New expat: US/Foreign tax & bona fide resident.

- B
- ben.a.bowen
  
  Contact options for registered users
posted
16 years ago

Wed, Mar 5, 2008 2:45 PM

Hi, all. I've searched through the thread and can't find anything that matches this.

I moved to Switzerland from Texas on July 1. I have taken a permanent position in Zürich and do not plan on moving back to the US any time soon. I do not plan on giving up my citizenship. As far a I know, I do not count as a bona fide foreign resident yet as I have not been here a full year. I paid US taxes through June. I have been paying Swiss taxes since July 1. Am I able to deduct the Swiss taxes from my US taxes? Or will I be doubly taxed on those 6 months? Everything I've read speaks of "bona fide" and "presence", but I can't seem to find an answer to this.

I'm hoping I don't. Thanks for the advice.

Ben..

- L
- L K Williams
  
  Contact options for registered users
Vote on answer
posted
16 years ago

Wed, Mar 5, 2008 5:00 PM

To qualify under the bona fide residence rule, you must be a resident for a period that includes one full tax year. In your case, having taken up residence in July 2007, you will not be able to meet this requirement until January 2009!

If you will meet the physical presence rule (330 days out of a

12-month period) you can take the exclusion AFTER you actually have been outside the US for the requisite period of time. If you use this rule, you cannot file until you do meet the requirements. File before and the IRS will disallow the exclusion.

In your case, it appears the 12-month period begins on June 1, 2007, assuming you do not return to the US anytime during the year.

If, for any reason, you do not qualify for the exclusion or your income exceeds the allowable exclusion, you may claim a credit for Swiss income taxes paid. Only that portion of the Swiss tax that applies to the non-excluded income is allowable, however.

As you seem to have discovered, the seemingly simple rules are not really so simple. I strongly suggest that you seek professional help from some one who is familiar with the expat rules. Not just any CPA or EA but some one who has experience working with expats.

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

- S
- s_pickle2001
  
  Contact options for registered users
Vote on answer
posted
16 years ago

Wed, Mar 5, 2008 10:08 PM

You won't be double taxed. You have two choices.

File now without claiming the foreign earned income exclusion, but you can always claim the foreign tax credit. Then once you have been in Switzerland for a year, file an amended return claiming the foreign earned income exemption,
File for an extension, and once file your tax return once you have lived in Switzerland for a year. You need to calculate or at least estimate how much tax you will owe and pay it by the due date, but the chances are that too much has been withheld from you. I believe that you can get longer extensions as well if you want to claim the foreign earned income exclusion but the standard 4 months one should cover you.