Foreign Income Exclusion - till May in US then in India

song__1766 · Post by **song__1766** » Sun Mar 06, 2011 3:59 pm

About Reporting Salary
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I lived in US from Jan 1st to May 31st in US. From June onwards, I have been working in India on India payrolls, same corporate group. I am a US Citizen.

I was just going through Turbo Tax and it wouldn't let me exclude the India income and was double taxing it except for a small amount of Foreign Tax credit. According to Turbo Tax, I cannot exclude the income unless I worked for 330 days in the tax year outside US.

Is there another way of doing this?. Do I really not qualify for exclusion from this double tax?

About Reporting India bank accounts
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I have India based bank accounts - over $10000 - how do I report? I have NRO, NRI accounts in ICICI. And also India resident accounts with SBI and ICICI. How do I handle these for IRS tax reporting?

mkngtrbl · Post by **mkngtrbl** » Mon Mar 07, 2011 8:51 am

song__1766;374273About Reporting Salary
---------------------------------------
I lived in US from Jan 1st to May 31st in US. From June onwards, I have been working in India on India payrolls, same corporate group. I am a US Citizen.

I was just going through Turbo Tax and it wouldn't let me exclude the India income and was double taxing it except for a small amount of Foreign Tax credit. According to Turbo Tax, I cannot exclude the income unless I worked for 330 days in the tax year outside US.

Is there another way of doing this?. Do I really not qualify for exclusion from this double tax?

About Reporting India bank accounts
-----------------------------------------------------
I have India based bank accounts - over $10000 - how do I report? I have NRO, NRI accounts in ICICI. And also India resident accounts with SBI and ICICI. How do I handle these for IRS tax reporting?

From my understanding, you have to have had 330 days outside the US to qualify. It does not have to be 330 days in the same tax year but 330 days in any given 365 day period. Read through this http://www.irs.gov/pub/irs-pdf/i2555.pdf and http://www.irs.gov/pub/irs-pdf/f2555.pdf to get the complete details of the requirements for foreign earned income exclusion.

I tried to use turbo tax for my taxes and FEI exclusion,but it kept messing it up. Eventually did the taxes by hand and with reading all the instructions. I was also not able to e-file because it was being filed with a foreign address so mailed in a paper copy recently.

song__1766 · Post by **song__1766** » Mon Mar 07, 2011 10:49 am

Please advise about IRS reporting for -

ICICI NRI account
1. How to report on (a) savings account and (b) Fixed Deposits in this.
2. When to convert this to resident account?

SBI Resident account
1. How to report on (a) savings account and (b) Fixed Deposits in this.

song__1766 · Post by **song__1766** » Mon Mar 07, 2011 11:38 am

mkngtrbl

Does this mean then that the Indian income is 'double taxed' because it is paid to me post-tax. When filing Indian taxes then is there any provision to claim back taxes? Thank you.

fnln510 · Post by **fnln510** » Mon Mar 07, 2011 2:45 pm

I may be in the same boat. I will be completing 330 days by the end of this month but my company is planning on sending me on a project to the US before then. If they do this I will not meet the 330 day requirement and may need to file for a tax credit instead of a foreign earned income exclusion. In this situation will I be able to get the full credit for my Indian taxes paid or only a partial credit?

mkngtrbl · Post by **mkngtrbl** » Tue Mar 08, 2011 12:12 pm

fnln510;374406I may be in the same boat. I will be completing 330 days by the end of this month but my company is planning on sending me on a project to the US before then. If they do this I will not meet the 330 day requirement and may need to file for a tax credit instead of a foreign earned income exclusion. In this situation will I be able to get the full credit for my Indian taxes paid or only a partial credit?

When will you be back? The 330 days can be split over a 365 day period. You basically have to show a 365 day period and that during this time, you spent 330 days out. I am no expert at this as I just managed to complete my returns for the first time after R2I and I concentrated on my specific situation. Desi (or someone else) with more experience and better understanding of the tax forms might be a better judge. I suggest some reading time with the instruction booklet for form 2555 to understand how this may apply for your situation. Sorry couldn't be of more help.

mkngtrbl · Post by **mkngtrbl** » Tue Mar 08, 2011 12:30 pm

song__1766;374384mkngtrbl

Does this mean then that the Indian income is 'double taxed' because it is paid to me post-tax. When filing Indian taxes then is there any provision to claim back taxes? Thank you.

You will not be double taxed for the Indian income (depending on how big the number is). When you file after completing the requirements of form 2555, you will be showing that the income from June 1 to June 31 was earned when you were out of the US. Read through the instructions of form 1040 to see how and what line this Indian income has to be reported. As far as I understood, the US+Indian salary income goes on line 7 of form 1040, The Indian income will be listed on line 21 as a negative number (actually the number here will be the number from form 2555 or 2555 EZ and is subject to an annual limit). The Indian interest income will be added to your US interest income and reported on line 8a. If you spouse also has an Indian income, you will need to take that into account also if filing with MFJ status.

Not sure about reporting the accounts that held more than 10K USD equivalent in India.

Again, I am no expert but just saying what I figured and did for my returns. I used free fillable forms from IRS's site to complete the forms and read through the instructions for 1040 line by line to understand the details. I then printed out hard copies and mailed them in to IRS and to my state revenue department. Mailed recently so not sure if they accepted my understanding.

Last note: Your Indian income will not be double taxed but will push up your US bracket. Work through the tax forms by hand and you will get a good idea. The forms are very detailed and cover all aspects. There is a automatic 60 day extension for you when filing form 2555 (says so in the instructions) but do your due diligence.

fnln510 · Post by **fnln510** » Tue Mar 08, 2011 12:33 pm

Hi. Thanks. Duration could be longer than a month. Anyway, I guess that my basic question is, does it make a difference on your US tax liability if one files for a foreign tax credit instead of a foreign earned income exclusion? If there is little difference between the two, it's probably not worthwhile fighting this with my company. Don't know if there is a generic answer for this question... I know everyones tax situation is different. Other than this tax credit issue my tax situation is fairly straightforward, some brokerage and savigns accounts in the US and on a regular Indian payroll in India.

mkngtrbl · Post by **mkngtrbl** » Tue Mar 08, 2011 12:41 pm

Guess it again comes to working out the numbers. See what your return would look like if you used the credit and see what it would look like if you used the FEI exclusion. In my case, using the FEI exclusion was working out to be the better deal.

brinbrin · Post by **brinbrin** » Tue Mar 15, 2011 11:32 pm

Hello,

I lived in the US till May 2010, returned to India. I have a couple of questions:

1. I understand I may have to file a change of address using form 8822 - can I do this online ?

2. My 330 consecutive days in India will be completed on April 26, 2011. I also read that if filing when abroad in my situation we get 60 additional days by default to file.

If that is true do I need to file 2350 (extension) when already 60 additional days are granted ?

3. Can I just wait until April 26,2011 and file using taxact.com, adding my India income and claiming the foreign earnings exemption of $91,400 ?

Thanks in advance.