By current IRS policy, cited in IRS Form 673 (Statement for Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911), a taxpayer must qualify under the Bona Fide Residency Test, or the Physical Presence Test.
This form allows the company to reduce your Federal tax withholding based on your intention to qualify for the Internal Revenue Code Section 911, which consists of a foreign-earned income and housing exclusion. For 2008, the annual foreign-earned income exclusion is $85,700 and the annual housing exclusion is $24,720 of which $13,712 is a base amount.
To qualify for the deduction, the taxpayer must physically be outside of the US for 330 days out of consecutve 365 day period.
That having been said, there are ways around this.
From what I’m being told, the system is being taken advantage of, with Blackwater getting preferential treatment.
Eric Prince is a friend of Bush.