrent, it might, be worth considering whether or not they were considered your employer under local tax law. 

Consider..

Did you only work on one contract at a time
Did you have to bring your own tools and supplies
Did you work at their premises
Did you work under their direction

If the answers to those questions are at least substantially yes, then for example under Australian Tax Law at least you would have been considered an employee.. (think professional services contractors)

Note there are a bunch of gotchas with self employment and the way credits, exemptions and deductions are calculated. Hodgen's Tax blog has a recent post on it, that might be worth a read.


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## Clivejive

OK Thanks for the new address, CelticWeb!


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## celticweb

Clivejive said:


> OK Thanks for the new address, CelticWeb!


If you write for a certificate be sure to provide this information for the certificate and provide the following information in your letter:

Full name;
Date and place of birth;
Citizenship;
Country of permanent residence;
U.S. and/or U.K. Social Security number;
Nature of self-employment activity;
Dates the activity was or will be performed; and
Name and address of your trade or business in both countries.

Write to the address I gave before with this information. Your wife or yourself will actually have to be registered as self employed in the UK to get the certificate. They then mail them out to you in about 4 weeks or so.

I enquired at the old address on the US social security website, A case worker wrote back quoting the new address and said to send the information here from now on and to make note of the new address. this was April 2016.

As others have said, you don't really need the certificate, it's only if you want a safe guard in case they ask. I think if you are self employed, having the safe guard is more beneficial because of the self employment tax. In the beginning I was worried about everything, now I worry about nothing anymore, wait to be asked.

Hope this helps.


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## Clivejive

Yes - thanks - it certainly does help! Thanks to everyone who has helped me with this!


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## Clivejive

Thanks to all the people who helped me by providing very useful and informative information and advice!

It has been a great deal of work, but I am now almost ready to mail my delinquent tax returns for 2011, 2012, 2013, 2014 and 2015 to the IRS. According to my calculations, provided that my wife and I are allowed the Foreign Earned Income Exclusion, there should be no tax to pay and therefore there should be no penalty charges either. I do have a couple of niggling questions though:
1) On Schedule C-EZ, I figured my net profit by deducting my Total Expenses from my Gross Receipts. I used the Optional Worksheet on Page 2 of the Form, but will the IRS want me to submit that page as well as Page 1?

2) I am also a little confused with regard to the Form 2555. Line 10 asks for the Date Bona Fide residence began but as a U.K. citizen I have always been a bona fide resident. For now I have just entered the first day of the relevant tax year for each return. So for the 2011 Tax Return I have entered 1-1-2011 as the date bona dude residence began, for the 1012 return, 1-1-2012, etc. etc.

Do you think this will be OK or should I be doing something different?

Hope someone can help as I would love to finish the job within the next few days!


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## Moulard

On Form 2555

For the Bona Fide Residence you would actually enter the date that you considered yourself a resident of the UK. So if you have never resided outside the UK then I guess it would be your birthdate and "continues" as the end date. Unless you left the UK at some point and resided elsewhere, in which case it would be that date that you returned to the UK.

If you just want to enter the first and last dates of the years, then I would suggest using the Physical Presence Test. (ie fill in Part III not Part II). 

Sorry can't help of schedule C.


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## Bevdeforges

Generally speaking, anything called a "worksheet" should not be submitted with the tax forms. You should, however, hang onto a copy of your worksheet "just in case" there are any questions raised. (The chances of this are very small, however, unless you did something very very overtly wrong on the Schedule C.)

For the 2555, I'd use the year of your birth and be done with it. It's annoying that the electronic forms don't seem to allow you to enter just the year anymore, but you do what you have to to get the system to take your filing. <g>
Cheers,
Bev


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## celticweb

Clivejive said:


> 2) I am also a little confused with regard to the Form 2555. Line 10 asks for the Date Bona Fide residence began but as a U.K. citizen I have always been a bona fide resident. For now I have just entered the first day of the relevant tax year for each return. So for the 2011 Tax Return I have entered 1-1-2011 as the date bona dude residence began, for the 1012 return, 1-1-2012, etc. etc.
> 
> Do you think this will be OK or should I be doing something different?
> 
> Hope someone can help as I would love to finish the job within the next few days!


