Nun. I respectfully disagree - simply having 1040 income does not qualify one for Roth ...income must be qualified :
* For 2011 the maximum contribution limits are $5,000 per person ($6,000 if over 50), based on qualified income; compensation must be at least equal to the contribution limit.
Qualified income includes wages and salaries, self-employment income, alimony, commissions, and non-taxable combat pay.* It does not include earnings from properties, interest or dividend income, pension or annuity income, deferred compensation, or income from certain partnerships. Nor does it include amounts excluded by the foreign earned income or housing exclusion (which are added to adjusted gross income for MAGI purposes).*
Contribution amounts for anyone with a retirement plan at work may be phased out as modified adjusted gross income (MAGI) levels rise according to filing status.
FEIE depends on foreign residence: bona fide or physical presence. In either case, the taxpayer must first qualify before any FEIE is available.* Once qualified as a foreign resident, the $92,900 exclusion can be lowered in the second year if you return to the U.S.* Suppose date of return 1 July 2011.* The exclusion amount would be reduced by 50%, with foreign income over $46,450 qualifying for Roth purposes. But subsequently the tax filer would have to re-qualify for the exclusion under the bona fide or physical presence tests.
During the qualification or re-qualification period, the physical presence test allows any 330 day period in a 12-month period. So suppose you are physically present in France, except for a 15 day vacation in December to the states, from 1 June 2010 through 30 September 2011 during which you earn $88,000.* To calculate the exclusion, count 330 full days backward from 30 September. Not counting the vacation days, 330 days is 21 October 2010.** Twelve months from this date is 20 October 2011, the last day of the 12-month period. The number of days from 1 January through 20 October 2011 is 293. The maximum exclusion is $74,570 (293 / 365 x 92,900). The bona fide presence test is met by residing in a foreign country or countries for a full tax year. *
(Revised April 2012)
Barron Harper
Barron's International Tax Service - Tax Help for Expatriates and Foreign Corporations