How do partial years work for the foreign income exlusion? If you start work half way into a year do you pro-rate the exclusion amount?

Forum|Forum|7 years ago
June 5, 2019
6 replies
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TurboTax Deluxe iPad

Best answer by pk_

Once you have qualified for the physical presence or bonafide resident tests ( form 2555), then the first year's ( the partial year) exclusion max will be an allocated amount based the number of days abroad. You can now ( if you are abroad, then it is June 15th ) either file a normal return including the foreign income and then when qualified file an amended return OR get an extension and file a proper return ( i.e. with foreign earned income exclusion in effect ) when you qualify.

pk_

Answer

Level 15

Paulhf

Level 2

My daughter resides in the UK as of 8/24/2018. I am now trying to file an amended return since she has been in the UK for a year as of 8/24/2019. Turbotax is responding that she is not eligible for the exclusion based on the bonafide resident test. is there something I need to enter in Turbotax so the program will recognize that she is eligible since she has been a resident for over a year.

pk_

Level 15

Bona-fide resident status requires IRS approval. Most Ex-Pats use physical presence test ---using a test period of continuous 12 months , show that the person has been away from the USA at least 330 days( 24 hr. ) .

From what I see in your post, you should use test period of 08/26/2018 ( assuming her leaving USA on 8/24/2018 and arriving in the UK on 8/25/18 -- the first full 24 day being therefore 8/26 ) through 8/25/2019 and show her travels to the USA for any reason as required for the form 2555. This should qualify her for foreign earned income exclusion --- note that this is allocated based on the actual days present in the UK and earned from a foreign entity.

Does this make sense ?