Revoking the US Foreign Earned Income Exemption

mhumke · #1 01-14-2008, 07:33 PM

I am a US citizen who recently returned from five years abroad working for a non-profit international environmental organization in the DR. During my five years abroad, I elected to claim the Foreign Earned Income exemption on my income, and therefore did not pay federal income taxes during that time.

I have since returned to the US, where I continue to work with the same organization. I obviously cannot claim the exemption this tax year (2007) because I have been living in the country for the last 18 months, but I do plan on working abroad again within the next two years, during which I hope to qualify and re-claim the Foreign Earned Income exemption.

Therefore, my questions are this:

1. Do I have to officially “revoke” my exemption this year, the first in which I will be paying income tax as a US resident in five years, or can I simply file my taxes (without the exemption and a revocation letter) as any other normal US resident?
2. If I do have to officially revoke my Foreign Earned Income exemption, do I really have to wait five years before I claim it again (even if I begin working abroad again in two years)? Why?
3. If I do have to wait five years, how difficult is it the have the IRS reinstate the exemption status prior to the end of that five year period?

In a nutshell…I want to pay my income taxes this year, but I don’t want to lose the opportunity to earn exempt income if I do return to the DR to work again in the next five years.

HELP! I realize it's a lot of questions, but any one with a similar experience and/or advice is greatly appreciated!

GringoCArlos · #2 01-14-2008, 08:10 PM

You can claim the exclusion for any calendar year that you are outside the US and its possessions (ie Puerto Rico, etc) for 330 days or more of the 365 days. Or if you choose, you can reassume residency here in the DR, and claim it once you have been here for a full
calendar year. Just keep track of the days you spend in hte US, and after you come back to the DR, you just note the dates spent in the US - you are fine this wy as long as you have less than 35 days there.

Otherwise, file and pay your taxes there in the US as normal. Don't bother to tell the IRS anything about coming back - let them figure it out by themselves. (and they will in time) . It won't affect your taxes once you move back there.