Tax Law (Questions About Taxes)/Forms 2555 and 2350

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Question
Hi,
In August 2014 I moved to Egypt for work.
I have been on form 2555 before, so I know that my Egyptian income will be U.S. tax exempt.
I will have to file form 2350 for extension through August 2015 so that I can meet bona fide residence abroad status. Question:

- When I file my taxes in August 2015, will I only pay taxes on the income I earned when working in the U.S. January-July 2014, and my income earned in Egypt will be tax free for period August-December 2014?

Answer
Dear Ben,

The answer to your first question:

You don't need to file form 2350 since you meet the Physical Presence test before October 15th. Regular extension form 4868 will suffice.

In order to meet the Bona Fide residence test you would indeed need to file form 2350 but then you have to request extension through December 31 of 2015 because you have to spend a full calendar year abroad to meet the Bona fide residence test. Waiting through December 31 to file is unnecessary as the amount of excluded income will be the same based on either test.

See http://www.taxesforexpats.com/expat-tax-advice/how-to-avoid-problems-when-claimi

The answer to your second question: it depends on your salary level. Exemption for income earned abroad will be prorated to the number of days spent abroad to the full calendar year. Hence, you will be able to exclude roughly up to $40K of foreign wages. If you earn more than that, the remaining non-excluded income will be taxable.


I.J.Zemelman, EA  

Tax Law (Questions About Taxes)

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IJ Zemelman, EA MBA

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I am an IRS-authorized EA and principal of a Tax Preparation firm focusing on U.S. Expatriates. We specialize in all tax issues faced by American citizens living abroad - such as foreign earned income, tax treaties, foreign spouse, etc. Visit our website - www.TaxesForExpats.com - for more information.

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18 years professional tax experience, 12 with expatriate taxes.

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Expatriate tax information on www.TaxesForExpats.com

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MBA from Zicklin School Of Business, IRS Enrolled Agent

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