I worked in a designated war zone from July 2017 through August 2019. For the purposes of the 2018 tax year, I can technically meet the 330-day requirement for the Physical Presence Test by setting my 12-month period from August 8th, 2018 through August 7th, 2019. The problem with choosing this time frame, as far as TurboTax is concerned, is that I miss out on the Foreign Earned Income Exclusion for the months in 2018 that fall outside of this frame - namely, January through July as well as the first part of August. In effect, I'd only receive a prorated exclusion for most of August through December 2018.
On the one hand, the only way to maximize my Foreign Earned Income Exclusion for the 2018 tax year would be to set my 12-month time period as January 1, 2018 through December 31, 2018, and the issue of a prorated exclusion for 2018 would no longer be relevant. On the other hand, choosing this same time frame means being unable to meet the 330-day requirement (I was only overseas for 302 full days during the January-December 2018 period, with the remaining time being either full days spent in the States or transit days to other countries, which don't count as full 24-hour overseas days).
As I understand it, the 330-day requirement is a hard and fast rule. But I've also read about prorated exclusions for partial years. For the 2017 tax year, my 12-month period was May 29, 2017 through May 28, 2018. The last paragraphs of the following link indicate that overlapping is allowed between two tax years.
https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-physical-pre...
The process outlined in the above link is the only other alternative I can think of - namely, borrowing from the 2017 tax year and ending in the 2018 tax year (say, from June 2017 to June 2018). But even then, I'm still left with the problem of missing out on the exclusion for the income I made from July through December 2018. Is there no way around this? Am I missing something here?
