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YouTube video text script - Intl Taxpayers-Foreign Earned Income Exclusion

WELCOME TO THE IRS'S INTERNATIONAL INDIVIDUAL TAXPAYERS ASSISTANCE VIDEO SERIES.

DID YOU WORK AND EARN INCOME OVERSEAS?

THIS VIDEO WILL HELP YOU DETERMINE IF YOU QUALIFY FOR THE FOREIGN EARNED INCOME EXCLUSION.

THIS EXCLUSION MAY REDUCE YOUR FEDERAL INCOME TAX.

HOWEVER, THERE IS ONE COMMON MISCONCEPTION ABOUT THIS EXCLUSION THAT NEEDS TO BE CLEARED UP.

MANY TAXPAYERS LIVING ABROAD BELIEVE THEY CAN EXCLUDE ALL THEIR FOREIGN EARNED INCOME AND NOT OWE ANY FEDERAL INCOME TAX, CONCLUDING THEY DON'T NEED TO FILE A U.S. TAX RETURN.

THIS IS INCORRECT.

EVEN IF TAXPAYERS HAVE NO TAX LIABILITY DUE TO THIS EXCLUSION, THEY MUST FILE THEIR U.S. TAX RETURN AND ATTACH FORM 2555 OR 2555-EZ IN ORDER TO CLAIM THE FOREIGN EARNED INCOME EXCLUSION.

TO DETERMINE IF YOU CAN CLAIM THIS EXCLUSION, YOU NEED TO ASK YOURSELF IF YOU HAD ANY FOREIGN EARNED INCOME.

FOREIGN EARNED INCOME IS GENERALLY INCOME YOU RECEIVED FOR SERVICES YOU PERFORMED DURING A PERIOD IN WHICH YOUR TAX HOME IS IN A FOREIGN COUNTRY AND YOU MEET EITHER THE BONA FIDE RESIDENCE TEST OR THE PHYSICAL PRESENCE TEST.

EXAMPLES OF SUCH INCOME ARE SALARIES AND WAGES, COMMISSIONS, BONUSES, PROFESSIONAL FEES AND TIPS.

HOWEVER, INCOME SUCH AS INTEREST, DIVIDENDS, CAPITAL GAINS, GAMBLING WINNINGS, ALIMONY, SOCIAL SECURITY BENEFITS OR PENSIONS ARE NOT FOREIGN EARNED INCOME FOR THIS PURPOSE.

SEE PUBLICATION 54, TAX GUIDE FOR U.S. CITIZENS AND RESIDENT ALIENS ABROAD, FOR ADDITIONAL INFORMATION.

TO GET TO IT, GO TO IRS.GOV AND TYPE “PUB 54” IN THE SEARCH BOX.

NOW IF YOU DETERMINED THAT YOU DID RECEIVE FOREIGN EARNED INCOME, THEN THE NEXT THING YOU NEED TO DETERMINE IS WHETHER YOUR TAX HOME WAS IN A FOREIGN COUNTRY.

BUT FIRST, WE NEED TO UNDERSTAND THE DEFINITION OF A TAX HOME.

REGARDLESS OF WHERE YOU MAINTAIN YOUR FAMILY HOME, YOUR TAX HOME IS WHERE YOU WORK PERMANENTLY OR INDEFINITELY AS AN EMPLOYEE OR SELF-EMPLOYED INDIVIDUAL.

IF YOU ANSWERED NO, YOU DIDN’T RECEIVE FOREIGN EARNED INCOME OR NO, YOUR TAX HOME WAS NOT IN A FOREIGN COUNTRY, THEN YOU CANNOT CLAIM THE FOREIGN EARNED INCOME EXCLUSION.

HOWEVER, IF YOU ANSWERED YES TO BOTH QUESTIONS, THEN… WERE YOU A U.S. CITIZEN?

BECAUSE ONLY U.S. CITIZENS AND SOME U.S. RESIDENT ALIENS CAN CLAIM THIS SPECIAL EXCLUSION.

IF YOU WERE A U.S. CITIZEN, THEN WERE YOU A BONA FIDE RESIDENT OF A FOREIGN COUNTRY?

BONA FIDE RESIDENCE IS DETERMINED ON AN INDIVIDUAL BASIS.

FACTORS INCLUDE YOUR INTENTION, PURPOSE OF YOUR TRIP, AND NATURE AND LENGTH OF YOUR STAY ABROAD.

