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Chronicles of Tax Advisors

Thorough Understanding of Tax Law Brings Tremendous Refunds

Posted by Todd Ancona Posted on Nov 04 2016

In this case, we helped our client correct a mistake made by another firm. Our client worked overseas in the oilfield industry, so they had foreign earned income and could be eligible for Foreign Earned Income Exclusion or Foreign Tax Credit.

The Foreign Tax Credit can be used as a dollar for dollar reduction in taxes due if the taxpayer paid taxes to the foreign government and those taxes paid were included as part of their income. This was not the case here.

For the Foreign Earned Income Exclusion, the prior preparer only checked to see if our client met the Physically Present test for the exclusion. The preparer neglected to check if client met the Bona Fide Residence Test. The difference between the two is this. Physical presence requires that the taxpayer be out of the country for 330 days or more during a 12-month period. Bona Fide Residence does not have the 330-day requirement but does consider residency of taxpayer in foreign country and length of contract. So, if the taxpayer has a foreign resident card and their contract does not indicate a definite end to the contract they can subjectively be considered a Bona Fide resident. There are a few other requirements.

Due to IRS statute of limitations on refunds, we amended the last three years for our client yielding over $50,000 in refunds from the federal and state tax authorities.


Todd Ancona, EA

Licensed to practice before the Internal Revenue Service

An Enrolled Agent (EA) is a federal authorized tax practitioner who has technical expertise in the field of taxation and who is empowered by the U.S. Department of Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service for audit, collections and appeals.



Disclaimer: The information in this blog is for general informational and educational purposes only, including any comments provided by blog visitors. All stories described are accounts of actual experience with actual clients of Tax Advisors. Postings are not solicitations or legal advice. This information is not intended to create and receipt of it does not constitute an agent-client relationship. The reader should not rely or act upon any information in this site without seeking professional legal counsel or advice from his or her tax professional.