The Motley Fool Discussion Boards

Previous Page

Financial Planning / Tax Strategies


Subject:  Re: Should I Convert? Date:  6/21/2011  11:02 AM
Author:  trepanne Number:  113556 of 127613

IIRC, no. I'm far from an expert in this area, but I've seen discussions, both here and elsewhere, which concluded that if you elect the exclusion you can't restrict it to less than the full amount allowable.

phil, i am not a pro, and i am operating on recollections from years ago, but i looked at this fairly carefully when i was doing it.

congress has not drafted the tax law in this area to OBLIGE you to minimize your taxable income, merely given you the RIGHT to avoid double-taxation up to a certain limit. that was my reading of the IRC at the time.

from a mechanical reporting standpoint - the way i put this down on the forms was to choose the "physical presence" test rather than the "bona fide resident" test. then i figured out how many days out of 365 would pro-rate my income to the desired amount, and then i wrote that number down in the box for "physically present" on the relevant form. hey presto.

edyboom - if you read the beginning of the instructions for f1040, you'll see that if you don't owe any US taxes, and you haven't owed any for several years (which is usually the case for expat english teachers), then you don't even need to file a return.

in this case, if you filed returns for prior years wherein you excluded 100% of your income while simultaneously making IRA contributions, then you are likely going to need to go back and amend those prior year tax returns on f1040-X in order to exclude less income, in order to avoid the penalties for excess contributions.

usual disclaimers apply, IANAL etc. etc., just trying to help 'cause i've been there before.

Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us