The Internal Revenue Service and the U.S. Treasury announced that they have released guidance on the estimated tax penalty for citizens or residents of the United States living and working abroad.The Tax Increase Prevention and Reconciliation Act of 2005, which was enacted in May 2006, changed the maximum amount of foreign earned income and housing costs that can be excluded from gross income -- increasing the maximum amount of foreign earned income that may be excluded from gross income to $82,400 and limiting the amount of housing costs that may be excluded or deducted.
The act also changed a provision so that the tax applicable to income not covered by the foreign income exclusion would be calculated as though the exclusion had not been elected.
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