The Foreign Earned Income Exclusion is not a given—You have to play by the rules

Many taxpayers I have seen over the years were under the assumption that if they didn’t owe the IRS money, or, better yet, if the IRS owed them a refund, there was no rush to file a tax return. When they eventually filed, if ever, they thought they could still take advantage of all the deductions, credits, and exclusions.  But that’s not the case; not filing can cost more than just the refund.

Last year, I was contacted by an American I’ll call Eric, who had been living and working in the Netherlands for about 3 years.  The first year was hectic for Eric as he adjusted to a new job, in a new country, and he failed to file a tax return in the U.S. When he finally filed his U.S. tax return last year with the help of a local tax preparer, he also filed his previous years’ returns after receiving a notice from the IRS that they had filed a substitute for return for him.

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