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Subject Author Date
foreighn earned income exclusion taxmax 02-27-2007
Posted by taxmax on February 27, 2007, 10:11 pm
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 My stepdaughter is working for a Japanese company in Tokyo.
She has been hired as independent contractor. She arrived on
6/13/06 and planning to leave on 5/30/07. Is she qualified
under overlapping rule (physical presence rule) to use the
number of qualifying days in order to take advantage of 2006
foreign earned income exclusion provision? Does she have to
file form 2555? Can she also apply overlapping rule for
2007 and get prorated inclusion for 2007? She has paid 10%
flat rate tax to Japanese authorities for the income she has
earned in Japan.

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Posted by L K Williams on March 1, 2007, 7:06 am
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> My stepdaughter is working for a Japanese company in Tokyo.
> She has been hired as independent contractor. She arrived on
> 6/13/06 and planning to leave on 5/30/07. Is she qualified
> under overlapping rule (physical presence rule) to use the
> number of qualifying days in order to take advantage of 2006
> foreign earned income exclusion provision? Does she have to
> file form 2555? Can she also apply overlapping rule for
> 2007 and get prorated inclusion for 2007? She has paid 10%
> flat rate tax to Japanese authorities for the income she has
> earned in Japan.

If your daughter remains outside the US for the requisite
335 days, she would qualify for the exclusion under the
physical presence rules. She would not count either the
first or last day, because she would not have been outside
for the full day. So, if she did not return to the US for
more than 14 days, she should be OK.

So, she would have 201 days in 2006 and 149 days in 2007.
Prorating the exclusion on this basis gives her a maximum of
about $45,000 in 2006 and $33,000 kn 2007/

She does have to file Form 2555 to claim this exclusion; it
is not automatic.

You say she has been hired as an independent contractor. If
so, and she is truly not an employee of the Japanese
company, she will be liable for the self-employment social
security tax. However, if this job qualifies as a temporary
assignment (since it will last less than 1 year) she may be
able to deduct her expenses while in Japan.

Issues involving the exclusion and foreign tax credit are
not simple. Your daughter really should consult a
professional who is familiar with these rules. Paying a
professional could help her avoid making some costly
mistakes.

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

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by Benjamin Yazersky CPA on March 1, 2007, 7:06 am
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> My stepdaughter is working for a Japanese company in Tokyo.
> She has been hired as independent contractor. She arrived on
> 6/13/06 and planning to leave on 5/30/07. Is she qualified
> under overlapping rule (physical presence rule) to use the
> number of qualifying days in order to take advantage of 2006
> foreign earned income exclusion provision? Does she have to
> file form 2555? Can she also apply overlapping rule for
> 2007 and get prorated inclusion for 2007? She has paid 10%
> flat rate tax to Japanese authorities for the income she has
> earned in Japan.

Be careful here.
You may need to be on extension in order to meet the
physical presence test.

___________________________________
<<< Benjamin Yazersky, CPA [NJ & NY] >>>
-----> real address on hobokeni or hobokenx <-----

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by L K Williams on March 3, 2007, 5:07 am
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>> My stepdaughter is working for a Japanese company in Tokyo.
>> She has been hired as independent contractor. She arrived on
>> 6/13/06 and planning to leave on 5/30/07. Is she qualified
>> under overlapping rule (physical presence rule) to use the
>> number of qualifying days in order to take advantage of 2006
>> foreign earned income exclusion provision? Does she have to
>> file form 2555? Can she also apply overlapping rule for
>> 2007 and get prorated inclusion for 2007? She has paid 10%
>> flat rate tax to Japanese authorities for the income she has
>> earned in Japan.

> Be careful here.
> You may need to be on extension in order to meet the
> physical presence test.

If she remains in Japan until 5/30, she would, of necessity,
be outside the US on 4/15. If so, she qualifies for the
automatic extension until 6/15 to file (and pay) for those
who meet this requirement. If she doesn't file until she
returns to the US, she would then have been in Japan for the
needed 335 days to qualify.

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

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

Posted by parrisbraeside@yahoo.ca on March 1, 2007, 7:06 am
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taxmax wrote:

> My stepdaughter is working for a Japanese company in Tokyo.
> She has been hired as independent contractor. She arrived on
> 6/13/06 and planning to leave on 5/30/07. Is she qualified
> under overlapping rule (physical presence rule) to use the
> number of qualifying days in order to take advantage of 2006
> foreign earned income exclusion provision? Does she have to
> file form 2555? Can she also apply overlapping rule for
> 2007 and get prorated inclusion for 2007? She has paid 10%
> flat rate tax to Japanese authorities for the income she has
> earned in Japan.

Form 2555 is needed

<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2006) - All rights reserved. >>
<< ======================================================= >>

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