USA expat - no Foreign Earned Income Exclusion, but what about business "travel expenses"?

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  1. #1

    USA expat - no Foreign Earned Income Exclusion, but what about business "travel expenses"?

    Hello all. I'm a married US citizen moved to HK from USA in July. Therefore I fail the IRS' "bona fide resident" and/or "physical presence" tests per this helpful checklist: Foreign Earned Income Exclusion - Can I Claim the Exclusion or Deduction?

    I do however, meet the tax home test: Foreign Earned Income Exclusion - Tax Home in Foreign Country. Can I claim business travel expenses since I fail the residency tests? I'm worried I can't. This looks like I'm getting the worst of all cases. I can't claim the FEIE because I haven't been in HK for a year. But I can't claim business travel expenses because I meet the tax home test! Therefore my tax home is in HK, but I get zero benefit for it.

    Can anyone confirm these suspicions? I know that I can amend past returns to include FEIE once I earn it, but I'm trying to minimize my tax liability now. Any other suggestions for reducing taxes in my current situation?


  2. #2

    Join Date
    Mar 2007
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    Gold Coast Marina
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    Get a US accountant who specialises in this area.


  3. #3

    Join Date
    Oct 2004
    Location
    Midlevels / USA (MD) / London
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    Get a US accountant. Seriously. You're first year is always such a muck that's it really is best to get some professional help on this. There is a firm in Wanchai I think that does US taxes.

    fwiw you might be able to claim the FEIE for part of the year, if you delay your filing by requesting an extension. Once you reach 12 months in HK you can file and claim the last six months as part of a 12 month period in which you were here--I think. (June 2011-June 2012). But again, consult an accountant to see how this is done. Do not rely on a message board for answer on stuff like this.

    p.s. don't forget about FBAR, FATCA and IRS Form 5471 as those may apply to your situation.


  4. #4

    Thanks guys - I was afraid this was the answer. I know everybody's sick of accountant recommendation threads, so I'll ask a different follow-up question.

    For a relatively simple filing (considering the complexity I've already described), what's a fair fee for helping me file?

    Cheers,
    Chris


  5. #5

    Join Date
    Mar 2010
    Posts
    6,879

    IRS has international offices, the clsoest is in Beijing at the US embassy. call them or send them an email with your questions. I think they would be willing to give you a few pointers. I have good experience with them.


  6. #6

    Join Date
    Oct 2004
    Location
    Midlevels / USA (MD) / London
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    This is the guy I've been told about:

    US Asia Tax

    I don't know his exact rates though. I think he has one rate to do it all (i.e. you show up with a 'shoebox' with all your papers, receipts, etc) and then another, lower rate to review what you do (i.e. you do it in something like HR Block or Tax Cut Pro online, then take it to him for a review to make sure you didn't make a mistake).


  7. #7

    Morrison, thanks for your unexpected recommendation. Amazingly, I received a reply from the IRS in Beijing only 40 mins after email them! It was snarky and entertaining, to boot.

    Penguinsix, thanks for the recommendation.

    Other welcome!


  8. #8

    Join Date
    Nov 2010
    Posts
    23

    I arrived in HK in August of 2010 and was able to postpone my taxes for the following year until September, when I passed the foreign income exclusion test.