Updated Sec. 911 regulations provide relief for nonfilers.

• Author: Smaston, Carla M.

Under Sec. 911(a), certain taxpayers may elect to exclude foreign earned income and housing costs from gross income. Foreign earned income is generally any amount received from sources within a foreign country for services performed while the individual is a "qualified individual" under Sec. 911(d)(1). Housing costs are generally the reasonable expenses paid or incurred to house a qualified individual and his family in a foreign country. A strict qualification test that relates to the specific nature of the expenses paid or incurred must be satisfied to be eligible for the foreign housing exclusion.

To elect the exclusions under Sec. 911(a), a separate election is required for each exclusion. The election must be made on Form 2555, Foreign Earned Income, or other comparable form. Prior to the amended regulations, a valid election was made when the taxpayer (1) filed the form with a timely filed income tax return (including extensions), (2) filed the form with a timely filed amended return within the period described in Sec. 6511(a) or (3) filed the form with an original tax return filed within one year of the return's original due date (Regs. Sec. 1.911-7(a)(2)).

The amended Sec. 911 regulations allow a qualified taxpayer to make the election at a date later than...