Tips for Completing IRS Form 2555

| November 12, 2010

IRS tax form number 2555 is called the Foreign Earned Income form. This form must be filed in conjunction with your tax form 1040. Form 2555 can only be used by US citizens and resident aliens. The form is used to report foreign income and deductions for foreign expenses such as meals, lodging, transportation and more. The information calculated on this forum will affect the filing of your 1040 form. Therefore, it’s best to calculate your foreign earned income on form 2555 before completing your 1040 tax form.

Download the instructions for form 2555. The instructions are not included as part of form 2555. Therefore, you must download the separate set of instructions or view them from the website.

Complete the demographic information
. The demographic information pertains to the foreign location. Therefore, insert the foreign address (not your US home address), occupation, employer’s name and address. Also, insert the type of employer for which you’re filing form 2555 (self, foreign entity, US company, foreign affiliate of a US company or other).calculator

Determine whether or not you meet the bona fide resident qualification. Before you can complete the next section of the application, you must take the bona fide residence test. The test can either be found on page 2 of the Form 2555 instructions or on the website. If you qualify as a bona fide resident, complete Part II of form 2555, if not, complete Part III. Both part two and part three determine whether you’re a full-time or part-time foreign resident.

Enter the foreign earned income information on Part IV of form 2555
. This includes wages, bonuses, commission salaries or any type of income earned. Don’t forget to enter the non-cash income such as lodging and meals car or other allowances. Add all of the income and allowance and place the total on line 24. List excludable meals and lodging on line 25 (refer to the instructions to determine which meals and lodging are excludable). Subtract line 25 from line 24 and enter it on line 26.

Decide if you’re going to take the housing exclusion or deduction
. If you are taking the housing deduction then you must complete Part VI which is the section that calculates the housing exclusion or deduction. If you’re not taking the housing deduction, skip Part VI and continue on with Part VII which calculates the foreign income exclusion.

Fill in Part VIII only if you had to complete Part VII
. Part VIII must be completed by all taxpayers claiming either the housing exclusion, foreign earned income exclusion or both. The final number calculated in Part VIII must be entered on line 21 of tax form 1040.


Category: Form 2555, Tax Forms

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Felicia A. Williams is a wife, mother, freelance writer and owner of Tidbits About Money.

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