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Form 2555 CPA Tax Accountant discusses preparing IRS Tax Form 2555 | 2014 Form 2555 instructions | Foreign Earned Income Exclusion for Expats | Expatriate Tax Issues |Foreign housing exclusion

Form 2555 CPA expatriate tax issues

If you need help with tax the Form 2555 instructions, or any expatriate tax issue, consider calling us for a free phone consult at (910) 399-2705. Our virtual office makes it easy to work with us from abroad.

Form 2555 CPAs know it’s the key IRS tax form for Expats working abroad. Form 2555, Foreign Earned Income, calculates the Foreign Earned Income exclusion and the Housing Exclusion and/or Deduction (sic). The 2015 Form 2555 instructions cover most expat nuances, meaning the instructions contain too much info and get confusing. Conversely some expat issues that aren’t covered in the Form 2555 instructions. The IRS tries, but the tax terminology and writing style makes the Form 2555 instructions tough to read. Personally I read the Form 2555 instructions every year but I keep up with emerging and twilighting Form 2555 issues through a third party paid database subscription that is much easier to understand. I’ll provide some tips, presented as FAQs, I’ve learned over the years as a Form 2555 CPA tax accountant that should be in the IRS Form 2555 instructions but aren’t.

There are lots of other expat posts on the website dealing with Form 2555, Form 673 and Form 1116. Here’s a related post on Form 673, Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911. Basically Form 673 just allows your employer to not with hold federal income tax. The Form 673 premise? Will you qualify to use Form 2555, along with Form 1040, and owe no federal income tax thanks to the foreign earned income exclusion? The Form 673 instructions are good but the Form 1116 instructions aren’t all that helpful if you’re not familiar with the IRS jargon.

The IRS, under certain conditions, allows expats to exclude foreign earned income from taxable income on Form 1040. Form 2555, aptly named Foreign Earned Income, is a three page tax form that calculates the Foreign Earned Income Exclusion and Housing Exclusion/Deduction. It attaches to your annual Form 1040.  The foreign earned income, usually from a W-2,  appears on Line 7 of Form 1040, and the foreign earned income exclusion allowed, from tax Form 2555, appears as a negative number on Line 21 of Form 1040.

What is at stake

For 2015 you can exclude $100,800 of gross income from taxable income. That’s the foreign earned income exclusion. Plus you can additionally exclude up to 30% of that, $30,240, for the foreign housing deduction.

“In 2015 Expats can exclude up to $131,040 of wages from taxable income. It depends on your circumstances, but that means saving $45,864 of taxes.”
– Gary Bode, Form 2555 CPA

Should Expats File Tax Form 2555? Yes! Amend the tax return if you didn’t

Yes. Ironically, most non-filers would get a refund because of the $100,800 exclusion available on Form 2555 (2014). Every expat CPA has seen a few cases where the expat didn’t file Form 2555. We can amend the original tax return to include the Form 2555 tax reporting and generate a tax refund. But there’s an IRS three-year limit on refunds. Ouch. If you need a Form 2555 CPA to amend those returns please consider using as for tax preparation.

Should you File Form 2555 or Form 2555-EZ

Generally, CPA tax accountants don’t use any EZ form. Why? It is too easy (pun intended) to miss something by taking a short cut. But Form 2555-EZ may be appropriate for you. Just read the Form 2555 instructions carefully. There’s a lot of potential taxes due here, maybe $45,864 for 2016 (depending on you salary of course), so the foreign earned income exclusion deserves the longer Form 2555.

What if you make mistakes on Form 2555? IRS CP2000 Notice

If the IRS catches mistakes on Form 2555, they’ll probably send you a CP2000 Notice. Here’s our post on IRS CP 2000 Notices. This is a low-level, automated IRS tax audit. The IRS may re-calculate your return and “propose” additional tax, interest, and penalties. At this point, you should consult a Form 2555 CPA if you don’t understand the issues on the IRS CP2000. You can file an amended tax return using Form 1040X if you disagree with CP2000. Here’s our post on amended tax returns and Form 1040-X.

