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Hi,


My wife and I moved to Australia exactly one year ago today and worked in the USA Jan 1 – Feb 28 2011. In July, we paid taxes on our Australian income from March – June.

As I understand it, we will qualify for the foreign earned income and housing exclusions. I am hoping someone can clarify the following:

Does the 1040 need to include my total income in Australia and USA for 2011?

How is the income tax calculated on the income I earned while living in the USA – does this fall under non-excluded income?

I am not clear on the housing exclusion – is there any disadvantage to taking this exclusion?

I own rental properties in the USA, do I just complete the standard tax forms for these as if I were living in the USA?

Does turbo tax work well for this type of tax scenario?

Appreciate the advice….
 

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Whoops - sorry to have taken so long to get back to you. We were away for the weekend, and I missed your message before I left.

Hi,


My wife and I moved to Australia exactly one year ago today and worked in the USA Jan 1 – Feb 28 2011. In July, we paid taxes on our Australian income from March – June.

As I understand it, we will qualify for the foreign earned income and housing exclusions. I am hoping someone can clarify the following:

Does the 1040 need to include my total income in Australia and USA for 2011?
Yes, and forever more. Assuming you are both US citizens, you'll have to file US taxes declaring your entire worldwide income for the rest of your lives.

How is the income tax calculated on the income I earned while living in the USA – does this fall under non-excluded income?
You declare worldwide income and then you exclude only the excludable income (i.e. your earned income while living in Australia). That leaves the US income to pay taxes on.

I am not clear on the housing exclusion – is there any disadvantage to taking this exclusion?
Read the instructions for the housing exclusion carefully. If you're eligible for it, it's great. But if your earned income falls under the maximum FEIE (around $92K these days) you may not need to bother.

I own rental properties in the USA, do I just complete the standard tax forms for these as if I were living in the USA?
You just do the US forms like you always have done. The FEIE (form 2555) takes care of the Australian earned income, and then you pay US taxes on the rest. You want to check to see how (and if) the tax authority in Oz want you to declare the US income. If they expect you to declare your worldwide income once you're resident, there should be some way to exempt, exclude or credit you for your US taxes on the income that is taxed by the US.

Does turbo tax work well for this type of tax scenario?
The tax software programs are generally fine for overseas taxpayers as long as they include forms 2555 and 1116 (FEIE and foreign tax credit), which most do. Whether or not you can e-file from overseas is always a touchy issue. Most of the e-filing systems simply won't take a foreign address. If that is the case, simply print off the forms and mail them in.

This is an information sheet from the IRS office in Paris that discusses the issue of e-filing from overseas: http://photos.state.gov/libraries/france/5/irs/efiling.pdf I notice that TurboTax is not one of the listed softwares that can handle foreign addresses, but it should still be able to produce the necessary paper forms for filing.
Cheers,
Bev
 
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