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

[CatinaT1]

The income earned while in combat is generally not listed in box 1 of your W2, but in box 12 with a code Q, so there is nothing additional to do.

[rqjohnson2]

@CatinaT1 ,

all of my income was listed in box 1(none in box 12 with a q code), however i contacted my accounting department and found out exactly how much i made while on deployment. is there another way to deduct it?

[DaveF1006]

According to the IRS link, you may qualify to exclude this pay as  foreign income exclusion. in fact, Certain U.S. citizens or resident aliens, specifically contractors or employees of contractors supporting the U.S. Armed Forces in designated combat zones, may now qualify for the foreign earned income exclusion. To report this in Turbo Tax:

To enter Foreign Earned Income -

• Click on Federal 
• Click on Wages and Income  
• Click on I'll choose what I work on (if shown)
• Scroll down to Less Common Income
• On Foreign Earned Income and Exclusion, click on the start or update button

[rqjohnson2]

@DaveF1006 

after i go into the foreign earned income section it does not give me the option to enter the amount earned while on deployment. all of my wages were listed in box one of my w-2 and i am trying to deduct from that amount. 

thank you for the help 

[KarenJ2]

Unfortunately, in order to qualify for the exclusion, you must meet one of two tests, either the bona-fide residence test or the physical presence test.

The bona-fide residence test requires that you have lived and worked in a foreign country for a whole calendar year.  You must have been there from January 1, 2019 to December 31, 2019 to qualify.

The physical presence test requires that you have been in a foreign country for 330 days out of 365 days (12 months).  So you could have no more than 31 US days.

You do not qualify for the exclusion if you have only been there only 3 months, However, if you are still overseas, you may qualify for tax year 2020.

[Ben Franklin]

I am a TurboTax product agent and have a customer with the same situation. They have a waiver as stated in the links you guys keep pointing to. However the error keeps popping up on the form for this cx regarding the dates, and they are not able to efile. I have scoured the help publications and have found no solution to this. 

[rqjohnson2]

ben,

funny i am running into the same problem this year. i have all of the correct information input in the foreign earned exclusion with "combat zone" in the explain section however because my deployed dates are not a full year it keeps kicking it back to me and will not let me efile. all i can think of is to print and mail... please let me know if you find another solution 

[DaveF1006]

if you are trying to claim the foreign income exclusion, you need to enter a full 12-month qualifying period in order to meet the substantial presence test requirement. in your case, you will need to spend at least 183 days to qualify for the exclusion. 

So say hypothetically your last day deployed was 11/01/2020 and you spent at least 183 days in 2020. You would enter your qualifying period as 11/02/2019 to 11/01/2020 to be able to claim the foreign income exclusion.  You will do this if you did spend 183 days in the combat zone in your contract.

[rqjohnson2]

Dave,

thank you for your response. my ultimate question that has never been answered is how do i apply the combat zone exclusion/ waiver using the software. it was my understanding that i was to input it into the foreign earned income section and explain with "combat zone". i was deployed from may to nov totaling 109 days, the program keeps kicking it back because my dates are less than a year. thank you for your time

[DianeW777]

Certain U.S. citizens or resident aliens, specifically contractors or employees of contractors supporting the U.S. Armed Forces in designated combat zones, may now qualify for the foreign earned income exclusion.

Service in a combat zone. 

Citizens or residents of the United States serving in an area designated by the President of the United States by Executive order as a combat zone for purposes of section 112 in support of the U.S. Armed Forces can qualify as having a tax home in a foreign country, even if they have an abode within the United States. For a list of IRS recognized combat zones, go to IRS.gov/Newsroom/Combat-Zones.

This can be done in TurboTax by adding Form 2555, which is available for e-file.

Here's how to add—or remove—a Form 2555 or 2555-EZ from your return: Why use Form 2555?

1. Sign into TurboTax and open or continue your return.
2. Do a search for foreign income, and then select the Jump to link in the search results.
3. Continue through the foreign income section until you reach the screen Would You Like to Try and Exclude Your Foreign Earned Income? (if single), or Whose Foreign Income Would You Like to Try and Exclude? (if married). Answer Yes (to add a 2555 or 2555-EZ—we'll figure out which one you need) or No (to remove it), select Continue, and follow any on-screen instructions.

Tip: The -T or -S suffix after the 2555 stands for taxpayer or spouse, respectively.

[Ben Franklin1]

Isn't this hilarious? It's like these jokers don't even read our question. How can we make it any more clear that these customers have a waiver that exempts them from the full year requirement, yet TurboTax won't even process the form unless they change the date to the full year. So, not only can these heroes not efile, they can't even process the documents. [removed] 

[rqjohnson2]

LOL, thank you!!! ben, so from here what would you say is the best course of action? print and file by mail? i dont know what to do???

[Ben Franklin1]

I reckon if it were me, I would just go ahead to print and mail. And if you need to select Jan 1 - Dec 31 just so that TT will prepare the form for printing, then do so and just use a black pen and initial the edits after you print and attach the waiver and send it off. Sure hope that works for you!

[Ben Franklin1]

Also, I might contact customer service after you have printed it and request a product refund if you were unsatisfied with the product. Please wait 24 hours for the order to be processed before requesting a refund.