I am a government contractor and served 3 months in a combat zone. How do I apply the combat zone tax exclusion on my return? https://www.irs.gov/newsroom/combat-zones

[rqjohnson2]

roger, thank you for the help. youre a tier 2 representative in my book

[DK1970]

It has been my understanding that the new 2018 tax law change only took care of the Tax Home test for contractors working in combat zones.  We still MUST meet either the Physical Presence Test (330 Days) or Bona Fide Residence Test in order to qualify.  I as an example work in combat zones for 180-200 days per year.  I do not claim FEIE because I do not get 330 days nor do I consider myself a resident of Afghanistan since I live in a military barracks for 60 days at a time and then go home for to the USA for 60.

Additionally, I think the "Waivers" you are talking about are not correct.  The waiver does NOT apply to places like Afghanistan or Iraq for example.  Those places were already combat zones when you arrived.  In fact, if it were not a combat zone you would not be there in the first place.  The "Waivers" they talk about is when someone was in Myanmar and was planning to stay there for at least 330 days.  Once there was a coup against the government and people were getting killed it was no longer safe for Americans to stay there.  In this case the State/Treasury Departments may list Myanmar as a location that qualifies for the "Waiver".  Afghanistan and Iraq are not on that list published by the State/Treasury Departments as eligible for the waiver.  If there is any doubt about this, please see the link below about an accountant that many contractors used to use that was doing the waivers until he got busted.

https://www.justice.gov/opa/pr/justice-depart[product key removed]it-enjoin-las-vegas-man-preparing-...

Bottom line, if you were a contractor in a combat zone for 3 months you are almost certainly responsible for taxes on that income.

[jynthea76]

I am honestly pretty freaking annoyed right now with this whole thing. I was unaware something like this even existed and today I go to file my taxes and on a whim I google if you can do this and from what I have read my husband qualifies but turbo tax does not seem to want to help me with that in the software. My husband went to Afghanistan in march of 2020 as a contractor for a company who supports the US Armed Forces, and he was there up until we pulled out last yr, save for like 2 months when he came home to visit and the company did a horrible crap job of getting him back there when they should have. He was home from oct 2020 to the week before thanksgiving in 2020. That is likely past that 330 day mark thing and all of his income was listed in box 1 and he bought some meals there and other things he needed and we did not exactly track that stuff because we did not know to so how the heck are we even supposed to fill in the thing that they show you and why does it not let you enter whatever amount you can to exclude. He was not reimbursed for any of it either. 

[LeonardS]

For military and civilian personnel of the US government, the amount of income that can be excluded from tax is already shown on Form W-2. The amount of wages shown in box one does not include any combat pay. In other words, the combat zone exclusion has already been factored into the income reported to the IRS. There are no special forms to fill out regarding the combat zone.  

The Foreign Earned Income Exclusion (FEIE) is a different exclusion separate from combat zone exclusion.  

To qualify for the FEIE, you must be one of the following:

• A bona fide resident of a foreign country (or countries) for an entire tax year.
• Physically present in a foreign country (or countries) for at least 330 full days during any 12-month period.

[jynthea76]

Leonard, I am curious. Did you actually read what I wrote? Your name says you are a tax expert so I would assume you are also an expert at thoroughly reading what ppl write as well as understanding it.

If I tell you my husband was in Afghanistan from March of 2020 until we pulled put last yr which started in May and that is when he left and then I also add that he was home from the beginning of Oct 2020 until the week before Thanksgiving in 2020 and then went back, what does that mean do you suppose? Surely not that he was there for a year, right? Which would be more than 330 days that you mentioned. And as I have read because he was supporting the US armed forces he can consider that his tax home per the new law in 2018. The law also says it can be any 12-month span.  I feel like I am having to break it down barney style here. At the end of the day, no expert nor turbo tax has done a good job at helping anyone here with anything. 

