Combat Zone

There are many opportunities for Expats working overseas. Unfortunately, not all Expat locations are in Rome, Hong Kong, Germany and other luxurious places. For many Expats, hostile and remote assignments is the norm. There is, however, a lot of bad information floating around project sites. Read below for concise and accurate information from a Combat Zone specialist.

Qualified Combat Zones

A combat zone is any area the President of the United States designates by Excecutive Order as an area in which the US Armed Forces are engaging or have engaged in combat. An area usually becomes a combat zone and ceases to be a combat zone on the dates the President designates by Executive Order.

Persian Gulf Area – By Executive Order 12744, the following locations were designated as a combat zone beginning January 17, 1991.

  • Persian Gulf
  • Red Sea
  • Gulf of Oman
  • The total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates.

Afghanistan – By Executive Order 13239, Afghanistan was designated as a combat zone beginning September 19, 2001.

Kosovo Area – By Executive Order 13119 the following locations were designated as a combat zone and a qualified hazardous duty area beginning March 24, 1999.

  • Federal Republic of Yugoslavia (Serbia/Montegnegro)
  • Albania
  • Adriatic Sea
  • Ionian Sea

Qualified Hazardous Duty Area – Beginning November 21, 1995, a qualified hazardous duty area in the former Yugoslavia is treated as if it were a combat zone. The qualified hazardous duty area includes:

  • Bosnia and Herzegovina
  • Croatia
  • Macedonia

Combat Zone/Qualified Hazardous Duty Area Extension

In some cases, the deadline for filing tax returns, paying taxes, filing claims for refunds, and taking other actions with the IRS is automatically extended if you work in a qualified combat zone or hazardous duty area and directly support a US Armed Forces mission. Deadline for the IRS to take certain actions such as collection and examination actions is also extended. An Expats deadline for taking action is extended for 180 days after leaving a qualified combat zone or hazardous duty area. Work must be continuous with no available R&R or vacation time in the US or outside a qualified combat zone or hazardous duty area. Best practice is to file within normal filing deadlines and have taxes withheld from paycheck.

Civilian Contractor

Working overseas on a DOD or other USG contract may entail receiving official travel orders, military like identification cards and commissary and PX privledges as well as military transportation. However, none of these benefits entitles Expats to the combat zone tax exclusion. Say Again – Expats will never qualify for the combat zone tax exclusion. That perk is reserved for enlisted and commissioned members of the US Armed Forces only.

There is no IRS memo, waiver or special request that will allow this. The only exclusion available to Expats working in combat zones and qualified hazardous duty areas is the foreign earned income exclusion. The only way an Expat can qualify for the exclusion when working in a combat zone or qualified hazardous duty area is by the presence test or bona fide residence test. (See IRS memo)

Summary

You may be eligible for a 180 extension of time to file. There is no combat zone tax exclusion. The only exclusion of income is the foreign earned income exclusion and is earned by qualifying for the presence test or bona fide residence test. If an Expat hears or thinks otherwise they should contact us immediately before losing the foreign earned income exclusion or bust presence test.