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Extension of Time To File U.S. Income

A U.S. resident alien who is a citizen or

employer’s payroll periods, you received

Tax Return, with the Department of the

national of a country with which the

your last salary payment for 2007 in 2008,

Treasury, Internal Revenue Service

United States has an income tax treaty in

that income may be treated as earned in

Center, Austin, TX 73301-0215, before

effect and who is a bona fide resident of a

2008. If you cannot treat that salary

the due date of your return. Interest is

foreign country, or countries, for an

payment as income earned in 2008, the

charged on the tax not paid by the regular

uninterrupted period that includes an

rules explained under Income earned in

due date as explained earlier.

entire tax year (January 1 – December 31,

prior year, discussed later, apply. See

if you file a calendar year return). See

Pub. 54 for more details.

Choosing the Exclusion(s)

Pub. 901, U.S. Tax Treaties, for a list of

Foreign earned income for this

countries with which the United States

To choose either of the exclusions,

purpose means wages, salaries,

has an income tax treaty in effect.

complete the appropriate parts of Form

professional fees, and other

2555 and file it with your Form 1040 or

No specific rule determines if you are a

compensation received for personal

Form 1040X, Amended U.S. Individual

bona fide resident of a foreign country

services you performed in a foreign

Income Tax Return. Your initial choice to

because the determination involves your

country during the period for which you

claim the exclusion must usually be made

intention about the length and nature of

meet the tax home test and either the

on a timely filed return (including

your stay. Evidence of your intention may

bona fide residence test or the physical

extensions) or on a return amending a

be your words and acts. If these conflict,

presence test. It also includes noncash

timely filed return. However, there are

your acts carry more weight than your

income (such as a home or car) and

exceptions. See Pub. 54 for details.

words. Generally, if you go to a foreign

allowances or reimbursements.

country for a definite, temporary purpose

Once you choose to claim an

Foreign earned income does not

and return to the United States after you

exclusion, that choice remains in effect for

include amounts that are actually a

accomplish it, you are not a bona fide

that year and all future years unless it is

distribution of corporate earnings or

resident of the foreign country. If

revoked. To revoke your choice, you must

profits rather than a reasonable allowance

accomplishing the purpose requires an

attach a statement to your return for the

as compensation for your personal

extended, indefinite stay, and you make

first year you do not wish to claim the

services. It also does not include the

your home in the foreign country, you

exclusion(s). If you revoke your choice,

following types of income.

may be a bona fide resident. See Pub. 54

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you cannot claim the exclusion(s) for your

Pension and annuity income (including

for more information and examples.

next 5 tax years without the approval of

social security and railroad retirement

the Internal Revenue Service. See Pub.

Lines 13a and 13b. If you submitted a

benefits treated as social security).

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54 for more information.

statement of nonresidence to the

Interest, ordinary dividends, capital

authorities of a foreign country in which

Figuring tax on income not excluded.

gains, alimony, etc.

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you earned income and the authorities

If you claim either of the exclusions or the

Portion of 2007 moving expense

hold that you are not subject to their

housing deduction, you must figure the

deduction allocable to 2008 that is

income tax laws by reason of

tax on your nonexcluded income using

included in your 2008 gross income. For

nonresidency in the foreign country, you

the tax rates that would have applied had

details, see Moving Expense Attributable

are not considered a bona fide resident of

you not claimed the exclusions. See the

to Foreign Earnings in 2 Years under

that country.

Instructions for Form 1040 and complete

Moving Expenses in Pub. 54.

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the Foreign Earned Income Tax

Amounts paid to you by the U.S.

If you submitted such a statement and

Worksheet to figure the amount of tax to

Government or any of its agencies if you

the authorities have not made an adverse

enter on Form 1040, line 44. When

were an employee of the U.S.

determination of your nonresident status,

figuring your alternative minimum tax on

Government or any of its agencies.

you are not considered a bona fide

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Form 6251, you must use the Foreign

Amounts received after the end of the

resident of that country.

Earned Income Tax Worksheet in the

tax year following the tax year in which

instructions for Form 6251.

Part III

you performed the services.

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Amounts you must include in gross

Earned income credit. You cannot take

Physical Presence Test

income because of your employer’s

the earned income credit if you claim

contributions to a nonexempt employees’

either of the exclusions or the housing

To meet this test, you must be a U.S.

trust or to a nonqualified annuity contract.

deduction.

citizen or resident alien who is physically

Foreign tax credit or deduction. You

present in a foreign country, or countries,

Income received in prior year. Foreign

for at least 330 full days during any period

cannot take a credit or deduction for

earned income received in 2007 for

foreign income taxes paid or accrued on

of 12 months in a row. A full day means

services you performed in 2008 can be

the 24-hour period that starts at midnight.

income that is excluded under either of

excluded from your 2007 gross income if,

the exclusions. If all of your foreign

and to the extent, the income would have

To figure the minimum of 330 full days,

been excludable if you had received it in

earned income is excluded, you cannot

add all separate periods you were present

claim a credit or deduction for the foreign

2008. To claim the additional exclusion,

in a foreign country during the 12-month

you must amend your 2007 tax return. To

taxes paid or accrued on that income. If

period shown on line 16. The 330 full

only part of your income is excluded, you

do this, file Form 1040X.

days can be interrupted by periods when

cannot claim a credit or deduction for the

you are traveling over international waters

Income earned in prior year. Foreign

foreign taxes allocable to the excluded

or are otherwise not in a foreign country.

earned income received in 2008 for

income. See Pub. 514, Foreign Tax

See Pub. 54 for more information and

services you performed in 2007 can be

Credit for Individuals, for details on how to

examples.

excluded from your 2008 gross income if,

figure the amount allocable to the

and to the extent, the income would have

Note. A nonresident alien who, with a

excluded income.

been excludable if you had received it in

U.S. citizen or U.S. resident alien spouse,

IRA deduction. If you claim either of the

2007.

chooses to be taxed as a resident of the

exclusions, special rules apply in figuring

United States can qualify under this test if

If you are excluding income under this

the amount of your IRA deduction. For

the time requirements are met. See Pub.

rule, do not include this income in Part IV.

details, see Pub. 590, Individual

54 for details on how to make this choice.

Instead, attach a statement to Form 2555

Retirement Arrangements (IRAs).

showing how you figured the exclusion.

Part IV

Enter the amount that would have been

excludable in 2007 on Form 2555 to the

Specific Instructions

Foreign Earned Income

left of line 45. Next to the amount enter

“Exclusion of Income Earned in 2007.”

Enter in this part the total foreign earned

Part II

Include it in the total reported on line 45.

income you earned and received

(including income constructively received)

Note. If you claimed any deduction,

Bona Fide Residence Test

during the tax year. If you are a cash

credit, or exclusion on your 2007 return

basis taxpayer, report on Form 1040 all

To meet this test, you must be one of the

that is definitely related to the 2007

income you received during the tax year

following:

foreign earned income you are excluding

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regardless of when you earned it.

A U.S. citizen who is a bona fide

under this rule, you may have to amend

resident of a foreign country, or countries,

Income is earned in the tax year you

your 2007 income tax return to adjust the

for an uninterrupted period that includes

perform the services for which you

amount you claimed. To do this, file Form

an entire tax year (January 1 – December

receive the pay. But if you are a cash

1040X.

31, if you file a calendar year return), or

basis taxpayer and, because of your

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Instructions For Form 2555 - Foreign Earned Income - Internal Revenue Service - 2008 Page 2

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