What Documentation should Expats keep for Form 2555:

Everything a US-based taxpayer should, plus, proof of your physical presence or bona fide residence in the foreign country. Your passport works for this. Be sure to understand the IRS definitions if you’re cutting it close on the physical presence test.

Danger with filing Form 673,Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusion(s) Provided by Section 911, with your employer

I’ve seen a few cases where the expat taxpayer filed Form 673, had no taxes taken, and then didn’t qualify for the required physical presence test. So no foreign earned income exclusion or Housing Exclusion and/or Deduction was allowed. That means Federal income tax is due. Figure that number as 35% if your gross income. The 35% includes the state income taxes (if applicable) too.

Where to Get Info on Form 2555 preparation in 2015?

If you’ve never prepared Form 2555 before, I recommend:

  • Reading the IRS tax Form 2555 IRS instructions.
  • Google IRS related Form 2555 verbiage. This is published by the IRS. They offer a nice overview. I think they read easier than the actual Form 2555 instructions.
  • Complement the instructions with non-IRS material. Be careful about info from the Internet. This post, for example, is general and may not cover your particular circumstances.
  • Buy an appropriate tax book. Make sure the book is less than two years old. Tax Form 2555 and expat issues change rapidly.
  • Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, is another source. But like the Form 2555 instructions, it’s a hard read in my opinion.
  • Being ready to spend time learning the specifics for your expat circumstances. Remember, the first time is the hardest. It will go quicker next year!
  • Be wary of tax advice from other expats, at least on the first Form 2555.

What about Form 673?

Form 673 allows your employer to not with hold federal income tax from your paychecks. Which sounds great. Your cash flow improves. The IRS doesn’t hold your money for a year. Here’s two extremes that neither the Form 673 instructions of Form 2555 instructions cover:

  • A: Your employer doesn’t with hold federal income tax. You file your tax return and get no refund. But if you fail to qualify for the physical presence test or bona fide residence test you’ll owe taxes. I’ve seen this happen many times. It causes a cash flow crisis that can last years.
  • B: Your employer does with hold federal income taxes. You file and receive a large refund. The IRS holds your money for a year.

Note that using Form 2555 doesn’t cover social security and Medicare taxes, just federal income tax with holding.

What about Form 2555 the timing?

Be sure to file federal and state tax extensions if you need too. The physical presence requirement on tax Form 2555 dictates the filing date for Form 1040. That means you can only claim the foreign earned income exclusion at the end of 360 days after you started the foreign assignment. This is a first time Form 2555 issue, and once that time period includes an entire calendar year the tax filing deadlines are straight forward. That proves you qualify for the physical presence test. If you started a foreign assignment on July 1st, 2015, you’d file a tax extension for 2015 by April 15th, 2015, and then file the 2016 Form 2555 after June 30th, 2015.

What about expat tax extensions?

The IRS has an automatic two month extension for expats, changing the filing deadline from April 15, 2015 to June 14th, 2016. That protects you from under payment and late filing penalties. But most Form 2555 CPAs cover Expats with a “regular” extension as well. So the filing deadline  is October 15th, 2016. Note that doesn’t cover underpayment penalties. See Form 4648 and read the Form 4648 instructions. We e-file our expat tax extensions negating the vagaries of international postal issues.

What’s Form 1116 about?

You may able to deduct, under certain conditions, foreign taxes you paid. Form 116 calculates the tax deduction.

The IRS probably screens Form 2555 carefully

  • Essentially, Form 2555 is an income document analogous to Form W-2 and Form 1099-MISC. The IRS has excellent revenue matching programs for those forms. Why? Tax payers somehow make fewer errors on issues that the IRS can cross correlate. Go figure!
  • Form 2555 is complex, and when self-prepared I think the IRS looks for errors where errors most likely occur.
  • In my opinion the IRS could red flag many more tax returns than it does. But they are too short-handed to do something about it. Not all tax returns are treated equally, the IRS admits it goes after bigger fish.

