Hi everyone. I have a bit of a unique situation for taxes. I live abroad for the entire year. Work for a US Employer. I claim FEIE on my taxes and did so with no issues for the 2022 tax year. This year for the 2023 year I ran into a bit of an issue. If I use Jan-Dec 2023 as my qualifying period for the Physical Presence test, all of my income is excluded. This leaves my final taxable income at only around $1000 (some small interest I made).
However, when I went to E-File this year. I got the error message that my return is not eligible for E-Filing because the IRS does not allow for your sum of taxable income to be less than your federal tax withheld amount throughout the year. So it says I must file by mail which is difficult due to my being abroad.
There is one way I found to do it. If I change my qualifying period to be partly the year before (in 2022) then going into 2023, not all of the income can be included in the FEIE, thus I would show as having enough income to E-File (didn’t matter in the end because of the standard deduction which brings it to zero either way). I’ve read the rules about the physical presence test/qualifying period and it seems you can chose any period you want as long as some of it falls within the tax year and is a consecutive 12 months. Either way I was abroad for both 2022 AND 2023 so I think I could chose any period I’d wanna use.
Has anybody else run into this issue? It seems like people would if they are abroad and filing FEIE. It would basically prevent anyone doing this to E-file which is the easier option when abroad. Do you think I am ok to do my qualifying dates this way to be allowed to E-File?
Looking for opinions on E-Filing not just jumping to the file by mail option as that is difficult from here.