Hi all! First time poster here, I apologize for the long post but I want to include as many details as I can. I'm looking for some advice on three questions.

Scenario: I am employed by the US government overseas for a 1 year contract, and my wife (mexican citizen) is an international student (F Visa) in the US. I have been earning wages from this overseas job since early November (I have not paid any into taxes from that). She is employed by the school with earnings last year of ~12000 (~1500 in taxes paid). I was employed by the US Army last year (~40000 in wages, not sure on how much I paid for taxes yet) all year up until October. We have been married since April.

My first question is, when should I file? I ask because between nov'12 and nov'13 this job will pay ~$130k. I understand $95.5k is tax exempt. I also understand I have to work outside of the US for 335 out of 365 days in order to get that exemption. Does that mean I should file an extension until I get back? Or if I file now for wages earned in my Army job + November-December, how will that affect what income I will be taxed on, this tax season and next tax season?

My second question is, if I should file now, should I file Married Joint or Seperate?

My final question is, if I have to pay for my own plane tickets to go on a vacation, flying out of the middle east, would those be deductible?

Thank you very much for your advice!

“My first question is, when should I file? I ask because between nov'12 and nov'13 this job will pay ~$130k. I understand $95.5k is tax exempt.”===>Nov 12-13 2012, then you need to report the income on your 2012 return.
“ I also understand I have to work outside of the US for 335 out of 365 days in order to get that exemption. “===>The foreign tax credit was implemented to reduce a double tax burden for citizens earning income outside of the US.To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following: a U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year; a U.S. resident alien who is a citizen or national of a country with which the US has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or aA U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.So as long as you were in the foreign country for at least 330 full days in 2012, you can claim your FEIE on your return. Please follow the instructions here: Foreign Earned Income Exclusion - Can I Claim the Exclusion or Deduction?
Does that mean I should file an extension until I get back?”===> Not necessarily. But if you want, you can file an extension for form 2555. The maximum amount of the Foreign Earned Income Exclusion is $95,100 for 2012. You must attach Form 2555 to your Form 1040 or 1040Xif you file amended return) if you claim the foreign earned income exclusion. Form 2555 shows how you qualify for the bona fide residence test or physical presence test, how much of your earned income is excluded, and how to figure the amount of your allowable housing exclusion or deduction. Do not submit Form 2555 by itself. You generally cannot get an extension of time to file of more than 6 months. However, if you are outside the US and meet certain tests, you may be able to get a longer extension.You can get an extension of time to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. You should request an extension if all three of the following apply: You are a U.S. citizen or resident alien;You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due, and Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. The FEIE is voluntary.
“Or if I file now for wages earned in my Army job + November-December, how will that affect what income I will be taxed on, this tax season and next tax season?”====> An exclusion from federal income tax provides one of the highest levels of tax savings in comparison to deductions and tax credits. When you can exclude income, it essentially means that you can reduce your gross income before you even start calculating your income tax or claim any deductions. In contrast, your deductions only reduce your taxable income after finalizing your gross income amount. Tax credits are more valuable than deductions since they reduce your tax bill on a dollar-for-dollar basis, but it is calculated after all exclusions and deductions once your tax liability is determined. If your foreign income exceeds all of your exclusion amounts, you must pay income tax on the excess. However, one drawback is that the IRS will impose higher tax rates on this excess. Suppose you earn $130K this year, while living and working in ME, and your total exclusions equal $96K. This means that you must pay tax on the $34K difference. However, the IRS imposes the rates that would have applied to this amount had your entire income been taxable. Essentially, you would calculate the tax on $130K and then again on $96K. The difference between the two is what you owe. This is a much more expensive result than if you prepared your tax return reporting only $34K of gross income.You can claim your FEIE on your 2012 return or The exclusion doesn't carry forward. The foreign earned income tax exclusion applies to the income earned up til the day you departed the foreign country You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the Foreign Earned Income Exclusion or the Foreign Housing Exclusion. There is no double taxation in this situation because the income is not subject to United States tax Unless an exclusion applies, individuals must file forms 1116 and 1040 to claim the foreign tax credit.

Wnhough,

Thank you very much for the reply.

Based on what you described and the IRS link, I qualify for the FEIE based on my US Citizenship and the Physical Presence test. However, I won't pass the Physical Presence test until November, 2013. Does that mean I should file an extension until then? File my 2012 tax return in November 2013, then my 2013 tax return in the beginning of 2014, claiming the FEIE on each year for any income earned on this job between November 2012 and November 2013?

Alternatively, should I file a 2012 return now for all of my 2012 wages, with no exclusions, and file for the FEIE next year for wages from January 2013-November 2013, based on me earning wages outside of the country for November 2012-November 2013? If I'm right, that would tax me less on late 2012 wages, but I would be taxed very high on any wages from November-December of 2013, where ever I happen to be employed.

I hope my questions aren't too confusing, I just want to understand exactly what I need to do in order to to these taxes correctly.

“However, I won't pass the Physical Presence test until November, 2013. Does that mean I should file an extension until then?”====> You generally cannot get an extension of time to file of more than 6 months. However, if you are outside the US and meet certain tests, you may be able to get a longer extension.

