Foreign earned income exclusion-physical presence test

[andreal]

Hi, I moved to US at end of June on H1B and was living and working in my home country prior to this. For tax purposes, I am filing as resident alien. In order to deduce my foreign earned income prior to coming US, do I qualify for the physical presence test as I was living outside US prior to moving or the 330 days of presence should include only 2019? Thanks.

[KurtL1]

You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. The entire 330 days does not need to be in the same calendar year.

You may also be entitled to exclude from income the value of meals and lodging provided to you by your employer. Refer to Exclusion of Meals and Lodging in Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad

[andreal]

Hi,

Today i visited an accountant office and they told me i can't get exclusion for my foreign income before coming to US as I was not a resident alien back then. Is this true?

[LinaJ2020 · Accepted solution]

Yes, it is true that the Foreign Earned Income Exclusion only applies to US citizens or residents.  If you first came to the US is in June 2019, though you meet the Substantial Presence Test SPT Substantial Presence Test, you are considered as dual-status.  You may only apply the exclusion on a foreign income after June 2019, if there is any.  You cannot apply to your foreign income before you move to the US. 

@andreal

[andreal]

Is this still true, even if i am filing as resident alien for 2019? Thanks for your response.

[KarenJ2]

As you were a nonresident, you cannot use the foreign earned income exclusion for the time before arriving in the US.  

If you only arrived at the end of June in 2019, you need to count your days of presence to determine if you need to file as a dual status resident or a nonresident for 2019. Please see below on determining your residency.

You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year or you are a green card holder. To meet the substantial presence test, you must be physically present in the United States (U.S.) on at least: 

1. 31 days during the current year,(2019) and 

2. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:  

• All the days you were present in the current year (2019), and 

• 1/3 of the days you were present in the first year (2018) before the current year, and 

• 1/6 of the days you were present in the second year (2017)before the current year 

If your days of presence equal 183 days or more your will need to file a dual status return, part year nonresident and part year resident.

If your days of presence are less than 183 days, you need to file a nonresident tax return. 

TurboTax does not support nonresident returns however TurboTax has a partnership with Sprintax offering a nonresident tax filing solution to TurboTax customers.  

Visit the TurboTax/Sprintax site.  Sprintax does not support dual status returns but encourge dual status filers to contact them as they may be able to assist. 

In order to prepare a dual status return in TurboTax, you will need to print a copy of the nonresident return (Form 1040NR from the IRS website) for your tax on US income after May. There will most likely be no US source income to enter for that time.  So your income on this form will probably be zero unless you received US income after moving out of the US.. Write on the top of the 1st page of the 1040NR, Dual Return. You will need to write in your name and address and input zero as your US source income (if that is the case). 

2019 1040NR 

Then for the resident part of the return you prepare in TurboTax, you are not allowed to use the standard deduction, only itemized deductions if you are filing a dual status return.  Also, you can either file single (if you are single) or married filing separately.  

You must suppress the standard deduction.  Instructions for this are below. 

When your resident part of the return is finished in TurboTax, print the return and write on top of the return, Dual Statement.   

Put the 1040 on top of 1040NR  non resident return and staple and mail to the IRS.  You must sign the 1040 before mailing.  You do not need to sign the 1040NR statement.  

You will need to staple your 1040NR and 1040 together and mail to the following address: 

If you  are not enclosing a payment then use this address...  

Department of the Treasury 

Internal Revenue Service 

Austin, TX  73301-0215 

USA 

If you are enclosing a payment then use this address...  

Internal Revenue Service 

P. O. Box 1303 

Charlotte, NC 28201-1303 

USA  

Please see more help on dual status returns see page 7 of Pub 519.  

Publication 519  

TurboTax Online instructions  to switch from Standard Deductions to Itemized Deductions.

First, sign in and make sure your return is open. You should see 2018 TAXES in your left-hand menu as pictured below (if not, tap or click the upper-left corner to expand the menu or select Take me to my return). 

Once your return is open: 

1. From the left-hand menu, select Federal (on mobile devices, you might need to scroll down). 

2. Now select Deductions & Credits near the top of your screen. 

3. When you get to Now it's time for the fun part... Your tax breaks, scroll all the way to the bottom and select Wrap up tax breaks (if you don't see this button, select Skip to see all tax breaks, then scroll down again). 

4. Continue through the interview until you see The Standard [or Itemized] Deduction is Right for You, pictured below. 

5. On that screen, check the box Change my deduction to see the dollar amount for each deduction. 

6. Select Continue if you want to save any changes. If you're switching to the itemized deduction, you may be prompted to upgrade.