# Foreign Earned Income and Physical Presence Test



## jrgraves72 (Sep 1, 2012)

Please help me understand this. I am working in Afghanistan and looking to qualify for the foreign earned income exclusion. By the time I leave I will have satisfied my 330 day test.

However when I originally got here it was Oct 9 2011 and planning to depart Oct 4 2012. So again good on the 330, but does this cause problem with "tax home" and temp vs. perm assignment and all that? Or should I be good to go? It is less than 365 in another country but I have met the 330 within 12 months....


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## Bevdeforges (Nov 16, 2007)

For the physical presence test, you only need to be outside the US for 330 days (or maybe it's now 335 days) out of a 12-month consecutive period. It really has little if anything to do with the notion of "tax home."

For the bona fide residence test, you need to be a bona fide resident during an entire calendar year - and that does involve the notion of "tax home."
Cheers,
Bev


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## jrgraves72 (Sep 1, 2012)

*Thanks Bev, but...*

Firstly, I greatly appreciate you response....

That is what I had understood all along but then I started reading the IRS pubs and some accountant sites, there is conflicting info about this. The IRS pub 54 states you must have both tax home in foreign country and either physical presence or bona fide residence. Then it goes on to say the tax home is based on temp (less than 1 year) vs. perm/indefinite (more than one year)....temp not qualifying as "tax home" in general.

However the instructions for the exclusion tax for 2555 in regards to tax home state: Tax home test. To meet this test, your tax home must be in a foreign country, or countries (see Foreign country, earlier), throughout your period of bona fide residence or physical presence, whichever applies. For this purpose, your period of physical presence is the 330 full days during which you were present in a foreign country, not the 12 consecutive months during which those days occurred.

Maybe the key I am looking for is the part I highlighted in red....I'm getting a headache. 



Bevdeforges said:


> For the physical presence test, you only need to be outside the US for 330 days (or maybe it's now 335 days) out of a 12-month consecutive period. It really has little if anything to do with the notion of "tax home."
> 
> For the bona fide residence test, you need to be a bona fide resident during an entire calendar year - and that does involve the notion of "tax home."
> Cheers,
> Bev


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## stednick (Oct 16, 2011)

*Warrants professional services*

jrgraves72:

Due to the complexity of the USA tax code I will not offer an opinion on the foreign income exclusion requirements today. I've qualified for them previously and am somewhat familiar with the terminology that creates the "circular loops of conflicting information" we find listed in our (simplified) tax code. Yes, headaches, followed by confusion, followed by even more severe headaches. The people who wrote the code are sadists. 

I will make this comment. First, your are dealing with a considerable amount of money. Both in the potential savings by minimization of your tax burden, and also in the potential penalties and interest should a mistake be made in erroneously determining your qualification. So, on this basis, the taxation issue deserves "professional" service. 

I would seek, professional tax services. The peace of mind justifies the cost.

Good luck.


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## jrgraves72 (Sep 1, 2012)

*Bev?*

What do you think?



Bevdeforges said:


> For the physical presence test, you only need to be outside the US for 330 days (or maybe it's now 335 days) out of a 12-month consecutive period. It really has little if anything to do with the notion of "tax home."
> 
> For the bona fide residence test, you need to be a bona fide resident during an entire calendar year - and that does involve the notion of "tax home."
> Cheers,
> Bev


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## Bevdeforges (Nov 16, 2007)

In Pub 54, read the section on "tax home" on p. 12. Where have you been living while working in Afghanistan? The concept of "tax home" is related to where your "centers of interest" are located - and, as it says in pub 54, where you have your "abode."

Personally, I'd claim the FEIE and see what happens. The part you highlighted in red simply says that your "tax home" had to have been outside the US during the 330 days in which you were outside the US. (Typical tax instruction talk.) I can report that I had a similar situation some years ago - where I was outside the US for one month short of a full year and the FEIE went through with no problems.
Cheers,
Bev


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## jrgraves72 (Sep 1, 2012)

*Thanks again, Bev!!!*

Bev, I agree with you and that is my gut on it also. Yes, I have been and currently live and work in Afghan. The part that got me riled up was the part on p. 13 that discusses Temp vs. Perm/Indefinite that determines Tax Home. I am thinking this applies more to the Bona Fide test maybe? It is good to know that you had a similar situation and it worked out for you....hopefully same for me. Technically I could get travel re-scheduled for a few days later but ticket is bought and my employer would not be so happy with me. Plus, again, as long as the 330 is met I should be good. I'm assuming you had 330 when you got yours even though less than one year....



Bevdeforges said:


> In Pub 54, read the section on "tax home" on p. 12. Where have you been living while working in Afghanistan? The concept of "tax home" is related to where your "centers of interest" are located - and, as it says in pub 54, where you have your "abode."
> 
> Personally, I'd claim the FEIE and see what happens. The part you highlighted in red simply says that your "tax home" had to have been outside the US during the 330 days in which you were outside the US. (Typical tax instruction talk.) I can report that I had a similar situation some years ago - where I was outside the US for one month short of a full year and the FEIE went through with no problems.
> Cheers,
> Bev


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