Other non Form 2555 expat issues

  • File FinCen 1114, formally FBAR if you have non US banks accounts.
    • Note this goes to the criminal division of the IRS.
    • The IRS FATCA program, to discover American’s foreign bank accounts, is in full force. Many countries now report your foreign bank account information to the IRS. They could cross correlate Form 2555 with FATCA information.

“The most common error I see as a Form 2555 CPA? Not claiming the foreign housing exclusion. I know the Form 2555 instructions are counter intuitive, but the foreign housing exclusion could be $30,240 of deductions for 2015, maybe saving you $9,979 in taxes.”

Should you have an expat CPA tax accountant prepare Form 2555?

It depends.

  • Like anything else, Form 2555 preparation gets easier with experience. I think it’s like riding a bike. Anyone can do it but you probably fall a few times first.
  • But some expats only file a few Form 2555(s) in their lifetime, so it’s hard to get that experience.
  • The potential tax savings is significant.
    • Up to $45,864 in 2015, depending on your particular expat issues.
  • Tax software will allow errors. There’s usually a manually workaround for Form 2555. But that requires knowing what the outcome should be and making the tax return reflect it properly. Form 2555 is not handled as automatically s say a W-2 is.
  • The IRS Form 2555 instructions can be daunting.
  • Our virtual office makes the paperwork easy and the fees aren’t too bad.
  • CPAs specialize. But ExPat CPA specialists are hard to find. Experience counts. If you can’t find a local CPA well versed in all aspects of Expat taxation try calling us.

When I was a brick and mortar CPA I never saw a Form 2555 case. This blog sent me enough expats, Vets at first, to specialize. Foreign tax issues? We’re an Expat CPA firm that offers Form 2555 tax preparation, via a virtual, international office. We offer a gratis  initial phone consult at (910) 399-2705. Generally we prepare the entire tax return, not just Form 2555. Our goal is to keep you as an ongoing client, even when back in the US, so our service is responsive.

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74 comments to Form 2555 CPA Tax Accountant discusses preparing IRS Tax Form 2555 | 2014 Form 2555 instructions | Foreign Earned Income Exclusion for Expats | Expatriate Tax Issues |Foreign housing exclusion

  • John

    Given this article, I have a question. I was in Afghanistan for 330 which qualified me for FEIE, I met all the requirements. But I did my states taxesand calculated that NC owed me my taxes back because I payed over 10K in NC taxes while deployed. Do I get that all back? They wrote me and told me that I don’0t get anything back and that I may even owe them. How is this possible?

    • Gary Bode CPA admin

      Hi John. I don’t have enough info to base an answer on, sorry. You can call if you’d like, but I would need to see the tax return.

  • Yen Lee

    my question is I now work and paid in China so in 2012 I am without a W2, I have been paying taxes to the Chinese gov. Do I have any tax exemption from working over seas and if I am under this exemption then do I still have to file with the IRS? thans in advance

  • Ron Kowalski

    Does the IRS regularly contact or verify employment with foreign companies? After a very bad experience with a particular overseas employer, I wish no further contact with the company, but would like to exclude the income from my taxes (I’ve read publications and meet requirements for physical presence test, etc.).

    Thank you.

    • Sounds like you should exclude it Ron. The IRS is all powerful in the US. If they audited you, I think most foriegn companies would send them info. But I doubt they can cross correlate foreign pay routinely. So, after all that, I don’t know.

  • James

    Hi,

    I have a question for you to find out if I need a CPA. I have been living in South Korea for 3 years and doing my own return. I also have a son back in the states though, and been paying for his tuition, and now someone tells me I could have been claiming the American Opportunity credit and getting a refund.

