I. Filing Requirements

	When are U.S. income tax returns due?
	Generally, for calendar year taxpayers, U.S. income tax returns are due on April 15. If you are a U.S. citizen or resident and both your tax home and your abode are outside the United States and Puerto Rico on the regular due date, an automatic extension is granted to June 15 for filing the return. Interest will be charged on any tax due, as shown on the return, from April 15. Penalties will begin to accrue on June 15
	Where do I file my U.S. income tax return?
	If you claim the foreign earned income exclusion, the foreign housing exclusion, the foreign housing deduction, or an exclusion of income for bona fide residents of American Samoa, and you are not making a payment, you should file your return with the: Internal Revenue Service Center Austin, Tx 73301-0215. If you are not claiming one of the exclusions or the deduction, but are living in a foreign country or U.S. possession and have no legal residence or principal place of business in the United States, you should also send your return to the address shown above. If you are not sure of the place of your legal residence and have no principal place of business in the United States, you also can file with the Austin Service Center. However, you should not file with the Austin Service Center if you are a bona fide resident of the Virgin Islands or a resident of Guam or the Commonwealth of the Northern Mariana Islands on the last day of your tax year.
	I am going abroad this year and expect to qualify for the foreign earned income exclusion. How can I secure an extension of time to file my return, when should I file my return, and what forms are required?
	a) You should file Form 2350 by the due date of your return to request an extension of time to file. Form 2350 is a special form for those U.S. citizens or residents abroad who expect to qualify under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ).
	My entire income qualifies for the foreign earned income exclusion. Must I file a tax return?
	Generally. Every U.S. citizen or resident must file a U.S. income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status and income level.
	I was sent abroad by my company last year and I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return?
	If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. You must report your worldwide income on the return. If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U.S. income tax. However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid.
	I am a U.S. citizen and have no taxable income from the United States, but I have substantial income from a foreign source. Am I required to file a U.S. income tax return?
	Yes. All U.S. citizens and resident aliens, depending on the amount of the foreign source income, are subject to U.S. tax on their worldwide income. If you paid taxes to a foreign government on income from sources outside the United States, you may receive a foreign tax credit against your U.S. income tax liability for the foreign taxes paid. Form 1116 is used to figure the allowable credit.
	I am a U.S. citizen who has retired, and I expect to remain in a foreign country. Do I have any further U.S. tax obligations?
	Your U.S. tax obligation on your income is the same as that of a retired person living in the United States.
	I have been a bona fide resident of a foreign country for over 5 years. Is it necessary for me to pay estimated tax?
	U.S. taxpayers overseas have the same requirements for paying estimated tax as those in the United States. Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U.S. taxation. Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax.
	Will a check payable in foreign currency be acceptable in payment of my U.S. tax?
	Generally, only U.S. currency is acceptable for payment of income tax.
	I have met the test for physical presence in a foreign country and am filing returns for 2 years. Must I file a separate Form 2555 (or Form 2555-EZ) with each return?
	Yes. A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed.
	Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return?
	No. The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed.
	On Form 2350, Application for Extension of Time To File U.S. Income Tax Return, I stated that I would qualify under the physical presence test. If I qualify under the bona fide residence test, can I file my return on that basis?
	Yes. You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the qualification requirements. You are not bound by the test indicated in the application for extension of time. You must be sure, however, that you file the Form 1040 return by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident.
	I am a U.S. citizen who worked in the United States for 6 months last year. I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year?
	No. You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. This allows you to file only once and saves you from paying the tax and waiting for a refund. However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. (If you have moving expenses that are for services performed in two years, you can be granted an extension to 90 days beyond the close of the year following the year of first arrival in the foreign country.)

II. Meeting the Requirements of Either the Bona Fide Residence Test or the Physical Presence Test

	I recently came to Country X to work for the Orange Tractor Co. and I expect to be here for 5 or 6 years. I understand that upon the completion of 1 full year I will qualify under the bona fide residence test. Is this correct?
	Not necessarily. The law provides that to qualify under this test for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, a person must be a "bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year." If, like most U.S. citizens, you file your return on a calendar year basis, the taxable year referred to in the law would be from January 1 to December 31 of any particular year. Unless you established residence in Country X on January 1, it would be more than 1 year before you could qualify as a bona fide resident of a foreign country. Once you have completed your qualifying period, however, you are entitled to exclude the income or to claim the housing exclusion or deduction from the date you established bona fide residence.
	I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test?
	To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 - December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began.
	To meet the qualification of "an uninterrupted period, which includes an entire taxable year," do I have to be physically present in a foreign country for the entire year?
	No. Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence.
	Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. Can I figure the exclusion for the period I resided abroad?
	No. You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U.S. tax.
	Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test?
	Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect can also qualify under the bona fide residence test.

