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Missionary income
Dear Tax Talk:
I am an American missionary living in a foreign country. I receive
my income through a nonprofit organization depositing into my personal
account. What are my tax obligations?
Shersti
Dear Shersti:
I have done the taxes for missionaries in Santiago, Chile, who worked
through a sponsoring organization in the United States. The taxes
are the same for most workers living abroad. If you are a U.S. citizen,
you can claim that you are a bona fide resident of the foreign country
in which you perform the work.
To be a bona fide resident you have to have spent
an entire tax year in the foreign country as your main home. Let's
say, for example, you left the United States in November 2001 with
no present intention of returning here to reside and you continue
to reside in the foreign country at the end of 2002. In this case,
you have spent an entire year in the foreign country and can claim
an exclusion for your earnings.
Note that the rule permits you to have visited the
United States as long as you did so without intending to abandon
your foreign residence. This means you could have traveled here
in 2002 without losing the exclusion as long as it was a visit.
You also could not have indicated to the foreign country that you
are not a resident of that country.
If you are not a U.S. citizen you can still claim
the earnings exclusion as long as you spend at least 330 days in
a 12-month period in foreign countries. The 12-month period can
run over a period of more than one tax year.
For example, if you left the United States on Nov.
1, 2001, and returned on Oct. 1, 2002, you spent 334 days in the
foreign country and qualify for the exclusion of your earnings in
2002. The exclusion is 9/12ths for the nine months in 2002 of the
maximum exclusion or up to your earnings.
The earnings exclusion is claimed on Internal
Revenue Service Form 2555 or Form
2555EZ. The maximum earnings exclusion in 2002 is $80,000, which
is probably more than sufficient to shelter your wages.
-- Posted: Dec. 6, 2002
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