Tax Law (Questions About Taxes)/Foreign earned income


IRS Disallowed
IRS Disallowed  
The deduction for foreign earned income is being disallowed due to the company I work for did not pay me while I was in the country I live and that the oil rig is offshore - NOT in the foreign country offshore does not count. I work on an oil rig in different countries - Africa, Singapore and Brazil. I am living full time maintaining a household in the Philippines. My company office I work from is in Scotland. They do pay all my USA taxes each paycheck and then I file USA returns. My CPA told me in 2007 that I can live anywhere in the world and take this deduction. All I had to do was maintain a household outside of USA. I made the decision to move because after the 2007 economy my company closed and this helped me pay off my debt. After I received this from the IRS I hired another CPA that deals in the IRS issues. Before I hired him he fully understood what my deductions was and he told me that I was correct I could take this foreign earned deduction. He sent them what they requested and extended the due date.
I have read through what the IRS told me and believe already that I owe them and this deduction is not allowed and both CPA’s have gave me an illegal deduction advice.


Is the IRS correct – I am not able to take this deduction?

Are the CPA’s liable since they took the jobs and clearly stated that this is a legal deduction?

What is the best course of action with the IRS now that I owe them 3 years ($80K plus)?

What is best course of action against CPA’s?

Are CPA’s insured for malpractice?

How to locate this type of lawyer?

Thank you,

You have the right to use this but NOT MY NAME OR ANY INFORMATION ABOUT WHO I AM or CPA COMPANIES.


Thanks for your question.

Unfortunately, the IRS is correct.  In order to qualify for the foreign earned income you must reside or have a physical presence in a foreign country for 330 days in a 12 month period.  When you are working on the oil rig, you are not in a foreign country and the IRS says that is your residence when you are working there.

If they gave you bad advice, they can be liable for any penalties involved plus any fees that you paid them, and any costs (other than taxes) you incurred due to the bad advice.  Since you would owe the tax anyway, they are not liable for your additional tax amounts.

As far as the IRS is concerned, you can work out a payment plan with them to pay the amounts due.  They may waive the penalties if you demonstrate you were acting on the advice of your tax preparer.

Most CPA's do have malpractice insurance.  If you can no negotiate with the, I suggest you check with a local bar association for malpractice attorneys.

Hope this helps.

John Stancil, CPA

John Stancil, CPA

Tax Law (Questions About Taxes)

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John Stancil, CPA


I can answer questions on personal income taxes, partnerships, and some corporate income taxes. I can deal with some state tax questions. Limited gift and estate tax questions. I am also familiar with ministerial and church tax reporting issues. I am Professor Emeritus at Florida Southern College. Sales taxes and property taxes are state and local issues so I am not likely be be able to give you an in depth answer on those types of taxes. I have maintained a CPA practice, specializing in tax, for over 35 years. I am a member of the National Association of Tax Professionals, The Florida Insititute of CPA's, The NCPE Fellowship. In addition I am a Certified Mentor for SCORE. Visit my website at I also offer seminars and consultations to churches and clergy on their tax issues at Also visit my blog, I am listed on Tax Connections at Prepare and file your own taxes at


I hold a doctorate in Accounting, and am a CPA. My certifications of CIA, CFM, and CMA are inactive. I passed all certification examinations on the first attempt, and received honorable mention for my scores on the CIA exam. I have operated a CPA firm for over 37 years and have taught accounting and tax at the college level for over 35 years.

FICPA, NATP, NCPE Fellowship, Lakeland Business Leaders

The CPA Journal, Florida CPA Today, Green Consumer, Green Business, Global Sustainability as a Business Imperative, Palmetto Review, NATP TaxPro Quarterly, Mustang Journal of Finance and Accounting.

DBA University of Memphis MBA University of Georgia BS in Accounting Mars Hill University

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