    I was under the understanding that I could not get a refundable credit while filing the form 2555 asking for my income to be excluded (my income has been around 50k per year every year).

    Can I get a refund, and if so can I amend the past 3 years of taxes?

  • Sonya Coleman

    Can you put K1 earnings from your S Corp on form 2555?

    • I believe the Foreign Earned Income Exclusion is for wages from S Corp for work you did out of the country. Distributions from you S Corporation aren’t earned income. I hope that helps. Maybe I misunderstood the question.

  • Angela

    I have a Canadian/US resident. He lives in Canada year round and is self employed. He received a 1099 misc for work that was done in the US. He never stayed in the US just worked for a short period of time. Can we exclude the amount on the 1099? He did already pay taxes on it in Canada.

  • Erin

    Hello,
    I am a military spouse working as a contractor overseas. I completed the form 673 expecting to be here for the full 330 but now I am looking at divorce and leaving early. I will have been living in Germany from October 2012 through at least Sep 2013 so I will have lived abroad for over 330 days but I only started my job Jan 4th, 2013 so I will have been working for less than 330. Can I still claim exemption and file form 2555 or should I immediately retract my form 673 and expect to be paying back a lot of taxes this year? Thank you very much for your help.
    Erin

    • Sorry to hear about the divorce Erin. I would research your tax question to be sure but I think your residency fills the requirement even though you worked part of that time. Hope that helps.

    • Hi Erin. I think you’re OK with the residency requirement. If you were my client I’d check to make sure. We have a tax database to make that simple but I bet your issue is discussed in the IRS instruction.

  • Leroy

    My tax year is January 01, 2013 to Dec 31, 2013. I may not make my 330 days before my company makes me return to the states (We lost the contract in Afghanistan: Projected return date to the states September 10th, 2013. Will I have to Pay the full tax amount back to the IRS or just a small percentage.

    Thanks

    Leroy

    • OK Leroy. Even though you’re using a calendar tax year, the 330 physical presence days requirement for Form 2555 can span January 1st. If you don’t have the 330 days overseas you get no foreign earned income tax exclusion – ouch. Maybe you need to calculate the numbers to see if staying somewhere outside the US makes sense. Hope that helps.

      • Leroy

        This makes since. It is also what I thought to be true. Some one told me that there was a way out, but as I thought I will just get another Job over here, or Hang out until I make 330 days. Thanks!

  • Maggie

    Hi, thanks for the great info!

    I keep seeing conflicting information on my question below, even on some expat tax professional’s websites who make it sound like they can they can “help” with this issue (legitimately?), but it sounds like you know what you are talking about, so I’m hoping you can give a straightforward answer.

    Is it possible to only exclude SOME of one’s foreign earned income? Or is the exclusion an all or nothing thing (up to the FEIE limit, of course)? I ask from the standpoint of an expat with ONLY foreign income wanting to contribute to a Roth IRA back home (and who is otherwise eligible, except for the bit in Pub 590 about “Compensation for Purposes of an IRA…Does not include…any amounts you exclude from income,” which leads to this question about not excluding the entire amount…). If not, is there some other legitimate way that you know of to accomplish roughly the same thing?

    A million thanks in advance for your help!

    • Well Maggie I believe you can limit the amount you wish to exclude on Form 2555. But it would take some research to answer your entire question. We can provide that service. It’s just beyond the scope of a post comment, sorry.

      • Maggie

        Thank you, Gary. What’s the best way to find out, and how much will it cost to get the answer? I am really just trying to determine whether I need an accountant to help or not. So far, I’ve been fine doing my own taxes, even overseas. Thanks again!

  • chris

    Hi, Gary,

    Thanks for the great info!

    One simple question if I may, I receive a monthly payment (roughly 1000 USD per month) working as a consultant for a foreign company, but I live in US mostly and travel to that foreign company once or twice per year. So I am not eligible for the FEIE.

