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IRS Tax Foreign Income Exclusion 2555-EZ - eligibility

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  • IRS Tax Foreign Income Exclusion 2555-EZ - eligibility

    Hi all.

    I am preparing to file my tax for 2017.*

    Background:*
    I recently became a US Permanent Resident in 2016.*

    Activated my GC by entering the USA back in 2016 (towards the end of 2016)
    *
    Then left the USA.

    Entered the USA again in 2017 (towards the end of the year 2017).*

    All my income were derived from out of the USA.

    Days in the USA:*

    2016 (8 days )
    2017 (50 days) - around 9 months after my*exit in 2016

    I have been approved of my re-entry permit that covers end of 2017-2019 (though i have not received the physical permit but case check shows it had been approved).

    For 2016, i filed with Foreign Income Exclusion 2555-EZ (though i had not checked the status of the filing, but it was clear cut that I was qualified for the exclusion).

    Now i want to file my tax in 2017 and I got confused by the "Physical Presence Test" considering in 2017, i stayed for 50 days in the USA.

    IRS link: https://www.irs.gov/help/ita/can-i-e...oreign-country

    IRS guidance:*

    Physical Presence Test
    Note: For the question below there are four rules you should know when figuring the 12-month period.

    1) Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later.
    2) Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period.
    3) You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion.
    4) In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another.

    Were you physically present in a foreign country or countries for at least 330 full days during a period of 12 consecutive months STARTING OR ENDING ON ANY DAY WITHIN 2017? (my emphasis)


    MY QUESTION: In my case, to get* no less than 330 days, I will have to start the counting of the days from a period in 2016 that covers the 8 days I was in the USA, and the period ends in BEFORE my stay in the USA in 2017 (so that the total of the stay would just be 8 days).

    So for example, I entered the USA in 2016 in November, and I entered the USA again in 2017 in September, so my period would be from September 2016 - August 2017 - which shows I was in the USA for just 8 days).

    Is this what the guide wanted to say? (just checking if my understanding is correct - mainly point 3 and 4 and I am unsure what IRS meant by period overlapping one another).

    The IRS foreign income exclusion guide also had other questions like abode in the USA (which i would answer as NO, - and a bit concerned of this somehow would jeopardise my LPR status)

    Thoughts?

  • #2
    Originally posted by abumiqdad View Post
    MY QUESTION: In my case, to get* no less than 330 days, I will have to start the counting of the days from a period in 2016 that covers the 8 days I was in the USA, and the period ends in BEFORE my stay in the USA in 2017 (so that the total of the stay would just be 8 days).

    So for example, I entered the USA in 2016 in November, and I entered the USA again in 2017 in September, so my period would be from September 2016 - August 2017 - which shows I was in the USA for just 8 days).

    Is this what the guide wanted to say? (just checking if my understanding is correct - mainly point 3 and 4 and I am unsure what IRS meant by period overlapping one another)
    You got it

    Comment


    • #3
      Originally posted by inadmissible View Post
      You got it
      Does that mean, if i am filing for 2017, i can use the period between Mid January 2016, up to mid Jan 2017, where i am not in the USA to file for 2017 (where i could be in the USA for the most part of the year?)

      Comment


      • #4
        Yes, but keep in mind your exclusion is prorated based on the number of days in 2017 the 12mo period covers

        Comment


        • #5
          Originally posted by inadmissible View Post
          Yes, but keep in mind your exclusion is prorated based on the number of days in 2017 the 12mo period covers
          Thank you. I am now reading on the prorated stuff. I had no idea it will be prorated.

          So my calculation would be

          [Total days out of USA in 2017] / 365 * Max Amount of Exclusion (in 2016 it was USD100,800 though it would be higher in 2017 inflation adjusted).

          Say for example i was in the USA for 50 days, so:

          (365-50) / 365 x $100,800 = $86,991.78.

          As long as my earning for 2017 is below $86,991.78, then I do not owe anything to IRS right?

          Comment


          • #6
            betul

            Comment


            • #7
              Originally posted by inadmissible View Post
              betul
              Nice. Thanks for the confirmation.

              (you deduced my native language based on the country i put in my profile is it? hehe)

              Comment

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