Maximize Your Exclusion of Foreign Earned Income Using the Physical Presence Test

Maximize Your Exclusion of Foreign Earned Income Using the Physical Presence Test

Are you eligible to exclude most, if not all, of your foreign earned income?   Please see chart below:

Foreign Earned Income Exclusion

Many individuals fail to employ the physical presence test in the manner maximizing their exclusion of foreign earned income in the years of arrival to and departure from the foreign country.  Such failure to maximize the exclusion of their foreign earned income can result in thousands of dollars of additional taxes being paid needlessly.

Read the article on how to apply the physical presence test correctly in order to maximize the exclusion of foreign earned income in order to save thousands of dollars in income taxes:  Maximize Your Exclusion of Foreign Earned Income Under the Physical Presence Test.

William Brighenti, Certified Public Accountant

Accountants CPA Hartford, LLC

About William Brighenti

William Brighenti is a Certified Public Accountant, Certified QuickBooks ProAdvisor, and Certified Business Valuation Analyst. Bill began his career in public accounting in 1979. Since then he has worked at various public accounting firms throughout Connecticut. Bill received a Master of Science in Professional Accounting degree from the University of Hartford, after attending the University of Connecticut and Central Connecticut State University for his Bachelor of Arts and Master of Arts degrees. He subsequently attended Purdue University for doctoral studies in Accounting and Quantitative Methods in Business. Bill has instructed graduate and undergraduate courses in Accounting, Auditing, and other subjects at the University of Hartford, Central Connecticut State University, Hartford State Technical College, and Purdue University. He also taught GMAT and CPA Exam Review Classes at the Stanley H. Kaplan Educational Center and at Person-Wolinsky, and is certified to teach trade-related subjects at Connecticut Vocational Technical Schools. His articles on tax and accounting have been published in several professional journals throughout the country as well as on several accounting websites. William was born and raised in New Britain, Connecticut, and served on the City's Board of Finance and Taxation as well as its City Plan Commission. In addition to the blog, Accounting and Taxes Simplified, Bill writes a blog, "The Barefoot Accountant", for the Accounting Web, a Sift Media publication.
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4 Responses to Maximize Your Exclusion of Foreign Earned Income Using the Physical Presence Test

  1. Dean Leach says:

    Speaking of foreign income and taxes, I have a friend who’s been living in Canada for the last 7 years or so, and is a less than 10% owner in a Canadian company. He asked me the following question:

    “Situation: We continue to position our company to take advantage of tax situations, protection etc. In doing so, we created another company within our company (we have 3 now .. Cinnaroll and 2 numbered companies). Cinnaroll sold our building to the one numbered company. This allows us to sell off assets piece by piece if we want to .. and protects us in case of a lawsuit. The effect of this sale … We bought the building for 2.1m and “sold” it for 4.3m based on current market value. The next effect is this creates a capital gain for the ownership group. I am thinking that because I have a less-than -10% ownership that I am exempt from any capital gains from the U.S. In Canada all of this is deferred .. so no problem here (yet) .. but any idea of what my exposure might be in the US?”

    Any help will be much appreciated

    • If you are a U.S. citizen or resident alien, you must report income from sources outside the United States (foreign income) on your tax return unless it is exempt by U.S. law. This is true whether you reside inside or outside the United States and whether or not you receive a Form W-2, Wage and Tax Statement, or Form 1099 from the foreign payer. This applies to earned income (such as wages and tips) as well as unearned income (such as interest, dividends, capital gains, pensions, rents and royalties).

      I advise you to consult with your CPA. If you need my assistance, I would be happy to prepare your tax return for you.

      William Brighenti, Certified Public Accountant, Certified QuickBooks ProAdvisor
      Accountants CPA Hartford, LLC

  2. W&G says:

    I am an accountant with a CPA firm that does work with a management company that uses Quickbooks Online for the accounting for its properties. I saw your website about using Quickbooks Online for Property Management Accounting and thought you might be able to provide some insight. We were looking for a way to more conveniently and efficiently get reports from their system when we perform the audits of the properties. My question is as follows: Is it possible for the management company to set us up as a user with read-only access to their system, for example being able to only review and print reports without being able to post any transactions? Any information you can provide would be greatly appreciated. Thank you.

