Claiming the Foreign Earned Income Exclusion (FEIE) for the partial year BEFORE I established residence in foreign country?

[ryanf1475]

Hello,

For example, I moved to China from Sept. 2017-present. I thought I read somewhere that, now, after I have established residence in China, I can go back and amend my 2017 return to claim the FEIE for Sept-Dec 2017? Is this right?

Any help greatly appreciated.

Ryan

 

[FlyingRon]

While your terminology doesn't quite match the tax law, you have it essentially correct. The last months of 2017 aren't long enough for you to have established the presence/bona fide residence requirements (takes 330 days or a time that spans an entire tax year). However, once you have shown to have met that (I assume you spent the entire 2018 year living in China), then indeed you can claim a partial exclusion for the part of 2017 that you were residing abroad.

Note that this exclusion only applies to money you earned in the foreign country. Anything you derived from US sources is fully taxable.

 

[ryanf1475]

While your terminology doesn't quite match the tax law, you have it essentially correct. The last months of 2017 aren't long enough for you to have established the presence/bona fide residence requirements (takes 330 days or a time that spans an entire tax year). However, once you have shown to have met that (I assume you spent the entire 2018 year living in China), then indeed you can claim a partial exclusion for the part of 2017 that you were residing abroad.

Note that this exclusion only applies to money you earned in the foreign country. Anything you derived from US sources is fully taxable.

Thanks Ron... so, originally I deducted my meals for that part of 2017 since it was considered a long business trip. Can I still deduct them in the amendment, or does that need to be changed?

 

[LdiJ]

Thanks Ron... so, originally I deducted my meals for that part of 2017 since it was considered a long business trip. Can I still deduct them in the amendment, or does that need to be changed?

That would need to be changed.

 

[davew9128]

FWIW you were eligible for a one time extension for 2017 to allow yourself the time to have remained overseas long enough to meet the time test for the exclusion. You didn't need to file and now go back and amend.

 

[ryanf1475]

Thanks guys, but a couple other questions arise.... I had a Foreign Tax Credit and also took the Standard Deduction for this return. Do these need to pro-rated based on how long I was actually in the US? Or, I can take the full tax credit and deduction?

 

[LdiJ]

Thanks guys, but a couple other questions arise.... I had a Foreign Tax Credit and also took the Standard Deduction for this return. Do these need to pro-rated based on how long I was actually in the US? Or, I can take the full tax credit and deduction?

The Standard Deduction does not have to be pro-rated but the foreign income exclusion has to be pro-rated, and you cannot take a foreign tax credit against excluded income.

I really think that you are going to need a tax professional to help you on this one.

 

[ryanf1475]

Hello, it's me again, sorry. This isn't exactly the same issue as above, but related. I think I may have messed up my 2018 2555-EZ. Line 17 asks for total foreign earned income. Does this include my salary deferrals into my pre-tax 457 account? I am guessing not, since these deferrals were not included in my W2 Box 1. In other words, is it asking for W2 Box 1 or Box 5? Thanks.

relevant form: https://www.irs.gov/pub/irs-prior/f2555ez--2018.pdf

 

[Just Blue]

Thank You, Ryan!

 

[davew9128]

Was the salary deferral from a US employer? Asking for a reason.

 

[LdiJ]

The more questions you ask, the more I feel that you really need a tax professional helping you with the return. Its possible that with the meals you deducted and the foreign tax credit you took, that you may be better off NOT amending the return.

 

[ryanf1475]

The more questions you ask, the more I feel that you really need a tax professional helping you with the return. Its possible that with the meals you deducted and the foreign tax credit you took, that you may be better off NOT amending the return.

well, thanks, but I didn't deduct any meals from my 2018 return. And if I used a tax pro, I wouldn't be learning so much!

 

[ryanf1475]

Was the salary deferral from a US employer? Asking for a reason.

yes, it was.