foreign earned income exclusion


P

paso.yossarian

Hello Everyone,
simple question: I am trying to understand if I can claim "foreign earned income exclusion" or not.
I am a US resident alien. I work as a resident engineer in US for a European company for, let's say, 80% of the year. So, 20% of my income is received for work performed while I am in Italy for the italian company.
My country has a tax treaty with US.
I went here and I passed the test:
http://www.irs.gov/Individuals/Inte...lusion-Can-I-Claim-the-Exclusion-or-Deduction

So, do you confirm that I can exclude the 20% of my year income from the worldwide income that I must declare in the US? Or am I missing something?

thanks
 
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A

Alan

Hello Everyone,
simple question: I am trying to understand if I can claim "foreign earned income exclusion" or not.
I am a US resident alien. I work as a resident engineer in US for a European company for, let's say, 80% of the year. So, 20% of my income is received for work performed while I am in Italy for the italian company.
My country has a tax treaty with US.
I went here and I passed the test:
http://www.irs.gov/Individuals/Inte...lusion-Can-I-Claim-the-Exclusion-or-Deduction

So, do you confirm that I can exclude the 20% of my year income from the worldwide income that I must declare in the US? Or am I missing something?
Absolutely not.
1. We have no idea how you answered the five questions.
2. We have no idea whether you even understood the five questions being
asked.
3. We don't have enough detail to determine your tax home.
4. We have no idea when you are out of the country (US) and on foreign
soil nor do we know where and how you live when on foreign soil.
5. We have no idea whether your work in Italy is temporary or an
indefinite assignment.

If I had to guess that by earning 80% of your income in the US, you are
saying that you only spend 20% of your time on foreign soil, I would
also guess that you are domiciled in the US and the US is your tax home.
I would also guess that the US is your tax home. I would also guess that
you are NOT a bona fide resident of a foreign country because you could
not show an uninterrupted period of one calendar on foreign soil nor
could you pass the physical presence test of 330 full days on foreign
soil in a 12 month period to be eligible to exclude your foreign income.
 
J

John Levine

Hello Everyone,
If you're a resident alien, the US is your tax home. Period, end of
discussion. US residents cannot exclude foreign income, although if
you paid tax on it you can claim credit for tax paid on form 1116.
 
A

Alan

If you're a resident alien, the US is your tax home. Period, end of
discussion. US residents cannot exclude foreign income, although if
you paid tax on it you can claim credit for tax paid on form 1116.
You need to reread the rules for US resident aliens. See b and c below.

You must be one of the following.
a. A U.S. citizen who is a bona fide resident of a foreign country or
countries for an uninterrupted period that includes an entire tax year.

b. A U.S. resident alien who is a citizen or national of a country with
which the United States has an income tax treaty in effect and who is a
bona fide resident of a foreign country or countries for an
uninterrupted period that includes an entire tax year.

c. A U.S. citizen or a U.S. resident alien who is physically present in
a foreign country or countries for at least 330 full days during any
period of 12 consecutive months.
 
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A

Alan

Il giorno martedì 25 marzo 2014 12:32:25 UTC-4, Alan ha scritto:

You are right, I should have given more details.
About the Tax home.
Based on what the IRS website says:
Your tax home is the general area of your main place of business, employment, or post of duty,
--> I am employed by the Italian branch, I receive the salary from them. The presence in the US is temporary.

Again, on the IRS website:
You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. However, your abode is not necessarily in the United States while you are temporarily in the United States.
"Abode" has been variously defined as one's home, habitation, residence, domicile, or place of dwelling.
--> the only house I own is in Italy, I intend to return there when the assignment is over. In fact I work in United States with a "non resident" alien status, I am "resident alien" only for tax purposes, because I meet the substantial presence test.

About the Bonafide resident test: before coming to the United States to work here, I lived there for 28 years, I still have italian citizenship.

Regards
Us law does not distinguish between those who are permanent residents
and those who pass the substantial presence test. You remain a resident
of the US until such time that you lose your residency for whatever
reason. As such, and once again assuming that if you derive 80% of your
income in the US, then you are spending 80% of your time in the US, you
fail both tests to exclude your foreign earned income.
 

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