||2008 Tax Year
Publication 593 - Main Content
The U.S. filing requirements for U.S. citizens and resident aliens in foreign countries are generally the same as those for
citizens and residents living in the United States.
Who must file.
Your age, filing status, gross income, and whether you can be claimed as a dependent by another taxpayer determine
whether you must file a U.S. federal income tax return. To determine if you meet the gross income requirement for filing purposes,
you must include all income you receive from foreign sources as well as your U.S. income. This is true even if:
The income is paid in foreign currency,
The foreign country imposes an income tax on that income, or
The income is excludable under the foreign earned income exclusion, discussed later.
You must file a U.S. income tax return if you had $400 or more of net earnings from self-employment, regardless of
your age. Net earnings from self-employment include income earned both in a foreign country and in the United States.
You must pay self-employment tax on your self-employment income even if it is earned in a foreign country and is excludable
as foreign earned income in figuring your income tax.
Foreign bank and financial accounts.
If you had any financial interest in, or signature or other authority over a bank account, securities account, or
other financial account in a foreign country at any time during the tax year, you may have to complete Treasury Department
Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts, and file it with the Department of the Treasury at the address
listed on the form. You need not file this form if the combined assets in the account(s) are $10,000 or less during the entire
year, or if the assets are with a U.S. military banking facility operated by a U.S. financial institution.
You can get Form TD F 90-22.1 from the offices listed at the end of this publication or through the IRS website at
Estate and gift taxes.
Under certain conditions, you may have to file a federal estate or gift tax return. For more information, see Publication
950, Introduction to Estate and Gift Taxes.
You can also request additional information by writing to:
Internal Revenue Service
Estate Tax Group
1111 Constitution Ave. NW, LE-4435
Washington, DC 20224.
When to file.
If your tax year is the calendar year, the due date for filing your income tax return is usually April 15 of the following
Extensions of time to file.
You are automatically granted an extension to June 15 to file your return and pay any tax due if you are a U.S. citizen
or resident alien and on the regular due date of your return:
You are living outside of the United States and Puerto Rico and your main place of business or post of duty is outside of
the United States and Puerto Rico, or
You are in military or naval service on duty outside the United States and Puerto Rico.
You must pay interest on any unpaid tax from the regular due date to the date you pay the tax.
You do not have to file a special form to receive this extension. You must, however, attach a statement to your tax
return explaining what situation qualified you for the extension.
It may benefit you to file for an additional extension of time to file. You may benefit if, on the due date for filing,
you have not yet met either the bona fide residence test or the physical presence test, but you expect to qualify after the
automatic extension discussed above. To obtain an additional extension, file Form 2350, Application for Extension of Time
To File U.S. Income Tax Return, with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215,
or your local IRS representative or other IRS employee. You must file Form 2350 after the close of your tax year but before
the end of the first extension. If an additional extension is granted, it will be to a date after you expect to meet the time
requirements for the bona fide residence or the physical presence test.
Where to file.
If any of the following situations apply to you and you do not use an APO or FPO address, you should file your return
with the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215.
You claim the foreign earned income exclusion.
You claim the foreign housing exclusion or deduction.
You live in a foreign country or are a resident, for tax purposes, of a foreign country.
If none of the above situations apply to you or you use an APO or FPO address, see the instructions for your income
You may qualify for an exclusion from tax of a limited amount of income earned while working abroad. However, you must file
a tax return to claim it. In general, foreign earned income is income received for services you perform in a foreign country.
You also may be able to claim an exclusion or a deduction from gross income for a limited amount of your housing costs if
your costs are more than a base amount. Generally, you will qualify for these benefits if your tax home (defined later) is
in a foreign country or countries throughout your period of bona fide foreign residence or physical presence and you are one
of the following.
A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an
entire tax year,
A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect
and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax
A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full
days during any period of 12 consecutive months.
Your tax home is the general area of your main place of business, employment, or post of duty where you are permanently
or indefinitely engaged to work. You are not considered to have a tax home in a foreign country for any period during which
your abode is in the United States. However, being temporarily present in the United States, or maintaining a dwelling there,
does not necessarily mean that your abode is in the United States. For details, see Publication 54.
A foreign country, for this purpose, means any territory under the sovereignty of a government other than that of
the United States, including territorial waters (determined under U.S. laws) and air space. A foreign country also includes
the seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over
which it has exclusive rights under international law to explore and exploit natural resources. For this purpose, U.S. possessions
or territories and the Antarctic region are not foreign countries.
