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Question for the Money Doctors

Question submitted on Dec 15, 2012.

Question

I work abroad and I want to know if I have to pay taxes, I know there is a limit ($92,900) I can exclude but also I need to be 330 days out residing abroad but is it possible I come back to the states for a quick 2 day visit or would that change that exclusion and we''ll have to pay taxes ?

Thank you

Answer

I am not a foreign tax expert, but fortunately I work next door to such a person with McGladrey LLP. Below is her answer to your question.

The Foreign Earned Income (FEI) exclusion for 2011 is $92,900. This exclusion for 2012 is $95,100. To qualify for this exclusion, one of 2 two tests must be met. The bona fide residence test is met if you are a bona fide resident of the foreign country for a full calendar year. The second test is the physical presence test which is met if you are present in the foreign country 330 full days out of any twelve month period. This test allows for short visits back to the US. If the twelve month period used straddles calendar years, you must prorate the exclusion in each year.

To claim this exclusion, you must actually file a tax return and attach Form 2555.


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