What is Section 911 exclusion?
Varying forms of income exclusions have existed in the U.S. for decades for US expatriates. The regulations can be broken down into two main parts – foreign earned income exclusion and housing cost exclusion, which constitute Internal Revenue Code (IRC) Section 911 collectively.
These regulations were created for expatriates working abroad to reduce their tax base, avoid double taxation, and manage additional housing costs associated with living overseas.
Qualifying
To qualify for exclusions under IRC Section 911, three conditions that must be met.
- Accumulated foreign earned income
- Tax home is based in a foreign country
- Pass either the bona fide resident test or physical presence test
Once a U.S. taxpayer has met all of these conditions, they are considered an expatriate when concerning taxes.
When do I need to file?
Although U.S. tax payers within the United States and alien resident taxes are due on April 15th, expatriates who are not physically present in the U.S. at that time are entitled for an automatic two-month extension for filing and paying any taxes that are due. Simply file a statement with your tax return electing the extension.
In cases where the physical presence test will not be met by one of the prior extensions, expatriates can also use Form 2350 for requesting an extension until after the qualifying date.
Even though sec 911 has extensions that will provide more time to file, it may not extend the time for the payment due.
Additional factors that affect the tax obligations of expatriates include, but are not limited to:
- Totalization agreements
- Foreign tax credits
- FBAR filings
- DISC commissions
- Foreign financial accounts
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