Waiver of time requirements.
You may not have to meet the minimum time requirements for bona fide residence or physical presence if you have to
leave the foreign country because war, civil unrest, or similar adverse conditions in the country prevented you from conducting
normal business. You must, however, be able to show that you reasonably could have expected to meet the minimum time requirements
if the adverse conditions had not occurred.
A list of countries qualifying for the waiver is published in the Internal Revenue Bulletin (IRB). You can read the
IRB on the Internet at www.irs.gov
. Or, you can get a copy of the list by writing to:
Internal Revenue Service
P.O. Box 920
Bensalem, PA 19020-8518
If you violate U.S. travel restrictions, you will not be treated as being a bona fide resident of, or physically present
in, a foreign country for any day during which you are present in a country in violation of the restrictions. (These restrictions
generally prohibit U.S. citizens and residents from engaging in transactions related to travel to, from, or within certain
countries.) Also, income that you earn from sources within such a country for services performed during a period of travel
restrictions does not qualify as foreign earned income. Housing expenses that you incur within that country (or outside that
country for housing your spouse or dependents) while you are in violation of travel restrictions cannot be included in figuring
your foreign housing amount.
These travel restrictions currently apply only to Cuba. However, if you performed services at the U.S. Naval Base
at Guantanamo Bay, these travel restrictions do not apply.
Exclusion of Foreign Earned Income
If your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test, you
can choose to exclude from gross income a limited amount of your foreign earned income. Your income must be for services performed
in a foreign country during your period of foreign residence or presence, whichever applies. You cannot, however, exclude
the pay you receive as an employee of the U.S. Government or its agencies.
Credits and deductions.
If you claim the exclusion, you cannot claim any credits or deductions that are related to the excluded income. Thus,
you cannot claim a foreign tax credit or deduction for any foreign income tax paid on the excluded income. Nor can you claim
the earned income credit if you claim the exclusion. Also, for IRA purposes, the excluded income is not considered compensation
and, for figuring deductible contributions when you are covered by an employer retirement plan, the excluded income is included
in your modified adjusted gross income.
If your tax home is in a foreign country and you qualify under either the bona fide residence test or the physical
presence test for all of 2008, you can exclude up to $87,600 of your foreign earned income. The maximum amount you can exclude
is adjusted annually for inflation.
If you qualify under either test for only part of the year, you must reduce ratably the maximum amount based on the
number of days within the tax year you qualified under one of the two tests.
If your tax home is in a foreign country and you meet either the bona fide residence test or the physical presence test, you
may be able to claim an exclusion or a deduction from gross income for a housing amount.
Your housing amount is the excess, if any, of your allowable housing expenses for the year over a base amount. The amount
of allowable housing expenses is limited.
Allowable housing expenses are the reasonable expenses (such as rent, utilities other than telephone charges, and real and
personal property insurance) paid or incurred during the year by you, or on your behalf, for your foreign housing and that
of your spouse and dependents if they lived with you. You can include the rental value of housing provided by your employer
in return for your services. You can also include the allowable housing expenses of a second foreign household for your spouse
and dependents if they did not live with you because of dangerous, unhealthy, or otherwise adverse living conditions at your
tax home. Allowable housing expenses do not include the cost of home purchase or other capital items, wages of domestic servants,
or deductible interest and taxes.
Your allowable housing expenses are limited to a percentage of the maximum foreign earned income exclusion amount (discussed
earlier under Amount excludable), figured on a daily basis, times the number of days during the year that you meet the bona fide residence test or the physical
presence test. The percentage may vary depending on the foreign country where your tax home is located. For more information,
see the Instructions for Form 2555.
The base amount is 16% of the maximum foreign earned income exclusion amount, figured on a daily basis, times the number of
days during the year that you meet the bona fide residence test or the physical presence test. For 2008, this amount is $38.30
per day ($14,016 per year).
You figure the limit on housing expenses and the base amount on Form 2555.
You can exclude (up to the limits) your entire housing amount from income if it is paid for with employer-provided
amounts. Employer-provided amounts are any amounts paid to or for you by your employer, including your salary, housing reimbursements,
and the fair market value of pay given in the form of goods and services. If you have no self-employment income, your entire
housing amount is considered paid for with employer-provided amounts.
