We have settled in pretty well here, and now tax time is rolling around. My husband received his w-2 today, and he was told he would *have* to claim the foreign earned income exemption, and because of that would not be allowed to claim EITC, which we were going to claim since he earned enough to do so.
However, reading about it, it seems he may not qualify for the foreign earned income, but I thought I would find out if any of you might know. There's a part on the irs site that asks you questions and if you answer yes or no come to different conclusions. My husbands tax home now seems to be the US, so to me, he does not qualify. And qualify also means to me that it's not a requirement, and we'd be better off claiming EITC and not the earned income exclusion because his foreign earned income would most likely not even mean he would owe taxes anyway if he were taxed in the US on it.
This wouldn't be the first time his employer has led him astray which is scary since he works in the financial sector...they had him listed as a non-resident alien for the first couple of months!! That was a nightmare, they were taking out so much money in taxes...we'll get it all back but that was frustrating, to say the least.
So in the end all that to say, does anyone know if we can NOT claim foreign earned income exclusion? I won't take it as legal advice or anything, just in order to prepare for when we do file our taxes..I dont like surprises.
Foreign earned income exemption is to stop US citizens working in another country from being taxed again in the USA once they have already paid tax in the foreign country, ie to stop individuals from being taxed twice.
Something sounds dodgy if his employer was listing him as non-resident alien and he was working here? He would only have to do that if he was still being taxed by the UK.
Did he file the P85 in the UK to say he was leaving and would no longer be tied to UK Taxation? If he did not then this is where the problem lies. If he did file then something is wrong.
You can only claim the foreign earned income exclusion if you are physically in another country or are still tied to another countries taxation system.
I have finally gotten back to this, and unfortunately the P85 issue is STILL not resolved! My husband has no idea where his P45 went, and he can't get another one. How can we show he is owed a refund without his P45? Can he use his P60 when he receives it?
His parents were meant to send off the appropriate items, but from what I understand they threw away all his pay statements/anything related to his job!! Just threw them away, I can guarantee they weren't even shredded.And his mom is an accountant! I am absolutely livid with them, they are pretending they had no idea what his pay statements look like (even if his mom wasn't an account and deals with everyone's fianances,, most of his family works for the same employer, so it's not like they have never seen them).
They then told him they had sent what pay statements they *could* find...it was his pension info . Now we have to hope that what little (and I mean little) we have will be enough to file our US taxes. We have his last pay statement and his P60 from 2008-2009. So together they show his income from Jan 09-August 09, with his W-2 showing the rest of the year. I just hope it's enough for the IRS
In the UK, the P45 is used as an interim document when leaving one employment and going to another. Its shows the new employer how much has been earned to-date and how much tax has been paid, kind of like a summary to-date, so the next employer can carry on where the previous one left off.
At the end of every tax/financial year employees are supposed to receive a P60 from their employers, which is the summary of the years earnings and taxes paid. A point worth noting though is if he left employment before the end of the financial/tax year, employers have a habit of forgetting/not issuing a P60 as they think it's no longer necessary, and some just can't be bothered.
Thank you, I'll make sure dh gets his p60, whether its sent out or from HMRC.
I think we can piece together everything, but we're going to file for an extension because we don't want to find out later what we have isn't good enough and waste more time. I'd like to file and be done with it.
There is actually an online test that you can take, that will tell you if you qualify for the foreign earned income exclusion!!! Find it at: taxplannercpa
Filing taxes- foreign earned income and EITC
. Now we have to hope that what little (and I mean little) we have will be enough to file our US taxes. We have his last pay statement and his P60 from 2008-2009. So together they show his income from Jan 09-August 09, with his W-2 showing the rest of the year. I just hope it's enough for the IRS 
