How do I prepare for a year long trip as an employee trying to qualify for the FEIE via the physical presence test?

Question

I am going to be traveling to 12 different countries next year. I will be staying for a period of one month in each one. I will be employed by my current employer while traveling. I will not have a residence in the United States while traveling.

I would like to qualify for the FEIE to save a lot of money. What do I and my employer need to do to qualify me for the FEIE physical presence test? Do I put the 12 addresses on my w2? What financial obligations do I have to the countries I am staying in? Do need work visas for each country?

This trip is not work related. I am not being sent on a work related assignment. This is purely for fun. :)

Answer 1

Disclaimer: I am not a lawyer, financial adviser nor based in the US. This is not legal/financial advice.

You may be out of luck. Starting from Foreign Earned Income Exclusion on the IRS site, and specifically Am I Eligible to Claim Either the Exclusion or the Deduction?, the key conditions that appear applicable to your situation¹ are:

1. You must not be employed by the US government;
2. Your "tax home" must be in "a foreign country";
3. You must be physically present in one or more foreign countries for 330 full days in a 12 month period.

You don't indicate whether (1) applies (my guess is you are not so employed), and it seems clear that (3) is OK. However, looking specifically at the description of what constitutes a "tax home" on Tax Home in Foreign Country, condition (2) would appear to be your biggest hurdle. An example of what would qualify for FEIE is:

For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. In November of last year your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. Before you left, you distributed business cards showing your business and home addresses in London. You kept ownership of your home in Toledo but rented it to another family. You placed your car in storage. In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London.

i.e. a full-scale relocation for an extended period.

Furthermore, on the difference between temporary or indefinite assignment, it says (my emphasis):

The location of your tax home often depends on whether your assignment is temporary or indefinite. If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away from home expenses (for travel, meals, and lodging) but you would not qualify for the foreign earned income exclusion. [...]

If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. If you expect it to last for more than 1 year, it is indefinite.

Taken together, to my untrained mind I suspect you may have trouble arguing that your tax home has changed, and/or has changed permanently enough to be able to qualify for FEIE. Even if you can come up with some "facts and circumstances [that] indicate otherwise", your total time away is only going to be 12 months in total, so would appear to be classed as temporary and therefore non-qualifying.

As discussed in comments, the final clincher as to why I believe you won't qualify for FEIE is that it seems very unlikely that you will establish a "tax home" in any of the 12 countries you will be visiting, if you're only going to be in any one country for a month (but that doesn't mean you won't have a tax liability in those countries). If you never establish a "tax home" elsewhere during your 12 months' of travelling, logic dictates that it remains where it currently is – namely the US – thus excluding you from being able to claim FEIE.

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¹ There are some alternative ways of qualifying, but those don't appear to apply to your situation.

Answer 2

Purely in my opinion you pass.

1. You will be physically present in 1+ foreign nations for 330+

2. "I will not have a residence in the United States while traveling." I assume you mean you either (1) sold your owned house (2) rented out your owned house (3) stopped renting. You have no tax residence in the US

3. Your assignment is for 12+ months. (OK, it's "12" but that is OK; it's totally normal that large corporate send people on "exactly 12 months" assignments. Have your employer adjust it by a couple weeks up if you wish.)

Grounding: I have never had to do this from the US experience, but I have been intimately involved in numerous of these for US folks.

I know a number of actual examples of US folks who did this, for 2 months, and did NOT stay only in one country (2 or 3 countries). So.

Obviously, this is just "people guessing on the net", ask a tax person! (Be aware that they may be totally wrong unless they do zillions of these.)

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Hot tip. You surely use "taxact.com" or one of the others to file your taxes. They are remarkably helpful, and prompt, if you email them your query. They're often "wrong" but at least it's something.

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PS as I mention in a comment "12 visas ... You will almost certainly need work visas for each one, yes. That is a HUGE material issue."