I can actually help with the form 2555 by telling you what I did on this form and what I researched when I started doing my own taxes.

I was born a dual UK/USA citizen, parents working in the USA temporarily and I moved back to the UK at a young age. My form 2555 used the Bona Fide residence test and has the same dates on it for every year, the date being the day we moved back to the UK (years ago) and continues for the ending date so If you moved back from the US at some stage, then the date you moved back is your first date (like me) and then continues.

But if you never lived in the US and always here then I agree it would be your birth date, (as Moulard mentioned)

However if you are filing jointly with your wife and she is a US/UK citizen, I believe you each have to fill out your own form 2555, each one of you gets a single exclusion. In the case of your wife, the dates depend on her circumstances, for example her starting date could be the date she was given permanent residence in the UK either leave to remain or indefinite leave to remain. or it could be the date she became a naturalised UK citizen. or if she was born a dual but always lived in the UK, then also her birth date and or if she moved back from the US, then that date.


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## Bevdeforges

Yes, each person files their own 2555 and gets their own (full) exclusion. But you don't need to have received LTR nor ILR to claim your bona fide "start date." I have used the date I moved to Germany (I now live in France) to start work at my German job. Have not resided in the US since that date. 

To be honest about it, they don't really use that date for anything except in the year you made the move (to determine your qualification for physical presence vs. bona fide resident - since one is calendar year based and the other is based on any 12 consecutive months). I don't remember the actual date I moved (back in 1992) so just put July 1, since it was sometime during July, I think. But you can be a bona fide resident just by being on a long-stay visa, without having permanent resident status. (If you're resident enough to have to pay and file taxes in your country of residence, that's "bona fide" enough.)
Cheers,
Bev


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## celticweb

Yes it depends on circumstances but I read somewhere that the IRS do look at facts like your Visa status and I read somewhere that just because you moved to a foreign country, it doesn't mean you have Bona Fide residence in the eyes of the IRS. When are they ever logical about anything? We shouldn't even be paying them taxes from here.

For example if you are on a temporary work visa, they don't consider that Bona Fide. Of course if you are a citizen of that country, and live in that country then it's more obvious, like buying a house makes it more obvious. that's why all those questions on the form, did you purchase a home, does your visa have restrictions etc.

Of course I am not an expert and this shouldn't be taken as gospel advise. I doubt they check these things anyway. 

Also the Bona Fide residence test is the more desirable so if one qualifies, they should always use that.


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## Bevdeforges

In very general terms, most folks do wind up using the physical presence test for their first year overseas, since most folks actually do arrive mid-year. From that point on, it kind of depends on your "intentions" which have a tendency to change over time. (They used to make a big deal over whether or not you were planning on returning to the US.)

It was interesting the two years I was "sans papiers" here in France. When they asked what kind of visa I was on, I just answered "none." Then again, I wasn't making and excluding enough income to warrant much investigation of anything on my returns.
Cheers,
Bev


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## Clivejive

Thanks again! Should be no major dispute about my bona Fide Residence as I state that I am UK citizen, have purchased my home here and my tax home is here in UK too! With regard to my wife who lives with me throughout the tax year, on reflection, I think in the question about her visa I will mention that she was granted Leave to Remain indefinitely in 1982!


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## iota2014

Clivejive said:


> Thanks again! Should be no major dispute about my bona Fide Residence as I state that I am UK citizen, have purchased my home here and my tax home is here in UK too! With regard to my wife who lives with me throughout the tax year, on reflection, I think in the question about her visa I will mention that she was granted Leave to Remain indefinitely in 1982!


Does your wife want citizenship? If so it might be a good idea to get it in motion. It does take some time to go through, even starting with ILR, and change is in the air.