[Anonymous]

The 2018 law does not allow any sort of "waiver" for the foreign earned income exclusion (as someone above mentioned.)  All it "waives" is the disqualification due to having a primary abode in the U.S. https://www.irs.gov/newsroom/new-law-makes-clear-combat-zone-contract-workers-qualify-for-foreign-ea.... 

Any income that is excluded under combat pay rules is, as Leonard described, accounted for on your W-2 (this is typically for military personnel, however).  The rules do not allow a contractor in a combat zone to avoid the requirement to be out of the United States for 330 days - they simply do not require that the contractor give up his primary abode- his home in the U.S.   https://expattaxprofessionals.com/blog/article/combat-zone-contract-workers-claim-foreign-exclusion#....    

Your question has been answered, it seems you just don't like the answer.   Some people seem to think that the rule mentioned above doesn't require you to still meet the time test, but it absolutely does.  That is not what "abode" means in this rule - it doesn't mean that the contractor can live back in the US the rest of the year and exclude that income - it means the contractor doesn't have to establish a new "tax home". 

There is no waiver for the time - just a waiver for the requirement to meet the "tax home" requirement".

Your tax home is your regular or
principal place of business, employment,
or post of duty, regardless of where you
maintain your family residence. If you don't
have a regular or principal place of
business because of the nature of your
trade or business, your tax home is your
regular place of abode (the place where
you regularly live).
You aren't considered to have a tax
home in a foreign country for any period
during which your abode is in the United
States, unless you are serving in support
of the U.S. Armed Forces in an area
designated as a combat zone. See
Service in a combat zone, later.  

You can find this in the instructions for the form 2555.   The IRS isn't always clear when they speak but the only requirement that is waived is establishing a "tax home" - not the physical presence test. 

[DK1970]

Jynthea, I fully understand your frustration in all of this. The key element to the 330 day physical presence test is that it has to be 330 full days in a foreign country (travel days do not count) within a 365 day period. This is a very black and white rule in that 330 days you get the full exemption whereas 329 days you get nothing.

The 365 day period does not have to start on any specific day. The key is that whatever day you select, he has to be in a foreign country for 330 of those days. If there is any way to select a 365 day period that meets that requirement then you are good to go. Unfortunately, from what you described, I don't think you will qualify. If he deployed in March 2020, spent roughly 6 weeks home in OCT-NOV, and then stayed until the end; I just do not think there is any 365 day period that will give you the required 330 days. You will be roughly 15 days short if my math is correct and I know that is not what you wanted to hear.

Hindsight being 20/20, another thing you could have done was spend time in a foreign country during his vacation. If during his 6 weeks home you took a vacation in a different country or countries of your choice for 3 weeks then then those days also count and you would make the 330 day rule.

Sorry to be the bearer of bad news.

[jynthea76]

Lol, what are you even talking about a waiver? Who even mentioned a waiver because I certainly did not. 

In a 12 month span, my husband was in Afghanistan for more than 330 days. In Fact, it was more like a 13-month span. In march of 2020 he went there and in may of 2021 he left, permanently. March to April, month one. April to may, month two. May to June, month 3. June to July, month 4. July to August, month 5. August to September, month 6. September to October, month 7. From October to November lets say 16th, he was home visiting. Then from November to December, that is month 8. December to January, month 9. January to February, month 10. February to March, month 11. March to April month 12. April to May month 13. Even in a military situation, they do not count the time home as having left. As I said, I know this because of my experience. In the military when you go to file taxes, it shows you the amount that is allowed to not be taxed or w/e. In this case, it does not so you have to figure that **bleep** out on your own which is what I am trying to do and still I HAVE NO ANSWER!

And ya, no **bleep**, he can only claim tax home if he is supporting the us armed forces. I said that because I can read. I also know all about the military **bleep** because my husband is actually in the reserves right now and prior to this was active for 14 and was deployed so I am well aware of how the IRS will put things in box 12 I believe it is if I am not mistaken. It seriously is like you ppl cannot read or even get what I am saying. Am I not speaking English?