Section 911 – What Expats Need to Know

Section 911 And The Timing Of A Foreign Earned Income Exclusion Election

Section 911(a) of the Code allows qualified citizens and residents of the United
States living abroad to elect to exclude from gross income the foreign earned income
and housing cost amounts of such individuals. This is more commonly known as the foreign earned income exclusion and housing exclusion. Treas. Reg. 1.911-7(a) sets forth the procedural rules for making a valid section 911 election. The election must be made on Form 2555 or on a comparable form, and must be filed with the income tax return or with an amended return. With respect to the timing of the election, Treas. Reg. 1.911-7(a)(2)(i) provides that a valid section 911 election must be made:

1. With an income tax return that is timely filed (including any extensions of time
   to file);
2. With a later return filed within the period prescribed in section 6511(a)
   amending a timely filed income tax return;
3. With an original return filed within one year after the due date of the return
   (determined without regard to any extension of time to file); or
4. With an income tax return filed after the period described in the above paragraphs provided
   • The taxpayer owes no federal income tax after taking into account the
     exclusion and files Form 1040 with Form 2555 or a comparable form
     attached either before or after the Internal Revenue Service discovers that
     the taxpayer failed to elect the exclusion; or
   • The taxpayer owes federal income tax after taking into account the
     exclusion and files Form 1040 with Form 2555 or a comparable form
     attached before the Internal Revenue Service discovers that the taxpayer
     failed to elect the exclusion.

Thus, it is of great importance that if you have unfiled returns or late returns that you file your past due tax returns and claim the foreign earned income exclusion (Section 911 election) on Form 2555 before the IRS discovers that you have failed to elect the exclusion.

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