Watch out guys; the IRS in currently conducting a new drive to tax the foreign income exclusion. They are now targeting the time you spend over "international waters" as taxable, no kidding, as they are now arguing international waters do not constitute a foreign country... so if you are flying long-haul world-wide, well, your exclusion might now be reduced to just a fraction of that 80000plus... and you can thank that to the mavericks out there writing those nifty brown nosing articles on the WSJ and the Chicago Tribune, way to go!

 

Since we are pretty much 'forced' out of the country for work and making 3 times the pay, the IRS has to salivate over getting into our pockets. My gig is not a contract .

 

How do you negociate everything and know that your employer will stick to his words? I'm looking into working in Morocco and requested they write up a contract which would include salary, lodging, transportation, schedule, days off, etc. Being an expatriot is new to me. Can you tell me more about your gig? PM if you would like.

 

When you are employed overseas as a US citizen, OR a US green card holder, you are required by law to report all foreign income to the U.S government. If there are no local taxes in the foreign country you are employed in, then fine, no taxes need to be paid there. If you paid taxes in the foreign country where you were employed, then you could get a tax credit on your US taxes. Additionally, you should file as an expatriate. Be cautious about mentioning anything about offshore accounts. By U.S laws, again as a US citizen OR U.S green card holder, you are required to declare all bank accounts, stocks, properties owned, and any additional worldwide income. Don't forget your spouse if you get married to a non U.S citizen. U.S citizens have been prosecuted for not declaring hidden bank accounts and other assets. Hope that helps. I am not saying I agree with the tax laws in the USA. I thought it was the land of the free.

 

Interesting, that would affect the guys who use the 330 day rule but not those who use the residency rule. That said, any drive like that is doomed to failure since it violates the spirit of the exclusion. The exclusion realistically being for sevices not rendered because one is not in the USA. Whether one is inside the borders of a foreign country or flying over them is moot, he/she is still not using the services of the U.S. government in any form or fashion.


Typhoonpilot

 

Yes, indeed, but as we would have it, common sense and the spirit of the law sometimes go beyond the comprehension of your average hungry mid level bureaucrat...

Bonafide residence or 330 day rule are not in question, but the place where you perform your services... key words "international waters"

I agree, the drive might be doomed to failure, but in the mean time, someone has to pay the lawyers to defend it, and believe me, not cheap so far...