New Client worked in Belgium for 5 years

New client has worked in Belgium for 5 years, and properly filed taxes in Belgium for each year, and now wants to file US taxes for the 5 year period. He does not qualify for the foreign income exclusion. He was an employee of a hospital over there. I wouldn't think this would be a schedule C income would it? Also....I think that since he doesn't itemize that we need to take the credit instead of a deduction for the tax paid? He is a green card holder with a social security # and needs the 5 years filed for his immigration attorney.

He was an employee of a hospital over there. I wouldn't think this would be a schedule C income would it?

Employees don't file income on Schedule C. Report on line 7. I get into this argument at least once a year with practitioners who think that since social security wasn't withheld, self-employment tax must be paid.

Thank you. Done plenty of guys who stay in Iraq or Afghanistan all year in order to qualify for the foreign income exclusion, but never someone who both worked all year in a foreign country and also purposefully didn't qualify for the exclusion.

Curious as to why he would "purposefully" not qualify for the exclusion since it is an election.

Curious why a late s911 election would produce the optimum result for US tax purposes? Why does the client not qualify to claim the s911 exclusion? Did he not have a foreign tax home in Belgium throughout?

Are you implying perhaps the client wilfully did not file a US income tax return and his FBARs?

No....client was required to be in the US for a certain amount of time for each year in excess of the amount of time allowed to fully take the foreign income exclusion.

Qualification by Bona Fide Residence test doesn't include a limitation on days in the US. Only Physical Presence Test limits the days in the US. Are you sure he doesn't qualify under Bona Fide Residence test?

No....client was required to be in the US for a certain amount of time for each year in excess of the amount of time allowed to fully take the foreign income exclusion.

There is no such limitation; although it increases the chance of State filing obligations. Why would electing to claim the s911 exclusion produce the optimum result? Is Belgium not a high tax country?

OP says the client is a green card holder. That means the Bona Fide Residence test may be off the table. So that means counting days for the Physical Presence test is what's left (if electing the §911 exclusion)

-You do realize he needs to go into Streamlined?

-Where was his Tax Home? US or Belgium? Look into Treaty Tie Breaker and Closer Connection Rules. (By the way, the immigration attorneys that I work with, know absolutely nothing about taxes.)

-As stated above, you have Foreign Employer Compensation from the hospital, which flows into other income.

Deniz....I assume that you mean 5-percent penalty for Streamlined Domestic Offshore filers. Taxpayers immigration attorney reached out to me to help him get 5 years US returns filed. Taxpayer has not provided any documents yet. I assume he has a Belgium bank account.

RowTax - why is he domestic? If he spent too many days in the States he can only file domestic amended returns. If he spent fewer than 30 days in the States he could use foreign streamlined.

Separately, in the unlikely event that claiming the s911 exclusion is the optimum result, he could still use BFR by using the non-discrimination clause of the treaty.

Are you working under a Kovel letter?

No kovel letter, although I could. My client , the immigration attorney is asking for help for her client. Nothing seems fishy. Doctor working in Belgium . Needs legal US status for him, or his wife. Not my area of normal practice. If you think this might be difficult, I have no problem referring him to someone like any of the responders here who do more in this area. Frankly, we never come across any Fbar issues, but do have a number of ex military guys who live and work year round in Afghanistan other Mid East countries doing things like helicopter repairs at forward military bases. They tailor their visits to the US to ensure the foreign income exclusion.

I did not mean to imply anything is fishy. Immigration attorneys want Green Card holders to file US taxes and not claim foreign residency because it negates the green card holders statement that they intend to stay in the US permanently. For tax purposes, residency can be established elsewhere via treaty, statute, or foreign earned income exclusion. I outline the consequences for the client and let them client decide which risks they prefer to take.

I am happy to help, PM if you need anything.

As stated above, you have Foreign Employer Compensation from the hospital, which flows into other income.

Why would wages “flow” into other income?

Yes, you are right, line 7.

Always listen to Guya where foreign taxation is concerned. I have successfully put numerous taxpayers into the foreign streamlined procedures despite their current residency in the US because during a three year look-back period they qualified. And no 5% penalty. These are typically US Citizens who have moved back and do not want "foreign" compliance issues hanging over their head.