Help! out of the country.. do I have to pay obamacare penalty?

Read this.


http://blogs.angloinfo.com/us-tax/2013/11/11/us-citizens-abroad-and-obamacare/

An important exemption exists for certain US persons who are living and working abroad if they meet certain requirements. Those who qualify for this exemption need take no action to comply with the Obamacare provisions. The exemption exists because it would not be fair to force Americans living overseas to purchase a policy on one of the new US health insurance marketplaces because most US policies do not provide coverage for overseas medical care (other than emergency care).

Who Qualifies for This Exemption?

In order to qualify for the Obamacare exemption, the individual must qualify for the benefits of claiming the foreign earned income / foreign housing exclusions under Section 911 of the US Internal Revenue Code. Generally, Americans working abroad who meet particular requirements are eligible to exclude from US taxable income certain amounts of foreign earned income (wages, compensation for services) and housing costs paid by their employers under rules governing the Foreign Earned Income Exclusion (FEIE), and Foreign Housing Exclusion (FHE).

For an individual to qualify for the FEIE and / or FHE, a “tax home” must be maintained in a foreign country and either the Bona Fide Foreign Resident (BFR) or Physical Presence Test (PPT) must be met.

Generally, a “tax home” is the location of the main place of business, irrespective of where a family home is maintained. If the nature of a person’s work means that there is no regular or main place of business, then the tax home may be the place where the person regularly lives. A person is not considered to have a tax home in a foreign country if the person’s household is maintained in the US. Temporary presence in the US (for example, for vacation or for employment), does not necessarily mean that the household is in the US during such time.

The BFR Test: To meet the BFR Test, a person must be a bona fide resident of a foreign country for an uninterrupted period which includes a full calendar year. A resident is one who, based on the facts and circumstances, has established a “tax home” and has in effect settled in that country.

The Physical Presence Test: To meet the PPT an individual must be physically present in a foreign country or countries for 330 days in any 12 consecutive months. The 330 days do not have to be consecutive, but they must be whole days present in a foreign country. Travel time does not count toward the requisite 330 days if the travel is in the US or its possessions for periods of 24 hours or more, or takes place over international waters. Recordkeeping is critical. The PPT often helps an individual on short assignment. It also enables an individual to come back to the US for short periods (generally up to one month) in any consecutive 12-month period and still qualify for the exclusions.

Many people have asked if the individual must actually file returns and claim the FEIE and FHE in order to be exempt. My view is that so long as the individual meets the “tax home” test and either the BFR or PPT test, he should be exempt from the health care coverage rules. In other words, I believe the individual must merely qualify for the benefits of claiming the foreign earned income / foreign housing exclusions under Section 911 – the law does not say he has to actually claim them to qualify for the exemption. This would make sense since the exemption exists because it would not be fair to force Americans living overseas to purchase a US policy on one of US health insurance marketplaces since generally these policies do not provide coverage for overseas medical care. The law was trying to provide relief for the US person who is truly residing abroad and uses the “tax home”, BFR and PPT concepts to implement the exemption.

Copied below is some of the supplementary information from the final Treasury Regulations implementing the Obamacare provisions:


(Click the link to read the rest.)