If you claim the exclusion, you cannot claim any credits or deductions related to excluded income, including a credit
or deduction for any foreign income tax paid on the excluded income.
If you are self-employed and your housing amount is not provided by an employer, you can deduct it in arriving at
your adjusted gross income. However, the deduction cannot be more than your foreign earned income for the year minus the total
of your excluded foreign earned income plus your housing exclusion.
If you cannot deduct all of your housing amount in a tax year because of the limit, you can carry over the unused
part to the following year only. If you cannot deduct it in the following year, you cannot carry it over to any other year.
You deduct the carryover in figuring adjusted gross income. The amount of carryover you can deduct is limited to your foreign
earned income for the year of the carryover minus the total of your foreign earned income exclusion, housing exclusion, and
housing deduction for that year.
Choosing the Exclusion(s)
You make separate choices to exclude foreign earned income and/or to exclude or deduct your foreign housing amount. If you
choose to take both the foreign housing exclusion and the foreign earned income exclusion, you must figure your foreign housing
exclusion first. Your foreign earned income exclusion is then limited to the smaller of (a) your annual exclusion limit or
(b) the excess of your foreign earned income over your foreign housing exclusion.
Once you choose to exclude your foreign earned income or housing amount, that choice remains in effect for that year and all
future years unless you revoke it. You can revoke your choice for any year. However, if you revoke your choice for a year,
you cannot claim the exclusion again for your next 5 years without the approval of the IRS. For more information on revoking
the exclusion, see chapter 4 of Publication 54.
If both you and your spouse are eligible for the exclusion(s), see chapter 4 of Publication 54.
Tax on Income Not Excluded
If you claim the foreign earned income exclusion, the housing exclusion, or both, you must figure the tax on your nonexcluded
income using the tax rates that would have applied had you not claimed the exclusions. See the instructions for Form 1040
and complete the Foreign Earned Income Tax Worksheet. When figuring your alternative minimum tax on Form 6251, use the Foreign
Earned Income Tax Worksheet in the instructions for Form 6251.
Exclusion of Employer-Provided Meals and Lodging
If as a condition of employment you are required to live in a camp in a foreign country that is provided by or for your employer,
you can exclude the value of any meals and lodging furnished to you, your spouse, and your dependents. For this exclusion,
a camp is lodging that is:
Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is
not available to you on the open market within a reasonable commuting distance,
Located as close as practicable in the area where you work, and
Provided in a common area or enclave that is not available to the public for lodging or accommodations and that normally houses
at least 10 employees.
Tax Withholding and Estimated Tax
Generally, you must pay U.S. tax on income earned abroad in the same way you pay tax on income earned in the United States.
If you are an employee of a U.S. company, your employer probably withholds income tax from your pay. If income tax is not
withheld or if not enough tax is withheld, you might have to pay estimated tax.
You may be able to have your employer discontinue withholding income tax from all or a part of your wages. You can
do this if you expect to qualify for the income exclusions under either the bona fide residence test or the physical presence
test. See Publication 54 for information.
Withholding from pension payments.
U.S. payers of benefits from employer deferred compensation plans (such as employer pension, annuity, or profit-sharing
plans), individual retirement plans, and commercial annuities generally must withhold income tax from the payments or distributions.
Withholding will apply unless you choose exemption from withholding. You cannot choose exemption unless you provide the payer
of the benefits with a residence address in the United States or a U.S. possession or unless you certify to the payer that
you are not a U.S. citizen or resident alien or someone who left the United States to avoid tax.
For rules that apply to nonperiodic distributions from qualified employer plans and tax-sheltered annuity plans, get
Publication 575, Pension and Annuity Income.
Because foreign employers generally do not withhold U.S. tax from your wages, you may have to pay estimated tax if
you are working abroad for a foreign employer. Your estimated tax is the total of your estimated income tax and self-employment
tax for the year minus your expected withholding for the year.
When you estimate your gross income, do not include the income that you expect to exclude. You can subtract from income
your estimated housing deduction in figuring your estimated tax liability. However, if the actual exclusion or deduction is
less than you expected, you may be subject to a penalty on the underpayment.
If you qualify for the foreign earned income or housing exclusions, see Publication 505 to estimate your tax liability.
Use Form 1040-ES, Estimated Tax for Individuals, to estimate your tax. The requirements for filing and paying estimated
tax are generally the same as those you would follow if you were in the United States.
