2555 Help

[Margaret CPA in OH]

Just when I thought I had it all figured out.... rejected.

Family moved to Australia mid-November planning to permanently settle. Husband is on university faculty, nothing left behind, children enrolled in school.

Per Pub 54 they technically don't meet either bona fide residence (not a complete tax year) or physical presence (330 days or 12 months). But they will meet PP mid-October 2013 and bona fide residence for all of 2013. It seems there must be a way to exclude the $7000 husband earned in 2012 when he began teaching. Should we extend and wait to file Oct. 10 to meet the 12 months/330 days? Per Figure 4-B in Pub. 54 and explanation on how to figure, it seems that would/should work as they will meet the PP test then but it isn't perfectly clear that the exclusion is valid for the first year as well as the second.

If this is the case, I am hoping to file the state and local returns to be done with them as a small amount of tax is due. Otherwise, I hope they can pay with an extension but the local does not handle payments electronically.

Thanks for any help!

[Lion EA]

Extensions. If money is due, mail checks with extensions if direct debit is not available or they are in the process of changing their banking.

[Margaret CPA in OH]

Lion, do you then agree that by extending they will meet the PP test in October for tax year 2012? They actually would get a federal refund if so. They do owe state, school district and local tax. State and SD can be electronic but local is paper check.

Thanks for the quick reply!

[Lion EA]

Yes, extend until they meet the PP test. Then, for 2012, you'll have a ratio of the 2012 months (2?) to multiply times foreign income, foreign housing, etc. (For 2013, it sounds like they will be at 100%

.)