FEIE: Do I need to revoke after moving back to US?

[AaronJ]

Hi. I used FEIE for tax years 2019 and 2020. I moved back to the US in November 2020. If all my income in 2021 is US sourced, do I need to revoke FEIE? Am I allowed to use FEIE again in 2022 or do I have to wait 5 years?

Thanks for the advice! Much appreciated.

[ToddL99]

You do not need to "revoke" the Foreign Earned Income Exclusion election in 2021; if you do not qualify to claim the FEIE, you just don't claim it.

There is no waiting period for FEIE; you can claim it again in 2022, if you qualify.

From the IRS:

To claim these benefits, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

• A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
• A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
• A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

You can use the IRS’s Interactive Tax Assistant tool to help determine whether income earned in a foreign country is eligible to be excluded from income reported on your U.S. federal income tax return.

[AaronJ]

Thanks for replying, Todd. From what I understand you can't flip-flop between using the FEIE and not using it, from year to year. If I stop using it one year, then I'd need to wait 5 years to use it again, or request permission from the IRS by letter. The exception I'm wondering about is my income for 2021 will be US-sourced, so I wouldn't be eligible for FEIE anyway. 

[ToddL99]

You do not need to revoke the FEIE election just because your earnings in a given year are U.S.-sourced; the exclusion simply wouldn't apply to any of your earnings in that year.   Once you choose to exclude your foreign earned income, however, that choice remains in effect for that year and all later years unless you revoke it.

As long as the election remains in place, however,  you cannot take the additional child tax credit or the earned income credit.

From the IRS  Tax Guide for U.S. Citizens and Resident Aliens Abroad:

Effect of Choosing the Exclusion

Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it.

Foreign tax credit or deduction. Once you choose to exclude foreign earned income, you can’t take a foreign tax credit or deduction for taxes on income you can exclude. If you do take a credit or deduction for any of those taxes in a later year, your election for the foreign earned income exclusion will be revoked begin-ning with that year. See Pub. 514 for more infor-mation.

Additional child tax credit. You can’t take the additional child tax credit if you claim the foreign earned income exclusion.

Earned income credit. If you claim the foreign earned income exclusion, you don’t qualify for the earned income credit for the year

[GrigN]

You do not need to actively revoke the exclusion. The IRS will consider it revoked once you do not use it.

You are correct that you cannot switch back and forth between the FTC and FEIE from one year to the next. Once you revoke the FEIE, you have to receive IRS approval to claim it again, or wait until the 6th year after the year you stopped claiming the FEIE. If 2021 is your first year without the FEIE, the first year you can claim it again without special permission is 2027.

See: https://www.law.cornell.edu/cfr/text/26/1.911-7

and: https://hodgen.com/flip-flopping-the-foreign-earned-income-exclusion/

[Dblkings]

Hi thanks for the helpful info.  I have similar situation with Op and in moving back from abroad in 2020 to US and US based income in 2021.

One wrinkle in my situation is that I am expecting a child and hoping would be able to claim the child tax credit and additional credit in 2022. I would still be on US based income then. Would I need to revoke FEIE (for 5 yrs) in order to claim credits going forward or would I still be able to claim the credits in not filing the FEIE election form for that year?

Thanks!