How Safe Is Iraq For A Contractor?

I am a contractor working in Iraq..Does the foreign earned income exclusion act still stand?

• I am a contractor in Iraq. Since Bush signed the heroes act in june of 2008, and everyone has to pay their taxes on their earnings, i was wondering if we can still use the foreign earned income exclusion with the irs at the end of the year and get all of those taxes back.

• Answer:

  You misstate the Heroes act. Yes, the act explicitly stated that US employers MUST pay fica/mc on income earned by US employees and that the fica/mc cannot be avoided by simply setting up a foreign subsidiary and claiming the employees worked for it instead. (And when you retire at 66, you will be very happy that this income was included.) The form 2555 is still available as long as you weren't working directly for the US governement. The exclusion for 2008 (if you qualify for all of it) is $87,600. Any income above that is taxed at the same tax rate it would have been taxed at if no income was excluded--meaning it starts at the 25% tax rate....