Question for the KBR guys....

[shellie01]

I'm trying to figure this out. My husband has been in Iraq working for KBR for two years now. Last year at tax season we did not have to pay taxes on the first 80,000. Ok now this year. My husband thinks we won't pay taxes this year either. But I just read somewhere that the tax break is only for the first year not the second....If that's the case, we're in trouble. KBR has not been taking any taxes out this year. I'm afraid we are going to owe like 10,000 now! What do you know about this? All years tax free or just the first?? Thanx.

[eosirl2]

Originally Posted by shellie01

I'm trying to figure this out. My husband has been in Iraq working for KBR for two years now. Last year at tax season we did not have to pay taxes on the first 80,000. Ok now this year. My husband thinks we won't pay taxes this year either. But I just read somewhere that the tax break is only for the first year not the second....If that's the case, we're in trouble. KBR has not been taking any taxes out this year. I'm afraid we are going to owe like 10,000 now! What do you know about this? All years tax free or just the first?? Thanx.

Shellie,

I believe it is every year. As this is considered as foreign income earned abroad. I believe this exclusion may occur as the law would presume you've paid taxes etc on the $80,000 already in your foreign country of residency.

However, if he isn't paying any taxes over there at all...then the sum of $80,000 may be considered for taxation here. But, if he was legally entitled to do that tax strategy last year, I don't see why he couldn't do it this year.

You really need some good tax adviser here, the crux of the matter is how your husbands earning status is viewed by the IRS, they may be exception because of the unique situation.

Sorry, the best I can do for you.

Hope it works out in your favor.

[myranchretirement]

Originally Posted by shellie01

I'm trying to figure this out. My husband has been in Iraq working for KBR for two years now. Last year at tax season we did not have to pay taxes on the first 80,000. Ok now this year. My husband thinks we won't pay taxes this year either. But I just read somewhere that the tax break is only for the first year not the second....If that's the case, we're in trouble. KBR has not been taking any taxes out this year. I'm afraid we are going to owe like 10,000 now! What do you know about this? All years tax free or just the first?? Thanx.

If he signed a 673 form you will be fine. It will be just like the first year.

[icarusII]

Originally Posted by shellie01

I'm trying to figure this out. My husband has been in Iraq working for KBR for two years now. Last year at tax season we did not have to pay taxes on the first 80,000. Ok now this year. My husband thinks we won't pay taxes this year either. But I just read somewhere that the tax break is only for the first year not the second....If that's the case, we're in trouble. KBR has not been taking any taxes out this year. I'm afraid we are going to owe like 10,000 now! What do you know about this? All years tax free or just the first?? Thanx.

Shellie......the same rule applies for any tax year spent abroad. If your husband meets either the physical presence or bona fide residence clauses for the tax year in question........the earnings over 80K are tax exempt under the international worker status. (330 day rule)

Icarus

[shellie01]

whewwww! thanks so much. I did call my tax person but she's out of pocket right now. I was just starting to get scared when I read more than once that it was for the first year. Ok I think I can breathe now.

[pwillie]

If your final year is less than 11 months on the exemption then you will have to pay taxes on the full amount. Best way to to extend out so you have the 11 months out of country. If all else fails with the money made just go on vacation for a couple months overseas till you get the required months for the tax break. Excemption doesn't apply if you don't spend 11 months for the tax break.


I want to say it's 35 days but could be alittle more or alittle less. I never pushed my luck on how much I stayed in the states. I stayed in Europe while I was on leave from Iraq.

But the IRS form that he filled out states alot of the things on the back. Can't remember the form number. And the IRS website as the more detailed version just get the form number and look it up.

[Javabear]

Sign the 673 and pass the physical presence test (330 day rule) and you're home free.

[psychojerm]

Originally Posted by pwillie

If your final year is less than 11 months on the exemption then you will have to pay taxes on the full amount. Best way to to extend out so you have the 11 months out of country. If all else fails with the money made just go on vacation for a couple months overseas till you get the required months for the tax break. Excemption doesn't apply if you don't spend 11 months for the tax break.


I want to say it's 35 days but could be alittle more or alittle less. I never pushed my luck on how much I stayed in the states. I stayed in Europe while I was on leave from Iraq.

But the IRS form that he filled out states alot of the things on the back. Can't remember the form number. And the IRS website as the more detailed version just get the form number and look it up.

It's 330 full days or more outside the US in a calendar year. You are also allowed to maximize this for two years if your calendar year spans over two tax years. For instance I was over from Jan 04 to beginning of May 05. My 330 was from the first day I left the US in my 2004 tax year giving me the maximum amount of days for that. Now for my 2005 tax year I will maximize for this year by counting my 330 from may 04 to may 05. This gives me the greatest amount of days that I can take the tax deduction in 05. It's perfectly legal to do so and encouraged by the IRS.

The foreign earned income tax exclusion is based on a calendar year, so if you had 300 days of your year in one tax year, and 65 in another, you get to claim them separately in two years. just go see a tax guy if you're taking it that's the best idea.

[s1rGr1nG0]

As long as he is out of the U.S. for 330 days of the year he will be fine. Don't sweat it.

[IQ-Contractor]

OK--this thread looks a little non-linear, at least to me.

the Tax deal is that you make your 'qualifying date' on the 365th day out. Everything after that is the <80K tax free. you dont have to complete another year to retain the tax benefit. If you only worked 4 more months after your initial year---you still get the tax bennies on it all assuming the <80k limit.

best to stay out the full tax year of Jan to Dec (all 365 days of the fiscal year)--then you can file a request for Permanent non-residency exemption. Under that, you can come and go as much as you like to the US---but you can't have so much as a dollar earned while there. --and not pay tax on a damn thing.

Thats what expats all over the world do--they live permanently abroad while retaining US citizenship for the sole reason that a US passport is one of the most valuable personal travel and ID documents in the world. Or some of them live in the US but once they get the perm exemption---they just go from big contract to big contract with lots of downtime in between and never have to worry about staying in the US for 30 days or less.

Tax Topic 853 - General
Tax Topic 854, Foreign Earned Income Exclusion - Who Qualifies
Tax Topic 855, Foreign Earned Income Exclusion - What Qualifies
Publication 54 - Tax Guide for U.S. Citizens and Resident Aliens Abroad

you can even go back to the States and retire with social security---you dont have to pay into SSI in order to receive it upon retirement age--its mandated by Congress.

soooo....if you have no need to live in the US, you can travel the world doing contracting and make a ton--then retire wealthy AND still get something back from Uncle Sam in your golden years.