    I understand that I need to report this income at Line 7 on form 1040. But do I also need to fill out form 2555 or 2555EZ? Again, I am not claiming FEIE. I guess my question is, does form 2555 need to be filled out by anyone who has any foreign earned income, or only the ones who are claiming FEIE?

    Thanks!

  • Halle

    My wife have been living outside of the U.S. now for 12 years as missionary’s in Central America. We no longer own a home in the states, but do own our own home here and are bona fide residents here. As such, could we return to the states for a couple of 30 day visits, say once in the spring and once in the fall of the same year for a total of 60 days and still qualify for the FEIE because we are bona fide residents? And if this is so, is there a limit to how long we can stay in the states and still qualify for the FEIE?

    • That’s true dedication Halle. For the bona fide residence qualification for Form 2555, Foreign Earned Income, you can be in the States longer than 60 days a year. How much longer? It depends. 60 days is the max for the Physical Presence qualification. You may be able to claim some foreign (non USA) housing allowance as well. Hope that helps.

  • Robert

    Gary,

    I have two questions regarding Form 2555.

    I am confused about line #9 on Form 2555. My son arrived in China on 1/16/2013 to work for one year at a private English language school. His contract ended 1/17/2014 and he returned back home to PA on 1/18/2014. He never left China during his work visa stay. Does he need to report on line 9 (tax homes for tax year) where he lived from 1/1/2013 to 1/15/2013 in addition to his apartment address in China? Since he was in China until 1/17/2014, does he also need to include that time or just until 12/31/2013?

    Also, (confused about 12 consecutive months)

    2013 Gross USD equivalent foreign income $11,000
    2014 Gross USD equivalent foreign income $500 (1/1/14-1/17/14)
    RMB’s go far in China.

    I checked and he qualifies for excluding 100% of his 2013 foreign income under physical presence criteria. (348/365 X 97,600 = 93,013). He’s not claiming the housing exclusion since his gross salary was so low anyway. They deducted their provided housing, utilities, etc. from the $11,000 (USD equivalent) gross salary and paid the net in RMB cash on the last day of month.

    I’m looking ahead to 2014. Does he also qualify for same physical presence exclusion of $500 for 2014? In other words, what goes on line 9 when we file his 2014 taxes next year. When he gains employment back in USA for 2014, I take he will be able to again exclude (17/365 X 97,600 = $4,545) which is still way above his $500 USD equivalent salary in 2014.

    I take he will record on line 9 next year, his two addresses (Chinese apartment and US apartment) for their respective time periods.

    I wish we could just include the $500 on his 2013 return and be done with it. To me it’s excluded regardless of the tax year since the 330 physical presence falls within a consecutive 12 month period.

    Thank you,
    Bob

    Thanks Bob

  • Sam

    Hi Gary,

    Nice Website and lots of good info. I’m not sure if I need to hire an accountant or not.

    Basically, my wife and I lived overseas from February 2011 through February 23, 2013. During that time, we both had self-employment income (I was doing contract work for U.S. Govt, she was doing work over the internet for clients in the U.S.) and claimed the foreign earned income exclusion. On February 23, 2013, my contract ended so we moved back to the U.S. She did some work there, but I made no U.S. income. In June we moved to China (arrived June 6, 2013) where she continues to do her self-employment thing, but I’ve been working as an employee of a Chinese hospital and paying Chinese income taxes. (So, basically our income from the first two months of 2013 meets the physical presence test based upon being overseas from Feb 2011 through Feb 2013, and our income from the last seven months of 2013 should meet the physical presence test once we’ve been here for a full 330 days…about the first week of May 2014)

    So, we started to do our taxes on TurboTax (with the intention of filing in May or June once we’ve been in China long enough to meet the physical presence test for our income made here) and when it comes to the part for foreign earned income, TurboTax seems to have it’s mind blown at the concept that a person might have two different foreign tax homes. It only gives us the option of listing a single 12 month period (to cover the first 2 months of 2013), but doesn’t allow us to enter dates for our arrival in China.

