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[Noelle]

This question is for Americans who file each year (I know many don't bother) and specifically for those who have broken a contract and then reported their Gulf earnings to the IRS.

A friend of mine left Dubai in November after having worked in her school for about 4 months. She's a licensed public school teacher and worked the rest of the 2012 in the States. Her CPA told her she would have been eligible for a good refund this year were it not for those 4 months she spent in Dubai.

She broke her contract and lost her last month's salary there and then paid her own airfare home. I did something similar in China back in 2004 after having spent most of the tax year earning money in the U.S. as well. When I filed, I did not owe anything and ended up with a refund of over $1000. Her report is now showing that she owes money and will not be getting anything back.

Just wondering if anyone out there could address this? I know that we have to be working abroad for 330 days or more, but I was under the impression that if we terminated our overseas employment and were penalized by the employer, we would not have to pay in to the IRS. Not sure where I got that notion as I'm quite hopeless when it comes to taxes.

She's wondering if this is happening because her UAE income was tax-free on that side. I don't remember paying any foreign tax on my earnings in China either though...

Anyone with a bit more understanding of this (which is most likely every U.S. expat on this forum) care to chime in?

[veiledsentiments]