Foreign earned income exclusion / foreign tax credit when present in US
I'm a citizen of Norway as well as of the US by birth. I've never before 2014 resided in the US. I'm a PhD student in my native Norway, but we are here considered employees and paid a wage. I've understood that I need to file with the IRS every year and declare this income, and that I can use the foreign earned income exclusion so that I don't have to pay any US tax.
Now, as part of my PhD work I in 2014 visited a US university, and resided in the country for about half the year. During this period, I was paid as normal by my employer (my home university), and my home country deducted ordinary income tax from this pay. The money was paid into my Norwegian bank account as it always has - I have no accounts in the US.
When filing my 2014 IRS return, I'm confused. Maybe someone can enlighten me with regards to the following:
Can I use the foreign earned income exclusion in my situation?
If not, how should I go about this to avoid being doubly taxed for 2014?
It seems that Norway has a bilateral tax treaty with the US, that, if I'm reading it correctly, seems to indicate that "visiting researchers to universities" (which really seems like I would qualify as) should not be taxed by either country for the duration of their stay. This seems too good to be true, and not really something I'm aiming for (I'll happily pay my taxes at home - I just want to make sure I don't pay twice), but if it were true, how does one go about filing IRS returns based on such treaties? Is it even something one can do on one's own?
I didn't even give a thought to state taxes; those should only apply to income sourced from the state I lived in, right (AKA [CO])?
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Can I use the foreign earned income exclusion in my situation?
Only partially, since the days you spent in the US should be excluded. You'll have to prorate your exclusion limit, and only apply it to the income earned while not in the US.
If not, how should I go about this to avoid being doubly taxed for
2014?
The amounts you cannot exclude are taxable in the US, and you can use a portion of your Norwegian tax to offset the US tax liability. Use form 1116 for that. Form 1116 with form 2555 on the same return will require some arithmetic exercises, but there are worksheets for that in the instructions.
In addition, US-Norwegian treaty may come into play, so check that out. It may help you reduce the tax liability in the US or claim credit on the US taxes in Norway.
It seems that Norway has a bilateral tax treaty with the US, that, if
I'm reading it correctly, seems to indicate that "visiting researchers
to universities" (which really seems like I would qualify as) should
not be taxed by either country for the duration of their stay.
The relevant portion of the treaty is Article 16.
Article 16(2)(b) allows you 00 exemption for up to a year stay in the US for your salary from the Norwegian school. You will still be taxed in Norway. To claim the treaty benefit you need to attach form 8833 to your tax return, and deduct the appropriate amount on line 21 of your form 1040.
However, since you're a US citizen, that article doesn't apply to you (See the "savings clause" in the Article 22).
I didn't even give a thought to state taxes; those should only apply
to income sourced from the state I lived in, right (AKA [CO])?
I don't know what State you were in, so hard to say, but yes - the State you were in is the one to tax you. Note that the tax treaty between Norway and the US is between Norway and the Federal government, and doesn't apply to States. So the income you earned while in the US will be taxable by the State you were at, and you'll need to file a "non-resident" return there (if that State has income taxes - not all do).
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