Job Discussion Forums

[boundforsaudi]

I left the USA Oct 1, 2005. Using the period Oct 1, 2005 to Oct 1, 2006 for the physical presence test, I was OK for not paying federal income tax, as I only spent the month of August in the USA. Here's my problem: For my next physical presence test, do I have to begin Oct 1, 2006 and run to Oct 1, 2007, or can I have an overlap and begin Sept 1, 2006 and run to Sept 1, 2007?

[veiledsentiments]

Don't bother with the physical presence test as you are now eligible for bona fide residence. You can use this for the rest of the time you work overseas as long as you don't switch your residence back to the US.

VS

[boundforsaudi]

Thanks for the suggestion. Can you tell me in a nutshell how the bona fide residence rule works? But I'd prefer the physical presence test because I may want to return to the states and go to college, in which case I'd need to meet the residency requirements for in-state tuition. So I still need an answer to my original question. Anybody have access to the language of the rules?

[boundforsaudi]

Bona Fide Residence Test
One Full Year of Residence
You are considered a "bona fide resident" of the foreign country if you reside in that country for "an uninterrupted period that includes an entire tax year." A tax year is January 1 through December 31. The qualifying period for the bona fide residence test must include one full calendar year.
Trips outside the Foreign Country
Brief trips or vacations outside the foreign country will not jeopardize your status as a bona fide resident, as long as the trips are brief and you clearly intended to return to the foreign country. You can even make brief trips to the United States.

Another problem under the bona fide residency test is if I go back to the States now, to re-establish residence there, then I'd owe taxes on what I earned in Oman during 2007, right?

[boundforsaudi]

Or does my residency in Oman during all of 2006 give me residency status that also applies to income I earned in Oman during only a portion of 2007? That would be perfect.

[boundforsaudi]

answer to my question from the IRS website:

In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another.
Example:
You work in New Zealand for a 20-month period from January 1, 2003, through August 31, 2004, except that you spend 28 days in February 2003 and 28 days in February 2004 on vacation in the United States. You are present in New Zealand 330 full days during each of the following two 12-month periods: January 1, 2003 - December 31, 2003, and September 1, 2003 - August 31, 2004. By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period.

[veiledsentiments]

[veiledsentiments]