This is Part II of a two-part blog series. After establishing that they have a tax home in a foreign country, taxpayers must still establish that they satisfy the 330 day physical presence test or the bona fide residence test. See IRC section 911(d)(1).
I. 330 Day Physical Presence Test
The 330 day physical presence test is the epitome of a “hard and fast rule.” To satisfy the test, the taxpayer must establish the following (there are “no ifs, ands, or buts about it”):
(1) That he is a U.S. citizen or resident of the United States, and
(2) That he was physically present in a foreign country or countries for at least 330 full days Read More
This blog addresses the foreign earned income exclusion rules as they apply to civilian contractors, and other civilian employees, who work in foreign country combat zones. By “civilian,” I am specifically referring to individuals who are not employees of the United States or any agency of the United States.
I. IRC Section 911 Foreign Earned Income Exclusion
Let’s start with some basics. IRC section 911(a)(1) allows a “qualified individual” to exclude his foreign earned income and housing costs from gross income. In the same way that the foreign tax credit limitation limits the foreign tax credit to the amount of U.S. tax attributable to foreign-source income, IRC section 911(b)(2)(D) limits the amount of foreign earned income that may be excluded to an amount adjusted annually for inflation. Read More
United States taxpayers seeking to use the streamlined foreign offshore procedures must satisfy the following requirements:
(1) The applicable non-residency requirement (for joint return filers, both spouses must satisfy the non-residency requirement); and
(2) Have failed to file an FBAR with respect to a foreign financial account; and
(3) The failure to file an FBAR must have resulted from non-willful conduct. Non-willful conduct is conduct that is due to negligence, inadvertence, or mistake or conduct that is the result of a good faith misunderstanding of the requirements of the law. Read More