The IRS recently issued Notice 2019-24
and Rev. Proc. 2019-15
to provide guidance to U.S. taxpayers living abroad, including some information relevant individuals still finalizing their 2018 federal tax return.
U.S. taxpayers working overseas remain subject to federal taxation on their worldwide income. One mechanism to mitigate federal taxation on overseas earnings is to claim the Foreign Earned Income Exclusion and Foreign Housing Exclusion on Form 2555 in an annual tax return. Individuals with a tax home overseas and who qualify under either the bona fide resident test or physical presence test can exclude up to $103,900 of income from their federal taxable income.
Taxpayers who may otherwise qualify under these tests but have to leave a foreign country because of adverse circumstances, such as war and civil unrest, may have the time requirements waived. Revenue Procedure 2019-15 identified the Democratic Republic of Congo, Cuba, Iraq and Nicaragua, as countries where this time waiver applies for 2018 tax filings.
The Housing Exclusion, like the Foreign Earned Income Exclusion, is adjusted annually. Notice 2019-24 provides taxpayers with 2019 maximum exclusion amounts in addition to confirming the limitation amount.
U.S. taxpayers working overseas should review whether the guidance impacts their 2018 and 2019 taxes and filings and plan accordingly.
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