III. Foreign Earned Income

	I am an employee of the U.S. Government working abroad. Can all or part of my government income earned abroad qualify for the foreign earned income exclusion?
	No. The foreign earned income exclusion applies to your foreign earned income. Amounts paid by the United States or its agencies to their employees are not treated, for this purpose, as foreign earned income.
	I qualify under the bona fide residence test. Does my foreign earned income include my U.S. dividends and the interest I receive on a foreign bank account?
	No. The only income that is foreign earned income is income from the performance of personal services abroad. Investment income is not earned income. However, you must include it in gross income reported on your Form 1040.
	My company pays my foreign income tax on my foreign earnings. Is this taxable compensation?
	Yes. The amount is compensation for services performed.
	I live in an apartment in a foreign city for which my employer pays the rent. Should I include in my income the cost to my employer ($1,200 a month) or the fair market value of equivalent housing in the United States ($800 a month)?
	You must include in income the fair market value (FMV) of the facility provided, where it is provided. This will usually be the rent your employer pays. Situations when the FMV is not included in income are discussed in chapter 4 under Exclusion of Meals and Lodging.
	My U.S. employer pays my salary into my U.S. bank account. Is this income considered earned in the United States or is it considered foreign earned income?
	If you performed the services to earn this salary outside the United States, your salary is considered earned abroad. It does not matter that you are paid by a U.S. employer or that your salary is deposited in a U.S. bank account in the United States. The source of salary, wages, commissions, and other personal service income is the place where you perform the services.
	What is considered a foreign country?
	For the purposes of the foreign earned income exclusion and the foreign housing exclusion or deduction, any territory under the sovereignty of a country other than the United States is a foreign country. Possessions of the United States are not treated as foreign countries.

IV. Foreign Earned Income Exclusion

	What is the maximum foreign earned income exclusion available?
	For 2008 the maximum foreign earned income exclusion available is $87,600. For 2009 and beyond the maximum foreign earned income exclusion will be increased for inflation.
	I qualify for the foreign earned income exclusion and earned more than $87,600 during the year. Am I entitled to the maximum $87,600 exclusion?
	Not necessarily. Although you qualify for the foreign earned income exclusion, you may not have met either the bona fide residence test or the physical presence test for your entire tax year. If you did not meet either of these tests for your entire tax year, you must prorate the $87,600 maximum exclusion based on the number of days that you did meet either test during the year.
	Is it true that my foreign earned income exclusion cannot exceed my foreign earned income?
	Yes. The amount of the exclusion is limited each year to the amount of your foreign earned income after reducing that income by the foreign housing exclusion. The foreign earned income must be earned during the part of the tax year that you have your tax home abroad and meet either the bona fide residence test or the physical presence test.
	My wife and I are both employed, reside together, and file a joint return. We meet the qualifications for claiming the foreign earned income exclusion. Do we each figure a separate foreign earned income exclusion and foreign housing exclusion?
	You figure your foreign earned income exclusion separately since you both have foreign earned income. The amount of the exclusion for each of you cannot exceed your separate foreign earned incomes. If you each have a housing amount, you can figure your housing exclusion either separately or jointly.
	I qualify for the foreign earned income exclusion and earned more than $87,600 during the year. Am I entitled to the maximum $87,600 exclusion?
	Not necessarily. Although you qualify for the foreign earned income exclusion, you may not have met either the bona fide residence test or the physical presence test for your entire tax year. If you did not meet either of these tests for your entire tax year, you must prorate the $87,600 maximum exclusion based on the number of days that you did meet either test during the year.

V. Exemptions and Dependency Allowances

	I am a U.S. citizen married to a nonresident alien who has no income from U.S. sources. Can I claim an exemption for my spouse on my U.S. tax return?
	Yes. You can claim an exemption for your nonresident alien spouse on your tax return if your spouse has no income from sources within the United States and is not the dependent of another U.S. taxpayer. You must use the married filing separately column in the Tax Table or the Tax Rate Schedule for married individuals filing a separate return, unless you qualify as a head of household. A U.S. citizen or resident married to a nonresident alien also can choose to treat the nonresident alien as a U.S. resident for all federal income tax purposes. This allows you to file a joint return, but also subjects the alien's worldwide income to U.S. income tax.
	What exemptions can be claimed by a U.S. citizen for a nonresident alien spouse who was blind and 65 years of age?
	The spouse did not have income from U.S. sources and was not a dependent of another U.S. taxpayer. A U.S. taxpayer can generally claim one exemption for his or her spouse. In addition, if the U.S. taxpayer does not itemize deductions on Schedule A (Form 1040), the taxpayer may be entitled to a higher standard deduction if his or her spouse is age 65 or older or is blind at the end of the year.
	I spend $375 a month to support my parents who live in Italy. I am sure this provides the bulk of their support. Can I claim exemptions for them?
	It depends on whether they are U.S. citizens or residents. If your parents are not U.S. citizens or residents, you cannot claim exemptions for them even if you provide most of their support. To qualify as a dependent, a person generally must be either a citizen or national of the United States or a resident of the United States, Canada, or Mexico for some part of the tax year. The other tests of dependency also must be met.
	Should I prorate my own personal exemption and the exemptions for my spouse and dependents, since I expect to exclude part of my income?
	No. Do not prorate exemptions for yourself, your spouse, and your dependents. Claim the full amount for each exemption permitted.

