Save your money with Form 2555. This is for real, and you can save your money if you file IRS Form 2555. Do you want to know how? Stay tuned at USTAXFiling.in where you will get all the important updates related to IRS Form 2555.
IRS Form 2555 makes an expat’s life more easy. The 2555 form assists expats electing to use the FEIE (foreign earned income exclusion), the biggest money savers in the expat realm.
Need of IRS Form 2555 For Expats
You have to use the foreign earned income exclusion in many cases; then, you must fill out IRS Form 2555-EZ or IRS Form 2555 and return it with your federal tax return (Form 1040) by the given deadline. If you become eligible, you might get excluded from US taxation by $112,000 on your income taxes.
Step 1: Become Eligible Using One of the Tests.
To become eligible for the FEIE or foreign earned income exclusion, you must become eligible for using the physical presence test or bona fide residence test. The physical presence test gives more flexibility. The bona fide residence test needs that you were in your residence country for an uninterrupted year. If you are present physically for the entire 330 days (it means 24 hours every day) during 12 consecutive months, you may pass the physical presence test. The complete 330 days don’t have to be consecutive, and you must pick and select the months that are conducive to your passing the test and that are aidful based on your calendar. You should not forget to choose the test that aids you in becoming eligible and don’t attempt to use both of them.
Step 2: Consider Which Form You Should File
Form 2555-EZ and Form 2555 accomplish similar goals, but IRS Form 2555-EZ does so with fewer documents. Also, to use form 2555-EZ, you should apply the following:
- You should be a resident alien or citizen of the United States.
- You should be physically present in a foreign country for a minimum of 330 days in a year.
- You are foregoing the Foreign Housing Exclusion.
- You should file an income tax return for the period covering a calendar year.
- You should not have moving expenses or business associated with your current job.
- You should have earned less than the foreign income exclusion amount for that particular year. If you are self-employed, then you cannot use Form 2555-EZ, and you have to file IRS Form 2555 with your expat income tax return.
If this is true, then yes, you saved yourself some time. Also, if you are using the regular 2555 form, you may claim the foreign housing exclusion and save yourself from tax liability.
Step 3: Fill The Form 2555 by the Deadline.
If you are using the IRS Form 2555-EZ, you should collect the following details before you get started:
- Foreign income earning statement
- Employer’s address and name (US and foreign, whichever is applicable)
- Previous year Form 2555-EZ, if available
- International travel calendar
Whichever form you have decided to use, you must remember these important steps of income do not qualify for the FEIE or foreign earned income exclusion. Income received as an worker of the US government, income for work in specific combat zones or international waters, the income received after the end of the financial year in the subsequent year that services were performed, pension, lodging furnished for the convenience of the employer, the cost of meals or annuity payments that includes social security too.
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