Hi Everyone –

We would like to extend our sincere thanks to each of you who decided to use Hughes Szuberla CPAs to prepare and file your taxes this last filing season! It’s our pleasure to serve you each year! We assisted more clients than ever before, and with the tax law changes implemented in 2018 it was our busiest year to date.

As we say every year, THANK YOU FOR THE COUNTLESS REFERRALS! We know it is difficult to obtain reliable tax advice and preparation services when working overseas. Your referrals tell us that we are doing a good job. If you know anyone who needs tax assistance, we will gladly assist.

This newsletter will focus on a technical area near and dear to many of you, the physical presence (330-days) and bona fide residence tests for the foreign earned income exclusion.

On March 28, 2019, the U.S. Internal Revenue Service released Revenue Procedure 2019-15 which provides a waiver for the time requirements for individuals electing to exclude their foreign earned income because of war, civil unrest, or similar adverse conditions in that country.

The four countries that are covered by this waiver include the following:

Country                                                         Date of Departure On or After
Congo (Democratic Republic of the)  December 14, 2018
Cuba                                                                January 4, 2018
Iraq                                                                   September 28, 2018
Nicaragua                                                      September 28, 2018

Individuals who would otherwise qualify for the foreign earned income and housing exclusions, may lose the benefit of these exclusions if they leave a country prior to fulfilling the time requirements, which could affect the amount of tax assessed.
A special exception to the time requirements to qualify for these exclusions is allowed to individuals who are forced to leave a country designated by the IRS due to war, civil unrest, or other adverse conditions.

This is the first year in a long time that Iraq was included on the list. We have many clients that worked in Basrah that received abrupt notification that their contracts were terminated. If you were working in Iraq, were on track to meet your 330 days overseas, and had your contract cancelled, you may qualify for an additional refund if you did not claim the exclusion in 2018.

Please reach out to us with any questions and to discuss your facts. Remember you would need to have been able to qualify if not for the civil unrest events taking place, so it is still important to have your days overseas documented with passport stamps, flight itineraries, employment contracts, LOAs, etc. We are expecting increased scrutiny from the IRS for these specific claims and refunds filed under this provision so retaining documentation will be important.