I have a client who qualifies for the Foreign Earned Income Exclusion for 2013 due to Physical Presence Test (PPT). I just found out that he had his rent paid for him in the tax year. According to my understanding this is taxable compensation, since he doesn't meet exclusions as listed on p.19 of Publ 54 1. Business Premises, 2. Convenience of Employer and 3. Condition of Employment.
Taxpayer is an independent contractor, living in Scotland where he contracts out to help build up and run a golf course. He has lived over there several years. But this is the first year he qualifies for PPT.
I am including the income as Foreign Earned income on line 21 of 2555 and preparing the housing deduction in part VI of form 2555.
I am adding the foreign housing benefit to Income (since it was not included on his 1099) and this amount is included on line 21 of 1040. This would increase his SE tax as well, correct?
Next year, I will include the additional housing as 1099 income and there will be no housing deduction since he will not qualify for the FEI Exclusion.
Does this all sound right?
Thanks so much for any guidance at all.
Taxpayer is an independent contractor, living in Scotland where he contracts out to help build up and run a golf course. He has lived over there several years. But this is the first year he qualifies for PPT.
I am including the income as Foreign Earned income on line 21 of 2555 and preparing the housing deduction in part VI of form 2555.
I am adding the foreign housing benefit to Income (since it was not included on his 1099) and this amount is included on line 21 of 1040. This would increase his SE tax as well, correct?
Next year, I will include the additional housing as 1099 income and there will be no housing deduction since he will not qualify for the FEI Exclusion.
Does this all sound right?
Thanks so much for any guidance at all.