Using 2 month automatic foreign extension to meet the physical presence test.

[chrisgh]

I am a US cit and have lived overseas a couple of years.  However, I spent about 3 months in the US in the early part of 2024 (still working for my foreign employer).  I have been using the physical presence test in past years, to  avoid any question about whether I"m a bone fide resident (likely am, but on a three year contract).    I would satisfy the physical presence test for 2024,  only if I identified my year as running from early May 2024 to early May 2025.   May I use the automatic extension to delay filing so I can add those couple weeks to my time overseas?    I just want to confirm that the 330 days for 2024 can continue past April 15, 2025.  

[pk]

@chrisgh  are you still abroad ?  If so then your filing date is June 16th. without any extension.   Also the extension request goes to IRS -- nothing to do with TurboTax -- it acts as a transmitter in the case of  an extension request ( automatic extension 4868 gives you till October 15th/16th.

About Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Retu...

Is there more I can do for you ?

[chrisgh]

Thank you. Yes, I am abroad so the June 16th deadline would apply. I’d like to confirm that it’s ok to count  my 330 days from May 2024 until May 2025–I.e after April 15,2025 but before June 16,2025.  (I have thought this was fine and then I saw another posting/answer that said the year had to end before the current tax year—that threw me off)!

[KeshaH]

Yes, your presence in the foreign country can be any 12 month period. However, you will still need to prorate your foreign earned income exclusion based on how many days you were present in 2024. So you'd qualify for the exclusion based on being present from May 2024 to April 2025, but your exclusion would be calculated based on May - December 2024.

[chrisgh]

Yes!  I’ve done the prorating!  Thanks!  

[chrisgh]

I think I figured out the source of my conclusion.  As noted above,   to apply the Foreign Income Exclusion under the physical presence test for 2024,  the 330 days can include days in 2025.     However, when looking at the monetary thresholds that trigger reporting Foreign Financial Assets on Form 8938 -- to be considered living outside the US (and thus subject to much higher monetary reporting thresholds)  you could either be a bona fide resident OR have lived overseas for 330 full days during any  12 consecutive months THAT END IN THE TAX YEAR BEING REPORTED.    So it could be possible that in 2024 you meet the 330 day requirement for the Foreign Income Exclusion counting days in 2025, but you would be subject to a lower reporting threshold  on your Foreign Financial assets because your 330 days didn't end in 2024.   Is this correct?     So slightly different applications of the 330 day rule for the different purposes.  I didn't catch that difference at first.

[chrisgh]

confusion (not conclusion)!

[pk]

@chrisgh , just to clear --

(a)   for FEIE, the 12 month test period has to be a continuous and  has to overlap the  earnings period that  you are trying exclude .  Thus  if  your  foreign  earning period  is  June 2024 through  Dec 2024 and you established a foreign tax home ( first full 24 hr. day abroad / in foreign country ) is  say May 1st. 2024, then the earliest 12 month  period is  May1st , 2024  through May1st 2025  Now if you meet the  physical presence test of 330 days abroad, you can exclude your earnings of June 2024 through December 2024 -- test period overlaps the  earnings period.

(b)  As long as you have a foreign tax home then  the FATCA higher threshold applies.   Thus  the augmented threshold  is valid as long as you have a foreign tax home on the last day of the year ( because  it asks   for the value at the end of the year plus a few  ands/ifs/buts ).

Does this jibe with your analysis ? or thought process?

pk

[chrisgh]

ah...ok.  I think I was not reading these as two separate tests.   so in your example in a (income in 2024), you are saying in that the higher FATCA threshold would apply because you established your foreign tax home in May 2024?  I'm not understanding why the instructions for the FATCA say that the 330 day period needs to end in the reported tax year.

[pk]

@chrisgh  now you got me --- I know of no requirement of 330 days for FATCA ( form 8938 ).  Here is a comparison of FBAR and FATCA  -- it just says  " living outside the US"  -- I am interpreting this to mean  a tax home ( for surely  the higher threshold will not apply if someone is vising  his grandparents  over the Christmas/ New Years holidays -- that would not be logical )

Comparison of Form 8938 and FBAR requirements | Internal Revenue Service.

Does this make sense ?

[chrisgh]

I was working of the IRS Instructions to Form 8938    https://www.irs.gov/instructions/i8938.

In the section on Types of Reporting Thresholds, it states:

Taxpayers living outside the United States.

If your tax home is in a foreign country, you meet one of the presence abroad tests described next, and no exception applies, file Form 8938 with your income tax return if you satisfy the reporting threshold discussed next that applies to you.

 . . .

Presence abroad.  You satisfy the presence abroad test if you are one of the following.

• A U.S. citizen who has been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year.

• A U.S. citizen or resident who is present in a foreign country or countries at least 330 full days during any period of 12 consecutive months that ends in the tax year being reported.

It's that last part of the second bullet that has confused me.

[pk]

@chrisgh  you are correct --  actually was not aware  of this implication -- but only for the first year.

You would be surprised  at what the  Foreign Financial Institution are required to report  under FATCA -- both for the 50K and 200K value accounts.  Thus  the US person's filing of FATCA form  ( 8938 )  is really a cross check ( but with teeth ).   There being no definition of "living abroad" except for the nearest stand in / proxy  being  the test for  Physical Presence  or  Bonafide  Resident.

Sorry for my  ignorance.

[chrisgh]

Interesting, isn't it.  But I hadn't thought about it really being only for the first year.  Thanks..this has been helpful.