    After googling a bit, some websites advise that for a situation such as ours, we would need to each file two separate forms 2555 (one for our first two months of 2013 before we moved to the U.S. for a few months, and then a second one to cover our income since moving to China in June), but some other websites indicate that we should each only file a single form 2555 to cover both income sources/tax homes.

    What are your thoughts?

    Also, I’d be interested in knowing how much you might charge to file our taxes for us if you wouldn’t mind giving a quote either here in the comments or via email.

    Cheers,

    Sam

  • Nagrom

    Hi! I will be living in Canada and plan to claim the FEIE for tax year 2015 (the 12 month period will actually be the whole calendar year from Jan-Dec). I plan on keeping excellent records in a travel diary and will have no problem staying out for 330 days. My question is: In the event of an audit, what will the IRS accept as “proof” that I was not in the US? When I do travel to the US, I do so by land and customs does not always scan/stamp my passport as a result. Would an official document(s) from US and Canadian customs detailing my travel history (obtained through a freedom of information request) satisfy the IRS? Would I be able to include this with my return before they might ask for it? I will only have W2 income from a US company <100k. I'm still paranoid of an audit! Thanks for any help.

  • Nick

    Ciao Gary,
    Great site. I have a question about FEIE. I am a govt. civilian overseas and my wife got a contracting job over here. We have been here 3 years and she qualifies for the FEIE, but whats confusing me is that her income still affects our federal tax results. For example… I put my W2 into TurboTax and we have a refund of $2k. Next I put in her W2 and we owe $7k (which makes sense because she hasn’t withheld all year). So then I answer all the FEIE questions, which result in her income being FEIE. The amount we owe drops to $2k. But shouldn’t the results swing all the way back to a refund of $2k if her income is indeed excluded?

    Hopefully I explained it alright. Thanks for any help!!

  • Mike

    Hello Gary,
    If I qualify for Foreign Earned income under physical present test.
    But my dates are from 04/01/2013 – 03/31/2014.

    How should I show the dates on the Form 2555, Part III, line 18, because this is 2013 tax return and the date in a future.

    Thank you.
    Mike

  • tim

    Question for 2012 IRS form 2555 under section VIII Line 44. ‘Deductions allowed in figuring your AGI (form 1040, line 37)that are allocable to the excluded income.’

    What does this mean? I took housing and foreign income exclusion for a total of $158,384. Am I required to put a figure down on line 44?

    Thank you

  • jolie

    I did not file my 2008, 2009 and 2010 taxes, for those years I was a US Citizen that earned foreign income….. I need to know if it is too late for me to claim the foreign income exclusion? If it’s too late, does that mean the income will be taxable?

    • Sorry Jolie, you’ve lost the right for any refund Form 2555 might have generated. But you can still use Form 2555 to zero out tax liability. And the IRS will ask for the returns eventually.

  • Rodger Regal

    Hi Gary,
    I am a US citizen working and living in Qatar. I filed for an extension for 2013 return and my question is: how do I deduct moving expenses for that were not reimbursed? Can I just deduct from my foreign income? I will be able to meet the 330 days presence test before I file. Thank you for your help.

  • robert

    When I did my 2012 taxes, i worked in afghanistan and used the physical presence test from april 2012 to april 2013. On my 2013 taxes, should I just use the physical presence test for the the calender year Jan 1 to dec 31 2013, or use april 2013 to april 2014?

  • john

    When I did my 2013 taxes I accidentally used the bona fide test for working in Afghanistan. Should I file an amended return to reflect the physical presence test?

    • Hi John. If you’re not bona fide but could meet the physical presence test I might not amend. I’d just use physical presence on the next return. So there’s no tax consequence here. But if can’t meet the physical presence test, and would be disqualified for the foreign earned income credit on IRS tax Form 2555, I would amend because you owe taxes.

