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  1. #1

    Question Foreign Earned Income Exclusion Form 2555

    Hypothetical question that I am close to making a reality.

    I am an American expat, I hold a US passport and I am A citizen of the United States. I do not have a home in the United States. No wife or children. I live abroad in foreign countries and remain off US soil 330 days out of the year. I travel the world living in hostels moving from country to country every 2-12 months.

    (what follows is getting a little off topic but I want readers to understand the full scope of my question)

    Many countries do not require a visa as long as you only plan on staying for a certain amount of time within their guidelines.(most are 30 to 90 days maximum stay without a visa) Some countries do not require a visa at all if you are a US Citizen (Britain,Belize,Bahamas,canada,Malaysia,New Zealand, just to name a few). Some countries like the Philippines you can apply for a tourist visa and stay for up to one year. Here is a listing of which countries require visas and which do not. visa requirements for countries and guidelines

    I earn my income from an assortment of Internet e-commerce websites. All the websites target US-based customers. Customers order products from my website with their credit card and credit cards are processed through a merchant account based in the United States and the funds are deposited into a United States bank account in my business name or my personal name.

    Here are my questions

    1. Because I have remained off US soil for consecutive 330 days, will I be able to use form 2555 (foreign earned income exclusion) Even though I am working through the internet and my products/services are being sold in the United States?

    2. While living in other countries I hire someone I trust within the United States to receive and handle customer's product returns. I also outsource other tasks to workers in the Philippines and/or India, things like search engine optimization to improve Google rankings and customer support responsibilities such as answering customers e-mails and phone calls. Will I be able to claim these business expenses while also taking advantage of the foreign earned income exclusion?

    3. Could I be liable to pay taxes in other countries that I have visited with a tourist visa? What might determine that liability?

    4. If I make more than (for example lets say $130k) the foreign earned income exclusion limit of $91,400 (2009) the remainder will be taxed at the percentage rate had I not taken the foreign earned income exclusion for the earned income. To lower this tax liability can I max out my 401K and IRA accounts and only be taxed on the remainder?

  2. #2

    Question Re: Foreign Earned Income Exclusion Form 2555

    Anyone care to respond?

    I have been told elsewhere that the money must be earned in the foreign country to be eligible for foreign earned income exclusion.

    How does this scenario change if I remain out of the United States 330days a year and my ecommerce store products are sold and shipped internationally or what if I target only Great Britain for sales, will I be eligible in these two situations?

  3. #3
    Join Date
    Jul 2007
    Location
    Florida
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    Default Re: Foreign Earned Income Exclusion Form 2555

    IRS Publication 54 will answer all of your questions: http://www.irs.gov/publications/p54/index.html

    In particular, I find the sentence, "Foreign earned income is income you receive for working in a foreign country" to be interesting with regard to your case. It could well be argued that your income is not for working in a foreign country, it is U.S. sourced income. However, the Internet being what it is, this is probably a grey area subject to interpretations that the IRS may or may not agree with.

    No one here is going to have any idea whether you will owe taxes to some unnamed country you have visited as a tourist. You would need to consult someone in the specific country who has expertise in that country's tax laws.

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