ItDepends wrote:Usually clients in the UK pay so much tax that the FTC is the first choice. Be careful if you switch form the 2555 to the FTC down the road because that is considered revoking the election.
Watch out, very carefully, for FBAR, 8938, 5471, 8621, and 3520 filing requirements. There is no statute of limitations for these forms when un-filed, and the penalties for not filing them are insane.
From what you said so far, it seems the presence test is more appropriate than the bona-fide.
For his 2018 return, look at the 12-month period from 08/01/2018 to 07/31/2019 and see if he meets the 330-day requirement. Work in and around that 12 month period to find the 12-month period where the most days possible fal into 2018 to where he is present outside of the US for 330 days. Use 2555 to allocate the amount of days in which the 12-month period falls in the 2018 calendar year and claim the partial exclusion accordingly.
The partial allocation is a little tough for most to get their heads around - but its all about "days that the 12 month period fall within the calendar tax year". 12-month periods can overlap form year to year.
There are lots of pitfalls and traps possible here - you just might consider referring the client to an expat expert if you are not really into the research and time costs required to do a good job for him.
Not an expert in this topic. Just want to learn.
So, as for foreign earned income exclusion (FEIE), there are two steps of determination.
The first step is to look at the period between the taxpayer moves to the foreign country and one year after. If the taxpayer stays in the foreign country for more than 330 days during this period, he is qualified for the exclusion. If not, he is out and there is no need to go to the second step. Lets say he moved to the foreign country was 5-1-2019. The determination period in his case would be 5-1-2019 to 4-30-2020.
If he passes the first step, the second step is to determine the partial exclusion based on the number of days that he was in the foreign country during the tax year. In his case, it would be 245 days in 2019 (5-1-2019 to 12-31-2019). And his 2019 foreign earned income exclusion will be based on 245 days out of 365 days.
Did I get it all correctly?