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Overseas tax exemption?

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Overseas tax exemption?

Postby bramm » Sun Nov 18, 2012 7:22 pm

I am a contractor working on a US. Military base overseas. I have been here since July 2012 and my contract will end in March 2013. I did not change my W-4 due to knowin the contract would not be long enough to qualify for the overseas tax break. But now my plan is to go work in Australia or Germany from March 2013 to July 2013 in order to be out of the states for more than 330 days within a 365 day period. My question is; if I do this do I qualify for the overseas tax break (the one that exempts me from federal taxes up to the first $93,000 or so) and be able to ask for the money back when filing my 2013 tax return, or does the 330 days all have to be within the same fiscal year?
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Overseas tax exemption?

Postby dov » Sun Nov 18, 2012 7:23 pm

The fist thing that you will need to do is to see what the wording of your contract as well as the SOFA with the host nation say. Many contractors to the military are covered under the UCMJ and don't pay income taxes to the host nation while they are overseas and as such are treated as working for the US government. If that's the case, you are not eligible to claim the Foreign Earned Income Exclusion at all regardless of the length of your stay.

If this does not apply to you then you may be able to claim the FEIE. If you are using the physical presence test of 330 days out of a full one year period, the year does not need to coincide with a calendar year. If it doesn't then you must apportion the FEIE between the two years. If you started on 1 July 2012 that would be exactly half for the 2012 tax year (half of $95,100) and half for the 2013 tax year (half of $97,600).

If you later qualify to claim the FEIE for 2012 after filing you can amend your 2012 return to claim it. You can also request an extension of time to file your 2012 return until you do qualify and then file. Since you'd potentially qualify on 30 June 2013 a simple Form 4868 extension request would suffice as it extends your filing deadline to 15 October 2013 for tax year 2012.
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Overseas tax exemption?

Postby chumin » Sun Nov 18, 2012 7:24 pm

Normally if you are exempted form host nation taxation under the SOFA, you do NOT qualify for the Foreign Earned Income Exclusion.
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