First Ever Physical Presence Test Calculator Unveiled

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According to a recent study conducted by the Treasury Inspector General for Tax Administration (TIGTA) , a large number of taxpayers living abroad are incorrectly calculating one of the most important elements of their tax return: the foreign earned income exclusion. To help taxpayers, a CPA firm specializing in expat taxes launched a new free online tool that will benefit the millions of American citizens living abroad. This innovative tool called the The Physical Presence Test Calculator is intended to help expats in preparing their tax returns accurately, avoiding audits and penalties.

Physical Presence Test Calculator

Tax Planner CPA Physical Presence Test Calculator

One of the most common mistakes Americans make on their self prepared tax returns has to do with calculating an incorrect Physical Presence Test window - which dramatically impacts their bottom line tax due.

The U.S tax code is one of the most complicated tax codes in the world. It keeps growing even more complex every year, often leaving taxpayers uncertain about whether they qualify for deductions or not. Among the topics within the U.S tax code, international affairs remains as the number one cause of tax issues: it affects approximate 6.3 million Americans who currently reside outside of the United States. Recent changes in tax policy, such as the Foreign Account Tax Compliance Act and the new IRS Large Business and International (LB&I) division, reflect the current administration's aggressive approach towards bringing US Expats abroad into tax law compliance and may result in high penalties or even jail time for some Americans. Failure to file a U.S income tax return is a criminal offense.

The foreign earned income exclusion is one of the hottest topics pertaining to expat taxes. If an individual meets certain criteria, he may exclude up to a specified amount of income earned abroad from U.S taxes (in 2011, the maximum exclusion is $92,900). In order to qualify you must establish your abode in a foreign country and meet either the Physical Presence Test or the Bona Fide Residence Test.

A U.S expat meets the Physical Presence Test if he is physically present in a foreign country or countries three hundred and thirty full days during a period of twelve consecutive months. The three hundred and thirty qualifying days do not have to be consecutive (The physical presence test applies to both U.S citizens and resident aliens). This means that a U.S expat can only be present in the U.S for a maximum of thirty five days during the same twelve-month period in order to qualify. The physical presence test is based only on how long you stay in a foreign country or countries. This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad.

Full days are defined as a twenty four hour period, and time on or over international waters in transit to or from the United States does not count towards the requirement. It can be challenging to determine the optimal period (There can be several periods under which you could qualify but only one is the optimal and gives you the greatest amount to exclude from income). The Physical Presence Test Calculator is designed to determine your optimal period.

The above is just a sample of the procedures surrounding the physical presence test. Tax Planner CPA took into account all the relevant code sections and regulations to design the Physical Presence Test Calculator. As a result, taxpayers can have more time enjoying their life rather than learning complicated tax code.

“One of the most common mistakes Americans make on their self prepared tax returns has to do with calculating an incorrect Physical Presence Test window - which dramatically impacts their bottom line tax due,” said Ed Parsons, Founder of Tax Planner CPA.


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Edward Parsons
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