Q: i was wondering when working for a contractor company outside the u.s there is an amount of your income not taxed, you can only stay in the u.s. for 30 days if you stay more you get taxed for the whole 1 year contract, how does the irs know that you stayed longer if you did not do anything in the u.s but eat and sleep?
A: If you are audited, the IRS will ask you to prove that you are eligible for the Foreign Earned Income Exclusion. You'll be asked to provide copies of all travel tickets and your passport and any other records to substantiate your claim. Additionally, USCIS maintains a record of each time you leave and enter the country. The IRS can get those records if they suspect you are playing fast and loose with the eligibility requirements. BTW, it's not 30 days in the US that will bite you. You must prove that you spent at least 330 days in one or more foreign countries to meet the Physical Presence Test. Time in transit on or over the high seas does not count towards the 330 day test. Nor does time spent in a place that is not a foreign country such as Antarctica. The IRS can and does get picky on this issue, and I've personally seen them deny the FEIE for missing the test by ONE day.