IRS Tax Question?

Question

for the 330 day exemption rule, what happens if you only stay out of country 300 days. Does the IRS communicate with Customs?

I basically lost my job after 10 months. So, now I have to pay taxes on what I made. Being that I lost my job, am now living off the little I had.

I know the IRS is necessary, but I don't think people should be put in prison if they can't pay taxes.

I basically lost my job after 10 months. So, now I have to pay taxes on what I made. Being that I lost my job, am now living off the little I had.

I know the IRS is necessary, but I don't think people should be put in prison if they can't pay taxes.

I basically lost my job after 10 months. So, now I have to pay taxes on what I made. Being that I lost my job, am now living off the little I had.

I know the IRS is necessary, but I don't think people should be put in prison if they can't pay taxes.

Answer 1

You talking about the Foreign Earned Income Exclusion Rule? The IRS may never contact with the Customs in your lifetime. Then you're lucky. However, in case, if you're audited, can you back up the info you provided? Business expenses, home office expenses, foreign income and EIC are some of the popular triggers of the IRS audit. If I were you , I would just do things according to the IRS Rule! The result would be a peaceful life.

http://www.irs.gov/businesses/small/international/article/0,,id=96968,00.html

Answer 2

The rule actually requires physical presence in a foreign country for 330 or more days. Time spent in transit over international waters or in Antarctica (which is NOT a country) do not count towards the 330 days. I've actually had some clients lose the FEIE because they spent over 30 days in the US and 4 or 5 days in transit over international waters.

The IRS doesn't actively track your crossing of international borders and probably doesn't have the means to do so with many foreign countries though they probably can get information from USCIS on entry and exit from the US.

The problem for you will crop up if your return is selected for audit and you've claimed the FEIE. They WILL ask you to prove that your presence in a foreign country or countries adds up to at least 330 days if your claim is based upon the physical presence test.

Given the amount of tax involved this is a common audit flag and if you've ever had the FEIE denied in the past, any future claims are almost certain to trigger an audit.

Answer 3

So you don't expect to meet the 330 days of physical presence test for the foreign earned income exclusion? No problem, you just aren't eligible to use the form 2555 to reduce your income. (You would still be eligible for the form 1116 for any foreign income taxes paid.)

Yes, the IRS can check your customs records. They can also ask you to produce plain tickets, hotel receipts, travel orders, work contracts, etc. to prove you were out of the country for the full time period.

Given the amount of taxes you are trying not to pay, this is a common audit area.

And it's not the IRS's fault that you falsely assumed you'd have the job for a year. Most people have the income tax withheld and if they can file the form 2555, get a big refund. You appear to have filed the form 673 (or failed to file estimated taxes) on the assumption you would hit the magic numbers. If you had stayed outside the US (eg, 45 days of vacation), you could have qualified...but no, you came back.

Suck it up and pay the tax. Getting on a payment plan with the IRS is like paying really bad credit card charges month after month. Pain now is better than pain later.