Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abord - 2011 Page 20
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44were paid $69,000 for work you did in Sweden
2. Count backward 12 months from May 11,
If you owe federal income tax after taking into
that year and in 2010 you were paid $74,000 for
2011, to find the first day of this 12-month
account the foreign earned income exclusion
that year’s work in Sweden. You excluded all the
period, May 12, 2010. This 12-month pe-
and the IRS discovered that you failed to choose
income on your 2009 and 2010 returns.
riod runs from May 12, 2010, through May
the exclusion, you may still be able to choose
11, 2011.
the exclusion. You must request a private letter
In 2011, you were paid $92,000; $82,000 for
ruling under Income Tax Regulation 301.9100-3
your work in Sweden during 2011, and $10,000
3. Count the total days during 2010 that fall
and Revenue Procedure 2011-1, 2011-1 I.R.B.
for work you did in Sweden in 2009. You cannot
within this 12-month period. This is 234
1, available at
exclude any of the $10,000 for work done in
days (May 12, 2010 – December 31,
ar06.html.
2009 because you received it after the end of the
2010).
year following the year in which you earned it.
4. Multiply $91,500 (the maximum exclusion
You must include the $10,000 in income. You
Effect of Choosing the Exclusion
for 2010) by the fraction 234/365 to find
can exclude all of the $82,000 received for work
your maximum exclusion for 2010
you did in 2011.
Once you choose to exclude your foreign
($58,660).
earned income, that choice remains in effect for
Community income. The maximum exclu-
You figure the maximum exclusion for 2011
that year and all later years unless you revoke it.
sion applies separately to the earnings of a hus-
in the opposite manner.
Foreign tax credit or deduction. Once you
band and wife. Ignore any community property
1. Beginning with your last full day, Septem-
choose to exclude foreign earned income, you
laws when you figure your limit on the foreign
ber 30, 2011, count backward 330 full
cannot take a foreign tax credit or deduction for
earned income exclusion.
days. Do not count the 16 days you spent
taxes on income you can exclude. If you do take
in the United States. That day, October 19,
a credit or deduction for any of those taxes, your
Part-year exclusion. If the period for which
2010, is the first day of a 12-month period.
choice to exclude foreign earned income may be
you qualify for the foreign earned income exclu-
considered revoked. See Publication 514, For-
sion includes only part of the year, you must
2. Count forward 12 months from October 19,
eign Tax Credit for Individuals, for more informa-
adjust the maximum limit based on the number
2010, to find the last day of this 12-month
tion.
of qualifying days in the year. The number of
period, October 18, 2011. This 12-month
qualifying days is the number of days in the year
period runs from October 19, 2010,
Earned income credit. If you claim the for-
within the period on which you both:
through October 18, 2011.
eign earned income exclusion, you will not qual-
•
ify for the earned income credit for the year. For
Have your tax home in a foreign country,
3. Count the total days during 2011 that fall
more information on this credit, see Publication
and
within this 12-month period. This is 291
596.
•
days (January 1, 2011 – October 18,
Meet either the bona fide residence test or
2011).
the physical presence test.
Figuring tax on income not excluded. If you
claim the foreign earned income exclusion, the
4. Multiply $92,900, the maximum limit, by
For this purpose, you can count as qualifying
housing exclusion (discussed later), or both, you
the fraction 291/365 to find your maximum
days all days within a period of 12 consecutive
must figure the tax on your nonexcluded income
exclusion for 2011 ($74,065).
months once you are physically present and
using the tax rates that would have applied had
you not claimed the exclusions. See the instruc-
have your tax home in a foreign country for 330
Choosing the Exclusion
tions for Form 1040 and complete the Foreign
full days. To figure your maximum exclusion,
Earned Income Tax Worksheet to figure the
multiply the maximum excludable amount for the
The foreign earned income exclusion is volun-
amount of tax to enter on Form 1040, line 44. If
year by the number of your qualifying days in the
tary. You can choose the exclusion by complet-
you must attach Form 6251, Alternative Mini-
year, and then divide the result by the number of
ing the appropriate parts of Form 2555.
mum Tax — Individuals, to your return, use the
days in the year.
Foreign Earned Income Tax Worksheet pro-
Example. You report your income on the
vided in the instructions for Form 6251.
When You Can
calendar-year basis and you qualified for the
Choose the Exclusion
foreign earned income exclusion under the bona
Revoking the Exclusion
fide residence test for 75 days in 2011. You can
Your initial choice of the exclusion on Form 2555
exclude a maximum of 75/365 of $92,900, or
or Form 2555-EZ generally must be made with
You can revoke your choice for any year. You do
$19,089, of your foreign earned income for
one of the following returns.
this by attaching a statement that you are revok-
2011. If you qualify under the bona fide resi-
ing one or more previously made choices to the
•
dence test for all of 2012, you can exclude your
A return filed by the due date (including
return or amended return for the first year that
foreign earned income up to the 2012 limit.
any extensions).
you do not wish to claim the exclusion(s). You
•
Physical presence test. Under the physi-
A return amending a timely-filed return.
must specify which choice(s) you are revoking.
cal presence test, a 12-month period can be any
You must revoke separately a choice to exclude
Amended returns generally must be filed
period of 12 consecutive months that includes
foreign earned income and a choice to exclude
by the later of 3 years after the filing date
330 full days. If you qualify for the foreign earned
foreign housing amounts.
of the original return or 2 years after the
income exclusion under the physical presence
If you revoked a choice and within 5 years
tax is paid.
test for part of a year, it is important to carefully
again wish to choose the same exclusion, you
•
A return filed within 1 year from the origi-
choose the 12-month period that will allow the
must apply for IRS approval. You do this by
nal due date of the return (determined
maximum exclusion for that year.
requesting a ruling from the IRS.
without regard to any extensions).
Mail your request for a ruling, in dupli-
Example. You are physically present and
cate, to:
You can choose the exclusion on a return filed
have your tax home in a foreign country for a
after the periods described above if you owe no
16-month period from June 1, 2010, through
Associate Chief Counsel (International)
federal income tax after taking into account the
September 30, 2011, except for 16 days in De-
Internal Revenue Service
exclusion.
cember 2010 when you were on vacation in the
Attn: CC:PA:LPD:DRU
If you owe federal income tax after taking
United States. You figure the maximum exclu-
P.O. Box 7604
into account the exclusion, you can choose the
sion for 2010 as follows.
Ben Franklin Station
exclusion on a return filed after the periods de-
Washington, DC 20044
1. Beginning with June 1, 2010, count for-
scribed earlier if you file before the IRS discov-
ward 330 full days. Do not count the 16
ers that you failed to choose the exclusion. You
Because requesting a ruling can be complex,
days you spent in the United States. The
must type or legibly print at the top of the first
you may need professional help. Also, the IRS
330th day, May 12, 2011, is the last day of
page of the Form 1040 “Filed pursuant to section
charges a fee for issuing these rulings. For more
a 12-month period.
1.911-7(a)(2)(i)(D).”
information, see Revenue Procedure 2011-1.
Chapter 4 Foreign Earned Income and Housing: Exclusion – Deduction
Page 20
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