Foreign income is a complicated issue because many factors such as U.S. tax treaties as well as the onerous reporting laws for foreign bank accounts and investments (FBAR).  Therefore it is wise to have a tax professional such as myself prepare your Federal and if applicable State income tax returns.

 

Please use the contact page to discuss the preparation of your income tax returns.  My fees are very reasonable and I provide every client my full attention, personal care with knowledgeable application of the tax code. 

Foreign Earned Income Exclusion

If you qualify you may be able to exclude $104,100 in 2018 (the amount is indexed so future years it will likely be higher) of earned income while living abroad.  You cannot exclude more than what you actually earned. So if your foreign earned income was $50,000 and if you qualify for the exclusion you exclude $50,000.  

 

If you are a U.S. citizen or a U.S. resident alien living in a foreign country you are subject to the same U.S. income tax laws that apply to citizens and resident aliens living in the United States however as mentioned in the previous paragraph the U.S. tax code has provisions that may allow you to exclude some or all of your foreign earned income.

 

A foreign country is any territory under the sovereignty of a governement other than that of the United States.  You qualify for the tax benefits (there is also a housing deduction) if you meet the "tax home test" and meet either the "bona fide residence" test or the "physical presence" test.

 

Income from working abroad as an employee of the U.S. Government does not qualify for either of the exclusions.

If you are living or residing overseas on the regular due date of your tax return, usually April 15th, you are allowed an automatic 2-month extension to file and pay.  For a calendar year return that would mean you have until June 15th.  If you qualify for the 2-month extension penalties for paying late are assessed from the 2-month extension date.

 

If you filed a previous year return and didn't claim the Foreign Earned Income Exclusion you may file an amended return.  For a refund you must file the amended return within three years (including extensions) after the date your filed your original return or within two years after the date you paid the tax, whichever is later.   If you filed your original return early it is considered filed on the due date (normally April 15th) however if you had an extension it is considered filed on the date the IRS receives the tax return.

 

The above is the general rule, taxpayers have additional years to file ameneded returns for some specific errors such as bad debts, foreign tax credits and other special situations.

Michael R. Evans, CPA
41 Hitchcock Way Suite A
Santa Barbara, CA 93105
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