Discussion:Approval for Foreign Earned Income Exclusion
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Discussion Forum Index --> Tax Questions --> Approval for Foreign Earned Income Exclusion
| 22 May 2007 | |
| Pub 54 stated that if a taxpayer revoked his FEI exclusion and needs to claim it again within 5 years, it must obtain an approval from the IRS, and points to Revenue Procedure 2006-1 for detail. And Oh My God, the RP is so convoluted that I have a hard time figuring what to do and what is the cost, if any.
So, I wonder has anyone asked for approval and can give me a summary/ pointer? Thanks! | |
| 22 May 2007 | |
| My understanding was that it all depends on what you mean by revoke. Is not claiming in one year a revocation or just forgetfullness?
On a practical level the FEI saves little tax these days so how much does this save/compared to possible fees? | |
| 22 May 2007 | |
| Guya,
Pub54 says once you claim FEI, it will be effective for all future years unless you revoke it. And once revoked, you must obtain IRS approval if you want to claim it again within 5 years. My interpretation is that once you move back to USA, you can't just stop using FEI without sending a letter revoking it. And if you move out again in les than 5 years, IRS needs to approve it. What is your interpretation of the Pub54? If my Foreign Income is less than, what, $85K for 2006(?), I can save a lot of income tax. Am I missing something? What possible fees are you referring to? Thanks | |
| 22 May 2007 | |
| Frankly there is not enough information here:
1. What country is your foreign tax home? 2. What date did this become your foreign tax home? 3. What date did this stop being your foreign tax home? 4. What foreign tax did you pay in 2006? 5. What FTC carryovers do you have from previous years? | |
| 22 May 2007 | |
| Guya,
Actually, I am not so much concerned about the fee right now. I am more concerned about the procedure - how to revoke FEI and how to obtain IRS approval. | |
| 22 May 2007 | |
| For consideration of a 911 re-election, relevant facts and circumstances may include the following: a period of United States residence, a move from one foreign country to another foreign country with differing tax rates, a substantial change in the tax laws of the foreign country of residence or physical presence, and a change of employer. | |
| 24 May 2007 | |
| Armsoo, Guya does HUNDREDS of 2555's a year; you can trust him on this. You don't have to go through any formal revocation process; the act of not filing form 2555 revokes.
You do need to go through the formal procedures to re-elect; Riley2 has explained this well. You can do this either as a Letter Ruling or simply attach the statement to the tax return. | |
| 25 May 2007 | |
| Lizzit, Guya and Riley2, thank you very much for your advice. They are very helpful. As far as re-election, do I just type a letter that discuss my facts and circumstances? And there is no additional fee for that? (Sorry for all these simple questions, I am pretty new to 2555) | |
| 25 May 2007 | |
| A private letter ruling is required. For examples, see Private Letter Ruling 200248025 and Private Letter Ruling 200230012. If gross income is less than $250,000, the user fee should be $625. | |
| 25 May 2007 | |
| Armsoo, you may not have this case, but one of your notes above made me think that you may not have formally revoked the FEIE. Simply moving back to the U.S. and not having foreign earned income does not mean that you have revoked the exclusion. On the other hand, if you have claimed foreign tax credits while not claiming the exclusion, then the FEIE would be treated as having been revoked. | |