In some cases, you can claim a credit or take a deduction for foreign income tax you pay. It is usually to your advantage
to claim a credit for foreign taxes rather than to deduct them. A credit reduces your U.S. tax liability, and any excess can
be carried back and carried forward to other years. A deduction only reduces your taxable income and can be taken only in
the current year. You generally cannot deduct some foreign income taxes and take a credit for others.
If you choose to claim a credit for foreign taxes, you generally must complete Form 1116, Foreign Tax Credit (Individual,
Estate, or Trust), and attach it to your U.S. income tax return. Do not include the foreign taxes paid or accrued as withheld
income taxes on Form 1040.
Your credit cannot be more than the part of your U.S. income tax liability based on your taxable income from sources
outside the United States. So, if you have no U.S. income tax liability, or if all your foreign income is excludable, you
will not be able to claim a foreign tax credit.
If the foreign taxes you paid or incurred during the year are more than the limit on your credit for the current year,
you can carry back the unused foreign taxes as credits to the previous year and then carry forward any remaining unused foreign
taxes to the next 10 years.
You will not be subject to this limit and may be able to claim the credit without using Form 1116 if the following requirements
You are an individual.
Your only foreign source income for the year is passive income (dividends, interest, royalties, etc.) that is reported to
you on a payee statement (such as a Form 1099-DIV or 1099-INT).
Your qualified foreign taxes for the year are not more than $300 ($600 if filing a joint return) and are reported on a payee
You elect this procedure for the year.
If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year.
Foreign taxes paid on excluded income.
You cannot claim a credit for foreign taxes paid on amounts excluded from gross income under the foreign earned income
exclusion or the housing amount exclusion, discussed earlier.
If you choose to deduct all foreign income taxes on your U.S. income tax return, itemize the deduction on Schedule
A (Form 1040). You cannot deduct foreign taxes paid on income you exclude from your U.S. income tax return.
The foreign tax credit and deduction, their limits, and the carryback and carryover provisions are discussed in detail
in Publication 514.
U.S. tax treaties or conventions with many foreign countries entitle U.S. residents to certain credits, deductions, exemptions,
and reduced foreign tax rates. In this way, you may be able to pay less tax to those countries.
For example, most tax treaties allow U.S. residents to exempt part or all of their income for personal services from the treaty
country's income tax if they are in the treaty country for a limited number of days.
Treaties also generally provide U.S. students, teachers, and trainees with special exemptions from the foreign treaty country's
income tax. Publication 901 contains detailed information on tax treaties and tells you where you can get copies of them.
You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from
the IRS in several ways. By selecting the method that is best for you, you will have quick and easy access to tax help.
Contacting your Taxpayer Advocate.
The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers
who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal
channels, or who believe that an IRS system or procedure is not working as it should.
If you live outside of the United States, you can call the Taxpayer Advocate at (787) 622-8940 in English or (787)
622-8930 in Spanish. You can contact the Taxpayer Advocate at:
Internal Revenue Service
P.O. Box 193479
San Juan, PR 00919-3479
Free tax services.Internet.
To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. It contains lists of
free tax information sources, including publications, services, and free tax education and assistance programs.
You can access the IRS website at www.irs.gov
24 hours a day, 7 days a week to:
E-file your return.
Check the status of your refund.
Download forms, instructions, and publications.
Order IRS products online.
Research your tax questions online.
Search publications online by topic or keyword.
Many services are available by phone.
If you are outside the United States, taxpayer assistance is available at the following U.S Embassy, consulate, or IRS office.
Please contact the office for times when assistance will be available. If you cannot get to one of these offices, taxpayer
assistance is available at (215) 516-2000 (not a toll free call).
If you are in a U.S. territory (American Samoa, Guam, Northern Mariana Islands, Puerto Rico, and U.S. Virgin Islands) and
have a tax question, you can call 1-800-829-1040.
If you are outside the United States during the filing period (January to mid-June), you can get the necessary federal tax
forms and publications from most U.S. Embassies and consulates.
Also, during filing season, the IRS conducts an overseas taxpayer assistance program. To find out if IRS personnel will be
in your area, you should contact the consular office at the nearest U.S. Embassy.
You can send your order for forms, instructions, and publications to the address below. You should receive a response within
10 days after your request is received.
Internal Revenue Service
1201 N. Mitsubishi Motorway
Bloomington, IL 61705-6613
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