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## celticweb

Clivejive said:


> Thanks again! Should be no major dispute about my bona Fide Residence as I state that I am UK citizen, have purchased my home here and my tax home is here in UK too! With regard to my wife who lives with me throughout the tax year, on reflection, I think in the question about her visa I will mention that she was granted Leave to Remain indefinitely in 1982!


Yes for sure, no major dispute however don't double proof the form by filing out both the Bona Fide section and the physical presence section. The IRS will reject it. Only fill out the Bona Fide section for each of you. Apparently taxpayers do this and fill out both to double proof and it gets rejected. I am sure you weren't going to do this but thought I would mention it.

For my Visa question, I answered UK citizen - no visa required.

For the question about your wife, if she's a UK citizen now, then answer the same as you, UK Citizen - no visa required. You can just use the start of her bona fide period to be the date she was granted Leave to Remain. or an estimate if you can't remember. When it's that far back, no one is going to be checking anything.

Hope this helps.


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## celticweb

also if she isn't a UK citizen yet then of course write what you said, about the leave to remain, and Iota is right, maybe time to look into citizenship.


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## Clivejive

That's great. Thanks Bev!


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## Clivejive

*Claiming the Foreign Earned Income Exclusion*

Once again I would like to thank all contributors to this Thread,

This is the week when I really must mail my Tax forms for the years 2011 to 2015 off to the IRS.

Trouble is, I keep checking the forms and the information online and finding additional factors which seem to be relevant.

My wife and I will both be claiming the Foreign Earned Income Exclusion (FEIE), and we will be filing the exclusion forms late.

IRS Pub 54 tells me that:

_Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1.911-7(a)(2)(i)(D).”_

So I have done that.

However, the same publication also states:

_Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it._

I had not previously noticed this, so I have been preparing Form 2555 for each tax year, when maybe I don't need to be creating more paperwork.

The first year we will be claiming the FEIE will be for 2011. So I have printed “Filed pursuant to section 1.911-7(a)(2)(i)(D).” at the top of the 1040 for 2011, I have completed the Form 2555 for myself (self-employed) and the 2555 EZ for Donna (my wife) and I have entered the sum of our two incomes on line 21 in parenthesis. I think I have got that bit right.

However, as for 2012 and the following years, it now seems that I don't need to claim the Exclusion again and that would logically suggest that I should not need to keep providing Form 2555's for myself? It seems a little strange though because how do the IRS know that I still qualify for the Exclusion?

Then as far as Donna is concerned, she was employed in 2011 but earned no income in 2012. However in the years 2103 to 2015 she did have a a small business which she used to run on a self-employed basis. Would her previously filed Form 2555-EZ cover her or would she have to file the Form 2555 from 2013 and then not have to file for the following years?

Can any of you help me with this too, please?

Thanks again,


Clive


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## Bevdeforges

Nope - you're overthinking this. You do need to file the form 2555 for each and every year you claim the exclusion (if only to give them the specific numbers for that year's exclusion). You're fine to pop those suckers into the mail now and be done with it.
Cheers,
Bev


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## celticweb

Clivejive said:


> _Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it._


One thing that might help you understand where this "stays in effect for that year and later years" comes from is that there are two ways to exclude earned income. One can take the FEIE (form 2555) or one can use foreign tax credits (form 1116). 

If you live in a country with a high tax rate it can work better sometimes with the second method. So basically all they are saying is that once you exclude earned income with the FEIE, that choice remains the same and in effect going forward and you can't just pick and choose what you use each year like say this year i will take the FEIE and next year I will use the foreign tax credit and then back again.

Once the FEIE is revoked by using the foreign tax credit instead, then i think you can't go back and use the FEIE again for 5 years. maybe someone else knows the exact time frame.

The FEIE is definitely easier if you want to do your own taxes and I believe most people are using it.


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## Moulard

celticweb said:


> The FEIE is definitely easier if you want to do your own taxes and I believe most people are using it.