FOR ADDITIONAL REQUIREMENTS ON U.S. RESIDENT ALIENS IN REGARD TO THE BONA FIDE RESIDENCE TEST, PLEASE CONSULT PUBLICATION 54.

IF YOU ANSWERED YES, THAT YOU RECEIVED FOREIGN EARNED INCOME, YOUR TAX HOME WAS IN A FOREIGN COUNTRY, YOU WERE A U.S. CITIZEN AND YOU WERE A BONA FIDE RESIDENT IN A FOREIGN COUNTRY, THEN YOU GENERALLY CAN CLAIM THE FOREIGN EARNED INCOME EXCLUSION.

TO CLAIM THE EXCLUSION, YOU MUST COMPLETE FORM 2555 OR 2555-EZ AND ATTACH IT TO YOUR FEDERAL TAX RETURN.

YOU CAN FIND THESE FORMS AT IRS.GOV.

IF YOU WERE NOT A BONA FIDE RESIDENT OF A FOREIGN COUNTRY, THEN WERE YOU PHYSICALLY PRESENT IN A FOREIGN COUNTRY OR COUNTRIES FOR AT LEAST 330 FULL DAYS DURING A 12 CONSECUTIVE MONTH PERIOD?

EVEN IF YOU ARE NOT A BONA FIDE RESIDENT OF A FOREIGN COUNTRY, YOU MAY BE ABLE TO QUALIFY FOR THIS EXCLUSION IF YOU SPENT ENOUGH TIME OUTSIDE THE UNITED STATES.

THE PHYSICAL PRESENCE TEST IS DETERMINED BY THE NUMBER OF DAYS YOU SPENT IN A FOREIGN COUNTRY OR COUNTRIES DURING A 12 CONSECUTIVE MONTH PERIOD.

SO, IF YOU ANSWERED YES, THAT YOU RECEIVED FOREIGN EARNED INCOME, YOUR TAX HOME WAS IN A FOREIGN COUNTRY, YOU WERE A U.S. CITIZEN AND YOU MET THE PHYSICAL PRESENCE TEST, THEN YOU GENERALLY CAN CLAIM THIS EXCLUSION.

HOWEVER, IF YOU DID NOT MEET BOTH THE BONA FIDE RESIDENCE TEST AND THE PHYSICAL PRESENCE TEST, THEN YOU GENERALLY CANNOT CLAIM THE FOREIGN EARNED INCOME EXCLUSION.

NOW, IF YOU WERE NOT A U.S. CITIZEN, WERE YOU A U.S. RESIDENT ALIEN?

FOR FEDERAL TAX PURPOSES, YOU ARE A U.S. RESIDENT ALIEN IF YOU HAVE A GREEN CARD OR YOU MEET THE SUBSTANTIAL PRESENCE TEST.

YOU CAN ALSO QUALIFY IF YOU'RE MARRIED TO A U.S. CITIZEN OR RESIDENT ALIEN AND CHOOSE TO BE TREATED AS A U.S. RESIDENT ALIEN FOR TAX PURPOSES.

SEE PUBLICATION 519, U.S. TAX GUIDE FOR ALIENS, FOR ADDITIONAL INFORMATION ON HOW YOU MIGHT SATISFY ANY OF THESE TESTS.

NOW, IF YOU WERE NOT A U.S. CITIZEN AND YOU WERE NOT A U.S. RESIDENT ALIEN, THEN YOU GENERALLY CANNOT CLAIM THE FOREIGN EARNED INCOME EXCLUSION.

NOW, IF YOU ANSWERED YES, THAT YOU RECEIVED FOREIGN EARNED INCOME, YOUR TAX HOME WAS IN A FOREIGN COUNTRY, YOU WERE A U.S. RESIDENT ALIEN AND YOU MET THE PHYSICAL PRESENCE TEST, THEN YOU GENERALLY CAN CLAIM THIS EXCLUSION.

AGAIN, PUBLICATION 54 IS A GREAT SOURCE TO CONSULT.

IT SPELLS OUT ALL THE DIFFERENT REQUIREMENTS FOR THIS EXCLUSION.

AND FOR INFORMATION ON ALL TYPES OF INTERNATIONAL TAXPAYERS, PLEASE VISIT IRS.GOV AND TYPE “INTERNATIONAL TAXPAYERS” IN THE SEARCH FIELD.

Page Last Reviewed or Updated: 26-Apr-2016