Foreign earned income and amounts received after the US entry

[Anna2024]

Hello,

I found a lot of useful information on this forum concerning FEE exclusion. Generally, the income earned before your arrival in the US can be excluded.

And what about your vacation pay? Are we still able to exclude this?

After your arrival in the US, you work 0 hours in Canada and you don't "earn" anything but you continue to receive money from your employer for the services performed during the exclusion period, i.e. your Canadian residency.

I looked more in detail at this concept and found that the law didn't allow to exclude the amounts received after the close of the taxable year and it made me think that the only condition to satisfy for the possible exclusion was: the amounts must be received within the taxable year for the services performed during your Canadian residency and not specifically before your US entry.

Am I absolutely wrong or is it a grey zone?

Here the exact text:

Foreign earned income.
(1) Definition. For purposes of this section --
(A) In general. The term "foreign earned income" with respect to any individual means the amount received by such individual from sources within a foreign country or countries which constitute earned income attributable to services performed by such individual during the period
described in subparagraph (A) or (B) of subsection (d)(1), whichever is applicable.
(B) Certain amounts not included in foreign earned income. The foreign earned income for an individual shall not include amounts --
(i) received as a pension or annuity,
(ii) paid by the United States or an agency thereof to an employee of the United States or an agency thereof,
(iii) included in gross income by reason of section 402(b) (relating to taxability of beneficiary of nonexempt trust) or section 403(c) (relating to taxability of beneficiary under a nonqualified annuity), or
(iv) received after the close of the taxable year following the taxable year in which the services to which the amounts are attributable are performed.

Thank you very much for any clarification,

[nelsona]

Yes, the money paid to you after you move can be included in FEIE, since it is considered foreign source, ie. earned while you were in foreign country. They could still be considered simple foreign income, and you would be allowed to claim any Cdn tax against the US tax that arises from it. This would make it a wash, but you can try it both ways.


The the verbiage described in the text pertains to the following tax year because FEIE is always based on the tax year. It simply means that you would have to wait to claim that income in the following tax year, and it would still be eligible for FEIE in that following year.

[Anna2024]

Thank you very much for clarification.

I'll try both ways to see if there's any difference in numbers - at the federal and the state level - between the excluded foreign income and the credits I would receive for the foreign taxes already paid.

Yes, it makes sense - when you speak about the wording of the text - about the possible FEIE after the closing of the tax year. It would be strange to disallow the amounts received only because the reception date is January 2.