You can get an extension of time to file your tax return if you need the time to meet the physical presence test to qualify for either the foreign earned income exclusion. You should request an extension if all three of the following apply;You are a U.S. citizen or resident alien;You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due, and Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies. A qualifying individual may claim the foreign earned income exclusion on foreign earned self-employment income. The excluded amount will reduce the individual’s regular income tax, but will not reduce the individual’s self-employment tax.I mean in this case, you need to pay quarterly estimated taxes to the IRS/state. OR you can use a 1040X form to amend a prior US 1040 tax return to include FEIE on your US return.As said previously, generally, Form 1040X must be filed within 3 years after the date the original return was filed or within 2 years after the date the tax was paid, whichever is later.
“File my 2012 tax return in November 2013?”-=> US Expats get an automatic extension to file their IRS Form 1040 returns until 6/15/11 for 2013 if they live abroad on 4/15. You can get a further extension until 10/15/13 if you file for one prior to 6/15 using form 4868. Keep in mind an extension does not extend the time you must pay any taxes due from the regular 4/15 date. If you do not any taxes due, penalties and interest will accrue until any tax due for 2013 is paid in full.
“then my 2013 tax return in the beginning of 2014, claiming the FEIE on each year for any income earned on this job between November 2012 and November 2013?”-===>Exatly as long as you pass the SPT;7.the exclusion must be prorated since you qulify for the exclusion, but reside in the foreign country only part of the years 2103, 2104.

“Alternatively, should I file a 2012 return now for all of my 2012 wages, with no exclusions, and file for the FEIE next year for wages from January 2013-November 2013, based on me earning wages outside of the country for November 2012-November 2013?”=========>Correct as described above.

I checked out the information regarding extensions, and since I won't be out of the country for 330+ days until November, I can't extend until then. So I should file now.

I was doing some research on MFS vs. MFJ. I live in Texas, which is a community property state. Is the following information correct, as I understand it?

Point 1) If I file either MFS or MFJ in Texas, with no special exemptions, then my wife's college pay, my army pay, and my November-December 2012 overseas pay will all be (basically) lumped together to determine our tax bracket and taxes/refund owed.

Point 2) Then when I file taxes for the 2013 tax year, I can claim the FEIE (having worked overseas for November 2012-November 2013) and my income, up to ~$95k, from 1Jan13 to 31Dec13 will be tax exempt, and I will pay taxes (in the original pre-FEIE tax bracket) on any additional income for that year, along with my wife's earnings?

This sounds correct in my head, but it seems like a loophole; not that I'm complaining necessarily, but if this is true it would save me several thousand in taxes compared to what I was expecting to pay. Most of my income for Nov-Nov OVER the ~$95k would be included in the 2012 return, and taxed at a lower rate (I didn't make nearly as much the rest of the year), instead of that income being taxed at the rate of the year of my contract.

“ If I'm right, that would tax me less on late 2012 wages, but I would be taxed very high on any wages from November-December of 2013, where ever I happen to be employed”=>Not that I know of as long as the FEIE is prorated betwenn 2012 and 2013.
I checked out the information regarding extensions, and since I won't be out of the country for 330+ days until November, I can't extend until then. So I should file now.-->Then you need to file amended return to claim your prorated FEIE credit on your 2012/2013 returns when you pass the SPT.

“I was doing some research on MFS vs. MFJ. I live in Texas, which is a community property state. Is the following information correct, as I understand it?
Point 1) If I file either MFS or MFJ in Texas, with no special exemptions, then my wife's college pay, my army pay, and my November-December 2012 overseas pay will all be (basically) lumped together to determine our tax bracket and taxes/refund owed.”====> Texas does not collect state income tax; nine states have no state income tax. TX is one of the states. Married taxpayers can choose between filing a joint tax return or a separate tax return. TheMFJ filing status provides more tax benefits than filing separate returns, but youwill need to weigh the pros and cons and decide for yourselves which is the best filing status.
If you are married, then you and your spouse can filing a joint tax return. You are considered married if you are legally married on the last day of the year. In order to file jointly, both you and your spouse must agree to file a joint tax return, and both must sign the return.MFJ provides more tax benefits than filing a separate return. If you and your spouse decide to file a joint return, your tax may be lower than your combined tax for the other filing statuses. Also, your standard deduction (if you do not itemize deductions) may be higher, and you may qualify for tax benefits that do not apply to other filing statuses. Filing a separate return provides relief from joint liability for taxes. However, married taxpayers who file separately are not eligible for many tax deductions and credits, and have higher tax rates. In general, it is more advantageous to file a joint return. I guess yo need some pro help from a Tax pro in TX or your fed return.


“Point 2) Then when I file taxes for the 2013 tax year, I can claim the FEIE (having worked overseas for November 2012-November 2013) and my income, up to ~$95k,”-====>Correct.
“ from 1Jan13 to 31Dec13 will be tax exempt, and I will pay taxes (in the original pre-FEIE tax bracket) on any additional income for that year, along with my wife's earnings?”===> If both you and your spouse have foreign earned income each spouse qualifies for the exclusion as long as each spouse meets the requirements for FEIE; also as long as you pay taxes to the foreign taxing authority , you need to claim your FTC on form 1116 on your US return.I guess your spouse’s foreign earned income doesn’t qualify for FEIE UNLESSS she meets the SPT as a US resident.

This sounds correct in my head, but it seems like a loophole; not that I'm complaining necessarily, but if this is true it would save me several thousand in taxes compared to what I was expecting to pay. Most of my income for Nov-Nov OVER the ~$95k would be included in the 2012 return, and taxed at a lower rate (I didn't make nearly as much the rest of the year), instead of that income being taxed at the rate of the year of my contract.”=====>Basically, as you can see, FEIE is for federal return NOT for state return.As far as I know, Not the whole $95K(but portionof the $95K) is included in your 2012 as said above.


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