Expert: Richard Stolp - 8/13/2009

Question
Dear Expert

    I am American citizen working overseas in a foreign country at this time. I started working overseas on April, 10, 2009, and my contract will end on April,11,2010. I am 33 single with no dependents, and no properties.

    there is a tax exemption for anyone who works outside United states of America, is called credit for foreign earned income for up to $ 87600 a year for 2008, and for 2009 will be increased by certain amount of inflation. My employer said the refund will depend on the number of days that I spend working in the foreign country.

    The company that I work for said that they will not charge me taxes for minimum of $80,000, but I am paying almost $2000 for taxes every month. Does this mean that they will send me a check for those 80 thousand after I file for my tax return?

    What is the minimum number of days or months that I have to spend working in a foreign country in order to receive tax exemption?

    When my days in a foreign country decrease, the amount of refund also decreases? And when days increase the refund also will increase?

    If I go for one to 4 weeks tourism vacation to other foreign countries while I am working here, and I pay for transportation, hotel, and meals will these expenses help me to increase my tax refund amount or not?   
 
    If I will be working in a foreign country from April 2009 to April 2010, When is the best time to take my 4 weeks vacation outside this country?

Thank you for your answers.

Sincerely;
Sam


Answer
Sam,
You must work overseas for a full year, I believe the number of days is 330, or you receive no tax break. It is not pro-rated, it's all or nothing. If your company is withholding taxes those dollars will be forwarded to the US Treasury.  It is the IRS that will give you a refund.  You may be able to declare some of your expenses as business expenses - you should go to the IRS website (www.irs.gov) and read about your options as an ex-US employee.  However, expenses related to vacations to other countries will not be allowed as expenses.  Also, it doesn't matter when you take your vacation, as long as you work the 330+ days out of country.