J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

36.5 Meeting the Foreign Residence or Physical Presence Test

To qualify for the foreign earned income exclusion, you must be either a U.S. citizen (or U.S. resident entitled to tax treaty benefits) meeting the foreign residence test or a U.S. citizen or resident meeting the physical presence test in a foreign country. The following areas are not considered foreign countries: Puerto Rico, Virgin Islands, Guam, Commonwealth of the Northern Mariana Islands, American Samoa, or the Antarctic region. The Tax Court has held that income earned in international airspace (by a flight attendant, for example) or in international waters (by a ship officer, for example) is not earned in a foreign country and thus does not qualify for the foreign earned income exclusion.

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Planning Reminder

Claiming Exemption From Withholding for Excludable Income

You can file Form 673 with your U.S. employer to claim an exemption from withholding on wages to the extent of your expected foreign earned income exclusion and foreign housing exclusion. You must certify, under penalty of perjury, that you have good reason to believe that you will qualify under the foreign residence or physical presence test and also must certify your estimated foreign housing costs.

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Waiver of time test.

If war or civil unrest prevented you from meeting the foreign residence or physical presence ...