    • There are four main types of users you can have:

      · Regular or custom user – you specify what areas of the product the user can and cannot access. (limited to only certain options can not hand pick each section)
      · Company administrator – These users have all access rights within QBO and to any other services your company is subscribed to.
      · Reports Only (QBO ‘s version of Read Only access) – When these users log into QBO, they see a special version that contains only reports. They can access any report, including Payroll reports, if the applicable features are turned on, but they cannot change or access any of the information they see in the reports. They do have the ability to create their own memorized reports, and they are free to create a group of reports as well. Reports Only users do not have access to the Activity Log.
      · Time Tracking Only – Time Tracking users see a special version that contains only time sheets and time reports for themselves. They have no access to any other feature within QBO.

      Note: Time Tracking and Reports Only users do not count toward the company’s total number of users. In essence, they are “free” users. However, the QuickBooks Simple Start Online and QuickBooks Online Basic products do not have the option of these last two types of users.

      In addition, every company is allowed one Accountant User login. This user does not count toward your current user limit. When you mark this user, you will choose one of the four above types as a template on how to set up their access rights. This type of access will also provide the accountant their own tab within the system that provides shortcuts to some of the most common functions used by accountants.

      When accessing your Activity Log you might notice some special types of users that our system creates when we make direct changes to your company:

      · Support Representative – Changes made by a QuickBooks Online support consultant
      · System Administration – Changes made automatically by QuickBooks Online
      · Online Banking Administration – Changes made automatically by QuickBooks Online related to the Online Banking feature (not available in Simple Start Free versions).
      · Import Administration – Changes made automatically byQuickBooks Online related to converting your data from QuickBooks desktop edition

      Out of the four types of users you can setup, only Regular or Custom users give you granular control over what area’s of QBO they can access.

      When you pick this user type your next task is to choose what kind of access to give them:

      · All Access Rights -Users with all access rights have all the limited access rights for the two main types of data:
      o Customers & Sales
      o Vendors & Purchases

      They also can:

      · Use everything in the Banking menu.
      · Use everything in the Company menu.
      · View all reports.
      · None (No Access Rights) – Users with no access rights cannot access any of the accounting features of QuickBooks Online. However, you can grant them access to:
      o Manage other services to which your company subscribes.
      o Fill out their own time sheet.
      · Limited Customers & Sales Access Rights: (Can not be limited to only certain sections)

      Will provide them all access to:

      · Enter invoices, sales receipts, estimates, refunds, charges and credits.
      · Create and delete statements.
      · Receive payments from customers.
      · Fill out time sheets for anyone.
      · Add, edit, and delete customers.
      · Add, edit, and delete product/service items and manage inventory.
      · View customer registers.
      · View customer and accounts receivable reports.

      Will not provide them any access to:
      · Print checks, including refund checks, Paychecks and Liability Checks.
      · Deposits or Journal Entries.
      · Make bills and purchases billable to customers.
      · View, add, edit, and delete accounts.
      · View bank registers.
      · Quantity tracking.

      Note: Custom users can only access payroll if setup with All Rights.

      · Vendors & Purchases Access Rights: (Can not be limited to only certain sections)

      Will provide them all access to:

      · Enter purchase orders for vendors.
      · Enter bills from vendors.
      · Pay bills.
      · Make bills and purchases billable to customers.
      · Write checks.
      · Enter credit card purchases.
      · Add, edit, and delete vendors.
      · View bank registers.
      · View vendor and accounts payable reports.
      · View Check Detail report.
      · Print checks, except refund checks.

      Will not provide them any access to:

      · View, add, edit, and delete accounts.
      · Reconcile.
      · Journal Entry.
      · Transfer.
      · Deposits.
      · Create Paychecks or Liability Checks.

      Note: Custom users can only access payroll if setup with All Rights.

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