  • Alan

    Hi Gary,
    I live in the UAE and a new CPA filled out my 2555. He filled out Part VI “Taxpayers Claiming the Housing Exclusion and/or Deduction” and added $34,000 to may wages. Now, my company takes care of my housing here, I never see that money as its part of my contract. Is this right? I understand if my company gave me the money they i paid for it, but I do not receive any money for it. Is this right? Do I have to fill out Part VI?

    • Alan

      Mr Gary,

      Please disregard my last comment. That has been resolved. Here is my other question lol. My company pays me per diem 50 dollars a day. My CPA will not remove that from my wages because he says I’m in the UAE more thank a year. Is this true and i have to pay for a all my per diem?

      • Sorry,I don’t have enough info to answer.

        • Grace

          Sorry I posted above, but I thought I would clarify this was for form 2555 (not 2555 EZ)

          Hi Gary!
          I hope its ok to ask for clarification on part III column (d) – when it asks for full days do you just count the days inclusive of days left + days arrived or do you exclude them?
          eg: if you arrived in the USA 01/01/2015 and you left 01/03/2015 do you put 3 -> even though you arrived in the afternoon and left in the morning? Or do you put in 1 because the arriving and the leaving days you were only partially in the USA?
          Thank you

  • Kathy

    Hi Gary:

    Thanks for the helpful forum.

    I’m unclear about whether I have to file Form 2555 every year. The first year I used it, I was able to reduce my tax liability to 0 only by filing 2555. But this year (and I assume in the future, though I hope not every year!) I made so little that I don’t owe any federal taxes even without using the exclusion. Do I need to file/use the exclusion anyway, to keep it “in force” somehow?

    Thanks for any insight.

  • Reza Nas

    Hi,

    I have a hard time understanding the following sentence from Form 2555 Part III line 18:
    “Exclude travel between foreign countries that did not involve travel on or over international waters, or in or over the United States, for 24 hours or more.”
    I traveled to the US on business for a total of about 25 days. Do I have to fill out the table in line 18 with the US travel dates? And what about line 18f? I didn’t earn income in the US, only my monthly salary that my employer pays me.
    Thanks,

  • Rose

    My employer paid $20,000 for my housing while working overseas, do i inlcude that as part of my W2 wages? I list it on line 22f but i was told i need to include it on line 7 on my 1040

    • Hi Rose. You would claim it on line 7 and deduct it on line 21. I just published a post that gives you the true “tax free” amount for Form 2555. I’d look to see if the foreign housing exclusion would help give your particular circumstances.

  • Angie

    not sure if you receive my earlier post. so here i go again – how do i report the $5000 contribution i made to Foreign Social Security System on my SE Income. I am in Tokyo Japan

  • I have been living as a retire US citizen in Mexico for 15 years, my only income is from social security $4200 USD per year. I am Married and head of the household but my wife is a Mexican National and pays her taxes to the Mexican Government on her business. Although I am approaching 77 years of age, I have been asked to provide business management services for an international firm. The income would exceed $50K USD what liability would I have in Mexico and the US for filing and paying income taxes

  • Madhu

    Hello, I have Green Card but out of USA since 2012 and currently in India. Every year I am filing my taxes. Made a mistake in 2013 taxes – I filed 1116 Form instead of 2555-EZ. This was done unknowingly. In 2012 and 2011, 2010 I filed 2555 -EZ.

    How I can correct it? Please reply.

    I would like to go with 2555 – EZ.

  • Dan

    Gary,

    Last year was my first year out of the Army and working overseas as a contractor. I did not meet the physical presence or bona fide residence test. At the suggestion of co-workers, I used an accountant that applies for waivers to the 330 day rule. He filed my return and I received a refund.

    On April 14th I found out (by accident really) that this accountant I used is being investigated by the Department of Justice for misuse of form 2555.

