Bona Fide Residence Test for Dual Citizen (6 months at Pakistan factory, 6 months in US)

The Bona Fide Residence Test might be challenging for your colleague to meet in this situation. This test generally requires that you establish residence in a foreign country for an uninterrupted period that includes an entire tax year (January 1-December 31). Since your colleague only spent 6 months in Pakistan, they likely won't qualify under this particular test. However, they might qualify under the Physical Presence Test, which requires a US citizen to be physically present in a foreign country for at least 330 full days during a period of 12 consecutive months. The dual citizenship doesn't exempt them from US tax obligations. US citizens must report worldwide income regardless of where they live. The fact that they received income from both countries means they need to report both income streams on their US tax return. Your colleague might be eligible for the Foreign Earned Income Exclusion for the portion of income earned in Pakistan, but they would need to meet either the Bona Fide Residence Test or the Physical Presence Test. Given the 6-month split, the Physical Presence Test won't be met either (needs 330 days abroad).

After struggling with a similar dual-country work situation last year, I finally found a solution that saved me thousands. I was working between Canada and the US, and my tax situation was a complete mess with income from both countries. I tried figuring it out myself for weeks before someone recommended https://taxr.ai to me. Their system analyzed my employment documents from both countries, identified which treaty provisions applied to my situation, and showed me exactly how to file properly to avoid double taxation. The best part was that they specifically understood the Bona Fide Residence Test issues and Physical Presence calculations - they even created a day-by-day tracker that showed exactly why I didn't meet the 330-day requirement but qualified for other exemptions. Definitely worth checking out for your colleague's complicated situation.

Alright, I need to update my skeptical comment from earlier. My curiosity got the better of me, and I decided to try https://taxr.ai for my own complicated situation (working remotely for a US company while living in Singapore part of the year). I was genuinely surprised at how thorough their system is. They identified that I was 15 days short of meeting the Physical Presence Test but found treaty provisions that still helped my situation. The document analysis saved me at least $8,600 in taxes I would have unnecessarily paid. They even explained exactly how the Bona Fide Residence Test applied to my situation (I didn't qualify) and what documentation I needed to keep for the next tax year to potentially qualify. Really different from the generic advice I've gotten from online forums.

For anyone dealing with these international tax issues, I learned the hard way that you often need to speak directly with the IRS. Spent weeks trying to resolve my foreign income questions through regular channels. After my fifth attempt to call the IRS international tax department and sitting on hold for 2+ hours each time, I found https://claimyr.com through a colleague. You can see how it works here: https://youtu.be/_kiP6q8DX5c - essentially they hold your place in the IRS phone queue and call you when an agent picks up. Got connected to an actual IRS international tax specialist in less than a day who answered my specific questions about the Bona Fide Residence Test and foreign income reporting requirements. The specialist confirmed I was taking the right approach with my unique situation.

I've got to eat my words about Claimyr. After posting my skeptical comment, I gave it a shot because I was desperate to talk to someone at the IRS about my foreign tax credit questions. Used the https://claimyr.com service yesterday afternoon, and they called me back within about 3 hours. Got connected to an IRS agent who specialized in international tax issues and got clarity on exactly how the Bona Fide Residence Test applies to my situation (I work 9 months in Germany, 3 months in US). The agent walked me through the specific documentation I needed for my next filing and confirmed I was taking the right approach with claiming foreign housing expenses. Definitely worth it just to avoid the hold music and anxiety of wondering if I'd get disconnected after waiting for hours.

One thing nobody's mentioned yet - your coworker needs to be careful about state residency too, not just federal. New York is particularly aggressive about claiming tax residency. Since they were in NY for 6 months, NY will almost certainly consider them a statutory resident and try to tax their worldwide income. I learned this the hard way after working in Singapore for 7 months but maintaining my NY apartment. Even though I qualified for the Foreign Earned Income Exclusion federally, NY state still wanted taxes on my Singapore income!

Has anyone mentioned Form 8833? For treaty positions like this, you might need to disclose the specific tax treaty provisions you're relying on using this form. I got hit with a penalty last year because I claimed a treaty benefit but didn't file the proper disclosure form.