e-file federal return with waiver for foreign earned income 2019

[mdean]

I left a foreign country due to the pandemic, but would have qualified with the physical test for the foreign earned income exclusion. I put the date that I returned to the US and, because it is not 330 days after I left the US, TT will not let me e-file even though there is a waiver with an explanation. Is there a solution for this problem? Thanks.

[pk]

@mdean  here is the latest notice from the IRS :

"

The COVID-19 virus has caused a global health emergency that has prompted the Department of the Treasury and the Internal Revenue Service to provide a waiver of the time requirements of Internal Revenue Code section 911(d)(1).

If, due to the COVID-19 emergency, you were required to leave:

• The People’s Republic of China (excluding the Special Administrative regions of Hong Kong and Macau) on or after December 1, 2019, but on or before July 15, 2020; or
• Another foreign country on or after February 1, 2020, but on or before July 15, 2020;

you may still be able to meet requirements of the bona fide residence or physical presence test for 2019 or 2020 for purposes of determining the foreign earned income exclusion and housing cost exclusion or deduction.  For more information and examples see Revenue Procedure 2020-27 (PDF).

In practical terms this means   you may have to satisfy the TurboTax by putting in a fictitious  date of return, print the return, sign date, erase the return date and replace with actual date, attach the revenue procedure  ref.  and mail the whole thing to the IRS.   I will also try the TurboTax software to see if they have up[dated to allow the waiver -- but the mail file will work since that would need human interaction.

See if you can make it work  and I will come back after I have simulated the senario

[mdean]

Thank you for your response, pk. I am sure that I qualify, but TT will not let me e-file; it tells me to fix the problem (the date I left) or change the way I am filing (so I guess that file-by-mail will be possible). I had just purchased e-file for my state (now would like a refund - it doesn't make sense to mail my federal and e-file the state). There should be a way to e-file with the waiver; that's really what I was asking about. Thanks.

[pk]

@mdean , i sort of remembered having seen the waiver screen before.   So on simulating your scenario -- early termination --  it does work perfectly.

When entering foreign earned income and exclusion, choose physical presence test ---> were you a US citizen--> Choose how you qualify  for the exclusion --> Choose the 12 month qualifying period--> Physical Presence info--> Can you claim waiver ---> Explanation for waiver request -->

This gets it done .  I ran the federal review, looked at the forms and confirmed everything works as expected.

Do you need more help ?

[mdean]

Thanks again, pk. Yes, everything works correctly except that I get an error with the date and it won't let me e-file. My only solution is to mail it?

[pk]

@mdean , oh dear the e-file end is the only thing I cannot try out.  Yes , I suppose then the only option is to  file by mail.  You can still file the State by e-file  ( depending on the state the  system should attach the  federal , if needed ),  since depending on your version of the software there may be charge for efiling the state.

Sorry I could not d more --- but I will bring this to the attention of the powers-be at Intuit

[mdean]

Thank you, pk. Yeah, I paid for the state thinking I was going to e-file both; now that I have to mail the federal, it just seems like a waste of money. Do you know how to get a refund for that?

[tjudge530]

Regarding this, I moved back to the USA in 2020 due to COVID pandemic. Where in Turbo Tax may I find the waiver for Foreign Earned income exclusion?

Is there a form for revenue Procedure 2020-27?

[DaveF1006]

It depends. As you navigate through the questions in the Foreign Income and Exclusion section,:

1. You will reach a screen that says Choose How To Qualify for This Exclusion. Choose the Physical Presence Test.
2. Next enter the dates you were present in the country to qualify for the Physical Presence Test. If your qualifying period is less than 12 months. then additional questions will generate. if so.
3. The next screen will inform you that the do not meet the physical presence test but you may qualify for a waiver. Press continue
4. Next Screen will ask can you claim a waiver. indicate yes.
5. Next screen will ask you to write an explanation for the waiver. Here you will record Revenue Procedure 2020-27.

[tjudge530]

Thank you. 

Suppose I am a self-employed individual. 

How do I enter income when 100% of my income is foreign earned income?

Does that go on:

- Self-employment income and expenses, or 

- Foreign Earned Income and Exclusion, or

- Both in some way?

Thanks!

[tjudge530]

Also, why is not 100% of foreign earned income excluded? 

[pk]

@tjudge530  ,  if your foreign earnings are from self-employment abroad,  then it requires a little bit more  than simple foreign earned income treatment---- (a) you first tell TurboTax that you are self-employed and that will result in schedule-C  being filled out plus the schedule-SE   ( the one for Self-Employment tax at 15.3% of most of net income).  Note that on schedule C you show your gross income as also all the allowable expenses associated with this  income stream;  (b) you follow the instructions  for "foreign earned income and exclusion" --- here you have to make sure that TurboTax does not show the  self-employed income twice

If this is your world income, the foreign income that is , then all of it would be excluded upto the max allowed for the year --- for 2019 it was US$105,900 and for 2020 it is US$107,600.  Any taxes  paid to a foreign tax administration on Un-Excluded foreign income is eligible for  foreign tax credit

Does this answer your query ?