Hello fellow taxpayers!

If you read my post from last week regarding the ridiculousness of what is the U.S. tax system. I mean, its messed up minus my particular issue, but that's not neither here nor there. Anyway, back to the posting at hand. Our friend Jeff, another American-immigrant really wanted to know how our tax situation was going to be this year. So much so he phoned the IRS himself (apparently they have a small staff at the Embassy) to figure out exactly what were the guidelines/ramifications for foreign earned income. Upon reading Publication 54 (exhilarating let me tell you), I determined that none of us met the residence or physical presence test since we did not live here long enough in the 2005 tax year. Which meant ALL of our foreign earned income what taxable by the U.S.

Jeff was told by the IRS to file an extension until a time when we would meet the physical presence test and THEN file our 2005 return and exclude our income under the threshold. My understanding and experience with tax law, is that all requirements, tests, and regulations fall within a taxable year (for normal people, Jan 1 - Dec 31). If any taxable event does not occur within this time period it is applicable during a different year.

Not physical presence test for U.S. citizens living abroad. This particular test requires you to live in a foreign country for 330 days during any consecutive 12 months. So we are going to file a Form 2350 for an extension until the first of September which will not only prevent us from paying tax this year, but we will get a comfortable return come this fall.

Another interesting point is that Turbo Tax did not catch this particular situation in all its checks and reviews. I entered all our current information, so the program knew we lived overseas AND the dates we relocated. Had I paid for my return using Turbo Tax Deluxe and determined all of this after the fact I would have been a very disgruntled user.

So our tax return will come at a very opportune time this time as a very special event is planned for this fall.