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Foreign Earned Income & 1099-misc

I am a US citizen but spent the entire year of 2006 outside of the US. I made income of about $25,000 from online advertising/affiliate programs which I manged while living here in Africa. I understand that regardless of the source of the funds or whether it is paid by a U.S. employer or a foreign employer, as long as I was physically present at my foreign tax home the entire tax year, I do qualify for the Foreign Earned Income Exclusion. The above incomes were reported on Form 1099-Misc with my US address which I still maintain. The problem now is I am filling my taxes using TurboTax, and when I enter the income in the 1099-Misc section, the Foreign Earned Income Exclusion is not applied. Can I just use the section of TurboTax that deals with Foreign Earned Income Exclusion, and enter the amounts there? G

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Reply to
glessor
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Beforehand, did you pay taxes on that income to the country where you are living? You can't take a Foreign Earned Income exclusion unless you paid taxes on it in your foreign tax home.

Reply to
parrisbraeside

For foreign income, enter the 1099MISC amount on Form 1040, Line 7 and then complete Form 2555. The result of the foreign income calculations on the form is that your foreign income exclusion is usually entered as a negative amount on Form 1040, Line 21. The foreign housing deduction is a "write-in" amount on Form 1040, Line 36. Turbo Tax should do this automatically for you if you meet the tests to exclude your foreign income from US taxation. If Turbo Tax does not support Form 2555, get the most current update online. Otherwise, hire a tax professional in your area if you're in the states.

Reply to
shedges

The exclusion is not automatic. You need to complete Form

2555.

-- Alan

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Reply to
A.G. Kalman

With all due respect, I disagree. If you do not pay tax to the country in which you reside, you MAY not be able to claim the exclusion under the bona fide resident rules. However, there is no such requirement under the physical presence rule. If you are subject to the tax laws of the country of residence but are not required to pay tax under some provision of that law, you may still qualify for bona fide residency. Not too common but not really that unusual, either. As long as you are outside of the US for the requisite 335 days, you can claim the exclusion under the physical presence rule. It doesn't matter whether or not you pay any taxes -- it doesn't matter how many different countries you may have been in -- all that is necessary is that you be outside the US.

Lanny K. Williams, CPA Nawarat, Williams & Co., Ltd. Income Tax Services for Expatriate Americans

Reply to
L K Williams

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