    That night (from overseas) I downloaded and ran TurboTax for the tax year 2014 without a form 2555 and sent all the forms to the wife for her signature. On April 15th (tax day of course) she put a 1040X along with the newly computed 1040 and a hefty check in the mail to the IRS. The IRS cashed the check 5 days later.

    My question is this, is there anything else you think I should do at this point? I am just trying to minimize any future repercussions from using a questionable CPA.

    • No Dan, I think the IRS will hold you blameless. However if you stayed over seas for 330 out of any 365 days you meet the physical presence test. So you might want to re-amend 2014 when you do 2014.

  • Richard

    Gary,

    I am filing bona fide resident for 2015 and am a resident of Georgia. I was in the US less than 330 days in 2015. The time I was in the US it was all vacation and I had not work income. When I tried to enter the days in Turbotax it said that I could not input 0 days of business… it required at least 1 day Is this a software glitch? Can I put in 1 day with no income?

    I will also be a bonafide resident for at least two more years.. through December 31, 2017 when my contract ends. Can I be in the US on vacation for more than 35 days. Will it raise it red flag with the IRS if I am here 45 or 50 days? It would all be vacation time.

    Thanks, your site is very informative.

    • Hi Richard. Well some of this is a TurboTax support issue. And I don’t understand the time line. You were in the US less than 330 days in 2015? Even with bona fide status your time in the US is limited if you want to file Form 1555. Hope that helps.

  • Deepak

    Hello Gary,
    I reached US in April’14 for the first time and stayed for 140 days post which I went back to India in Aug’14 and came back in USA in Aug’15.

    So I completed 330 days outside US to clear physical presence test.
    I have become the US resident for first time in 2015. Can I claim 2555 exemption for this year to exclude India wages income in 2015?

    Thanks.

  • Andrew

    Hi Gary,

    I’ve lived in Japan since 2006 and have always filed the 2555 using the physical presence test. This past year my wife(Japanese national) and I built a house and now I would like to file as a bona fide resident, but have questions on how I should answer some of the questions.

    Line 10-Date bona fide residence began. Would that be when I arrived in 2006 or do I use Jan 1 of 2015 since I’ve previously filed with the physical presence test?

    15b&c- type of visa which I entered Japan and limitations. I entered Japan with an instructor visa in 2006(3 year limit and limits type of work) but since then I’ve renewed that viasa, I’ve had a spousal visa(3 year limit but not limit on type of work) and now I`m a permanent resident(must be renewed every 5 years but no limit to length of stay or work type). How should I answer that question?

    Thank you very much for any info you can give me.

  • Michael

    Hello,

    My question regards form 2555. I am self-employed as single member LLC, but I’ve been elected to file as an S-Corp. I am now living in Germany, while my S-Corp business is still in Maryland. All of my income for 2015 is being reported as a distribution on form K-1 because I have not made much profit, and I did not use a payroll service to pay myself. Is there any way around this for form 2555 and to avoif double taxation? Might the income be eligible for the foreign exclusion because I am a sole proprietor and the 100% shareholder? Thank you very much for your help.

    • Gosh you kind of shot yourself in the foot Michael. Sounds like the S Corp needed to pay you. You might consider amending 2015 and doing payroll for the last quarter of 2015. But I’ve never done that. And there would be late payment penalties on all four payroll taxes, Social Security, Medicare, SUTA and FUTA.

  • Katie

    Gary, I lived in the UK from 1993-2014; I’m a US citizen, I did not know that I was required to complete a return all those years, as it turned out I moved back the US in 2014; completed the Streamlined Procedure for Compliance for 2010,2011, 2012 & 2013 all income was UK; I then filed US returns for 2014 & 2015; I had filed an extension on my 2013 return as I was waiting for my final wages or P60 (equivalent to W-2); I filed a 1040X with 1116 for 2013 and have received a refund back, I spoke with an IRS agent, explained the situation and asked what should I do, the agent stated I needed to send a 1040X 2013 with 2555; what should I do with the check? just return it with the amended tax form?

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