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Filing An Amended U.S. Tax Return To Back Claim FEIE

“Kathleen, I have a couple of simple questions to pose to you. I’ve read from you that ‘Note that the FEIE applies to salary you earn from your own business or as an employee’ and also that the company can be a U.S. company that employs a U.S. person residing abroad. A couple of years ago, I lived abroad for a period of 18 months straight (with barely two weeks back in the United States during that period), during which time I did work for a U.S. firm, as an employee of that firm, on a contract with the U.S. government. At the same time, I was a faculty member on leave of absence from a U.S. university while drawing a half-time salary from that university.

“My questions:

1) Was I eligible under the FEIE to exclude (up to the roughly US$90k limit) my salary from that U.S. firm from federal taxation?

2) Was I eligible under the FEIE to exclude (up to the roughly US$90k limit) my university salary from federal taxation?

3) If affirmative in either case, and assuming I did not claim the FEIE, am I correct that I can file an amended return now to claim it?

“Many thanks for your views on this matter.”

–Mark R., United States

Our global tax-planning authority replies:

Yes, you were eligible for the FEIE during the 18 months you worked abroad. As you were employed by a U.S. corporation, you still need to pay the Social Security, Medicare, and other withholdings, but the FEIE can be taken using the 330 Day Test (not the Residency Test).

Income from your university would not count as foreign-earned income…because it was not earned as a result of work done abroad.

Yes, you may amend your tax returns and claim the FEIE. As you were abroad for 18 months, you should amend both returns affected (18 months would span two calendar years and thus mean two returns).

Note that you have three years from the original due date to file an amended return and claim a refund. For example, your 2010 tax return is due on April 15, 2011. Add three years to this filing deadline, and you have until April 15, 2014, to file your 2010 tax return and still get a tax refund. If you file your 2010 return after April 15, 2014, then your refund “expires.” It goes away forever because the statute of limitations for claiming a refund has closed.

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