Question

Foreign Per Diem

Forum|Forum|6 years ago
February 2, 2020
1 reply
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I lived in a foreign country (country A) for all of 2019. During the year, I consulted for another foreign country (country B), for which I was paid income plus a per diem to cover expenses such as food and lodging. My income is reported under the foreign earned income exclusion. Where do I report the per diem?

P

pk12_2

@Phil9 , generally I would have used the heading foreign / employer paid housing/ living assistance-- this of course adds to your total foreign earned income ( eligible for exclusion , if ...). But in your case because you , as self-employed , would be filing a Schedule-C, your total gross income from the consultancy ( country B or otherwise ) would include total amounts paid by the client. Your expenses would include any travel, temporary housing etc. Note that per diem allowance varies by country ( and you generally have to subtract what it would have cost you had you eaten at home -- so I do not like perdiem. I would much rather show hotel / housing bills as expenses and forget about meals. Your total FEI exclusion max does not change, no matter what.

What countries are concerned? Assuming that you are US citizen. When did you leave USA i.e. do you qualify for the Physical Presence Test for 2019 ? Are you being taxed on the total world income ( foreign portion including country A and B ) by your resident country ?

P

Phil9Author

Thanks. Yes, US citizen and left the US 20 years ago. I retired in the Philippines and qualify under physical presence test. I started a consultancy business (I am sole employee) in 2019, after I retired. So income is foreign consulting fees and pension (also from a foreign entity). Country B is Malaysia. For some reason, income earned and reported on schedule-C does not appear to qualify for the foreign earned income exclusion. Not sure how to report that on schedule-C.

P

pk12_2

@Phil9 , thank you for your response. No, Schedule-C ( i.e. self-employment, sole proprietor etc. ) income should qualify for Foreign Earned Income. Let me try out on my copy of TurboTax and see what gives ( I am assuming that you are using a downloaded version and not the on-line version-- but it really should not matter ). Please excuse delay of a day for me to come back to you