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Old 24th Jun 2009, 04:00
  #719 (permalink)  
crj705
 
Join Date: Mar 2004
Location: Japan / Thailand
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Take a look at IRS publication 54 and the form 2555 and I think that will answer most of your questions. I have filed under the exclusion for the past 2 years, but I no longer live in the US.

The short version is you have to have income earned from work overseas. Even if you work with Crew, you can still qualify because your income is for work performed overseas.

You must then have a foreign tax home. You would probably meet this too, since you are working in Japan.

The most difficult part is the 3rd test. You must be in outside of the US for 330 days OR be a bona fide resident of another country.

If you are a bona fide resident, then there is no limit on the number of days you can spend in the US. What makes you a bona fide resident of a foreign country? Take a look at form 2555 and there is a series of questions you are asked. Where does your family live? If they are still in the US and you go back to see them every month, you don't qualify. Did you have a house prior to accepting your assignment overseas? Do you still have it? Rent it out? Sell it? Still live in it? Do you have a visa for your country of residence?

The bona fide residence test is very subjective. Basically, you file under the test and it is up to the IRS if you qualify or not. Should you file using the exemption and the IRS later determine that you don't qualify, you are going to owe a lot of money, plus penalty, plus interest.

With Obama's habit of spending, he will be looking for money from every place he can get it. I guarantee you will see audits of expats increase in the coming year because we are easy targets. You always tax those who can't vote you out of office (think high hotel and car rental taxes....the people paying those outrageous taxes don't vote for the politicians that levy them) and expats are a tiny group with comparitively high incomes.

Last thing to remember....With the IRS, the burden of proof lies with you. If you claim it, and can't back it up, you owe them.
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