It is definitely easier if your foreign wages, salary etc are below the FEIE threshold. Even if your earned income is over the limit, you can still take the FEIE up to the limit which may be enough for you to still end up with zero taxable income after deductions and exclusions.

It *can *be better to take a foreign tax credit, particularly if the bulk of your income is from foreign wages, (ie you have negligible passive or lump-sum type income) and your local tax rates are higher than the US rate. But with form 1116, AMT and other things it get complex fast. 

It can also be better from a tax planning perspective too. If you see a major event happening in the next 10 years in which you are likely to get a payment of some sort that is not taxed locally, but will be taxed by the US that pile of tax credits can come in handy.

But in light of the fact you are trying to catch up, I would not worry too much about it now. Something to consider in future.

If you are having trouble sleeping, take a look at the form 1116. 

And remember that if you change your mind and decide that a FTC is better, you can always revoke that choice with an amended return for the past 2 or 3 returns, or indeed, simply file a future return with form 1116 and not 2555 and from that year and for the following 5 years do the same.


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## Bevdeforges

One other little detail that some folks may overlook. If you should get lucky and start making a salary over and above the FEIE limit, you can take the FTC on the part of your salary that is not excluded (assuming you're living in a high tax venue). 

As already said, the FTC isn't particularly simple - it's not just a matter of taking the credit for the foreign tax you paid on the income in question. You have to split your income into active and passive - and then you apportion the income taxes (only) that you paid based on the relative amounts involved. The tax credits you calculate in this manner are then apportioned to your US taxes in a similar manner, which makes it not quite a dollar for dollar credit. If you're interested in the possibilities, it's best to run the numbers for yourself and your particular situation before you decide the best way to go.
Cheers,
Bev


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## Moulard

But equally, what Bev fails to mention is that once you are over the FEIE you are likely going to have to deal with the FTC anyways. There is only a USD 10,350 window between excluding under the FEIE and having a taxable income. (for the 2016 tax year at least, the values are adjusted each year). 

Whether it is a salary in excess of the FEIE or interest, capital gains, investment returns or for that matter an inheritance from a non-US person it would still be taxable income and would still count as part of that 10 grand. 

For what its worth 25% of people who file the 2555 also file a 1116 according to the latest SIO figures.

Lets face it a 10% increase in the value of the currency alone might be enough to tip you over the balance (it did for me one year).

Further, you have to take into consideration that if you cannot take a deductions or credits for any excluded income and you have to pro-rate it. 

Yes, if you exclude income your AGI will be quite low, and the AGI limits will be attainable and you may be in a position to take an itemised deduction above the standard deduction (particularly if you have high local property taxes or a mortgage with high interest). However your chances of deducting meaningful job related deductions goes down significantly. 

But on Bev's side of the equation, yes, there are a bunch of other things to consider include (but are not limited to):

You may get caught by the AMT (now that you have 100k+ AGI) and you need to consider local tax rates vs AMT tax rates as well as standard rates
You are more vulnerable to currency fluctuations which could push you from one tax bracket to another in USD without any real change. 
You are more vulnerable to changes in tax rates particularly if there is little difference between the foreign rate and the US rate.
Changes to your income passive to general income profile
Changes to your filing status that result in a tax credit splitting event.
Treaties sometimes cap tax rates on some types of income.

But, yes. I agree. You need to run the numbers given your circumstances - the outcome may well be very different depending on your income profile and where you are in your working life. 

All this is why I said, just file as is, and then spend some time between now and next year to explore, investigate and research. Depending on the outcome of that they can do nothing, file amended returns to revoke the exclusion, or revoke for that year and ignore past years.

Me, when I did the sums, it ends up tripling the amount I can carryover as a tax credit. A sum which could come incredibly handy to offset a US Taxable, but AU tax free income down the track.


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## Clivejive

Thank you very much, Bev and Moullard, but I am nowhere even close to hitting the maximum Foreign Earned Income Exclusion! 

Then again, who knows what might happen in the future!


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## Clivejive

Thanks CelticWeb too! From Celtic Clive!


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