VI. Income Tax Withholding

	How can I get my employer to stop withholding federal income taxes from wages while I am overseas and eligible for the foreign earned income exclusion?
	File a statement in duplicate with your employer stating that withholding should be reduced because you meet the bona fide residence test or physical presence test. See also the following question.
	Does the Internal Revenue Service provide forms to be used by employees requesting employers to stop withholding income tax from wages they expect to be excluded as income earned abroad?
	Yes. Form 673 is a sample statement that can be used by individuals who expect to qualify under the bona fide residence test or the physical presence test.
	I am a U.S. citizen residing overseas, and I receive dividend and interest income from U.S. sources from which tax is being withheld at a rate of 30%. How can I have this situation corrected?
	File Form W-9 (indicating that you are a U.S. citizen) with the withholding agents who are paying you the dividends and interest. This is their authority to stop withholding the 30% income tax at the source on payments due you.
	As a U.S. citizen receiving dividend and interest income from the United States from which tax has been withheld, do I report the net dividend and interest income on my return, or do I report the gross amount and take credit for the tax withheld?
	You must report the gross amount of the income received and take a tax credit for the tax withheld. This is to your advantage since the tax withheld is deducted in full from the tax due. It is also advisable to attach a statement to your return explaining this tax credit so there will be no question as to the amount of credit allowable.

VII. Deductions

	Can I claim a foreign tax credit even though I do not itemize deductions?
	Yes. You can claim the foreign tax credit even though you do not itemize deductions.
	I had to pay customs duty on a few things I brought back with me from Europe last summer. Can I include customs fees with my other deductible taxes?
	No. Customs duties, like federal excise taxes, are not deductible.
	Some taxes paid in the United States are not deductible if I itemize my deductions. Which ones are they?
	State and local taxes levied specifically on cigarettes, tobacco, and alcoholic beverages, are not deductible. In addition, no deduction can be taken for drivers' licenses or gasoline taxes. Auto registration fees cannot be deducted except when they qualify as personal property taxes. To qualify as personal property taxes they must be based on the value of the auto. Some state and local taxes are deductible, such as those on personal property, real estate, and income.
	What types of foreign taxes are deductible?
	Generally, real estate and foreign income taxes are deductible as itemized deductions. Foreign income taxes are deductible only if you do not claim the foreign tax credit. Foreign income taxes paid on excluded income are not deductible as an itemized deduction. Note. Foreign income taxes are usually claimed under the credit provisions, if they apply, because this is more advantageous in most cases.
	I rented an apartment in the United Kingdom and had to pay a local tax called a "general rates" tax, which is based on occupancy of the apartment. Can I deduct this tax as a foreign real estate tax?
	No. This tax does not qualify as a real estate tax since it is levied on the occupant of the premises rather than on the owner of the property.

VIII. Other

	Because I expect to qualify for the foreign earned income exclusion, I have requested and received an extension of time until January 30, 200x, to file my 200y return. However, since I will be paying self-employment tax on my spouse's income, should I file a 200x return when due, pay the self-employment tax, and then file another return when I qualify for the exclusion?
	No. You do not need to file a 200x Form 1040 (the regular income tax return) when due if you have received an extension. To stop interest from accruing on the self-employment tax due for 200x, you can pay enough estimated tax to cover the self-employment tax and any income tax that would be due after taking out the amount of excludable income.
	Last May my employer transferred me to our office in Puerto Rico. I understand that my salary earned in Puerto Rico is tax exempt. Is this correct?
	As long as your employer is not the U.S. Government, all income from sources within Puerto Rico is exempt from U.S. tax if you are a bona fide resident of Puerto Rico during the entire tax year. The income you received from Puerto Rican sources the year you moved to Puerto Rico is not exempt. The tax paid to Puerto Rico in the year you moved to Puerto Rico can be claimed as a foreign tax credit on Form 1116.
	I am a U.S. citizen married to a nonresident alien. Can I qualify to use the head of household tax rates?
	Yes. Although your nonresident alien spouse cannot qualify you as a head of household, you can qualify if (a) or (b) applies: a) You paid more than half the cost of keeping up a home that was the principal home for the whole year for your mother or father for whom you can claim an exemption (your parent does not have to have lived with you), or b) You paid more than half the cost of keeping up the home in which you lived and in which one of the following also lived for more than half the year: •Your unmarried child, grandchild, stepchild, foster child, or adopted child. A foster child will qualify you for this status only if you can claim an exemption for the child. •Your married child, grandchild, stepchild, or adopted child for whom you can claim an exemption, or for whom you could claim an exemption except that you signed a statement allowing the noncustodial parent to claim the exemption, or the noncustodial parent provides at least $600 support and claims the exemption under a pre-1985 agreement. •Any relative listed below for whom you can claim an exemption. 1. Parent Grandparent Brother Half-brother Sister Stepbrother Stepsister Stepmother Stepfather Mother-In-law 2. Father-In-law Brother-In-law Sister-In-law Half-sister Son-In-law Daughter-In-law, or If related by blood, Uncle, Aunt, Nephew, Niece
	If I wait to file my return until I qualify for the foreign earned income exclusion, I will be charged interest on the U.S. tax I will owe. To avoid being charged interest, can I file my return on time, reporting only my taxable income, excluding my salary for services abroad that will be exempt after I have met the qualifications?
	No. If you file a return before you qualify for the exclusion, you must report all income, including all income for services performed abroad, and pays tax on all of it. After you meet the qualifications, you can file a claim for refund by excluding the income earned abroad. If you defer the filing of your return, you can avoid interest on tax due on your return to be filed by paying the tax you estimate you will owe with your request for an extension of time to file on Form 2350, or by paying enough estimated tax to cover any tax that you expect will be due on the return.
	I am a US citizen who has funds in a offshore bank account, do I have to report this to the IRS?
	No, not to the IRS, however you do need to report any accounts that you have "financial interest in or signature authority, or other authority over any financial accounts, including bank, securities, or other types of financial accounts in a foreign countries, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year. Significant penalties can be assessed for failure to disclose such accounts.

IX. Extension of Deadlines - Combat Zone Service

	I have been serving in a combat zone since last November. I understand that the deadline for performing certain actions required by the tax laws is extended as a result of my service. When did these deadline extensions begin for me?
	The deadline extension provisions apply to most tax actions required to be performed on or after the beginning date for your combat zone, or the date you began serving in that combat zone, whichever is later. In your case, the deadline extensions began the day you started service in the combat zone last November
	The deadline extension provisions apply to most tax actions required to be performed on or after the beginning date for your combat zone, or the date you began serving in that combat zone, whichever is later. In your case, the deadline extensions began the day you started service in the combat zone last November
	For both questions, the answer is yes. In general, the deadlines for performing certain actions applicable to his taxes are extended for the period of his service in the combat zone, plus 180 days afler his last day in the combat zone. This extension applies to the filing and paying of your son's income taxes that would have been due April 15. In addition to the 180 days, his extension period will include the 46 days that were lefl before the April 15th deadline when he entered the combat zone. During his 226day extension period, assessment and collection deadlines will be extended, and he will not be charged interest or penalties attributable to the extension period.
	Do the deadline extension provisions apply only to members of the U.S. Armed Forces serving in the combat zone?
	No. Unlike the combat-zone militarypay exclusion, the deadline extensions also apply to individuals serving in the combat zone in support of the U.S. Armed Forces, such as merchant marines serving aboard vessels under the operational control of the Department of Defense, Red Cross personnel, accredited correspondents, and civilian personnel acting under the direction of the U.S. Armed Forces in support of those forces. You must notify IRS as follows: E-mail: combatzone@irsgpv No social security numbers should be used in an e-mail. Telephone: (800) 829-1040 (within the U. S.) Regular mail to the address where the worker files federal tax returns. Marking the top of tax returns and IRS notices in red with "Combat Zone" Put "Combat Zone" on the envelope used to mail back a notice. The notification should include: Name Stateside address Date of birth Date of deployment to the combat zone
	Do the deadline extensions apply only to those within a combat zone?
	No. Members of the U.S. Armed Forces who perform military service in an area outside a combat zone qualify for the suspension of time provisions if their service is in direct support of military operations in the combat zone, and they receive special pay for duty subject to hostile fire or imminent danger as certified by the Department of Defense. Q&A-1 lists various combat zones and the support areas certified by the Department of Defense. The Military Family Tax Relief Act of 2003 further applied the deadline extension provisions to those serving in a Contingency Operation, as designated by the Secretary of Defense.