Looking for a Form 2555 Templates? Download it for free!

Treasury, Internal Revenue Service

accomplish it, you are not a bona fide

profits rather than a reasonable allowance

Center, Austin, TX 73301-0215, before

resident of the foreign country. If

as compensation for your personal

the due date of your return. Interest is

accomplishing the purpose requires an

services. It also does not include the

charged on the tax not paid by the regular

extended, indefinite stay, and you make

following types of income.

•

due date as explained earlier.

your home in the foreign country, you

Pension and annuity income (including

may be a bona fide resident. See Pub. 54

social security and railroad retirement

Choosing the Exclusion(s)

for more information and examples.

benefits treated as social security).

•

Interest, ordinary dividends, capital

Lines 13a and 13b. If you submitted a

To choose either of the exclusions,

gains, alimony, etc.

statement of nonresidence to the

complete the appropriate parts of Form

•

Portion of 2006 moving expense

authorities of a foreign country in which

2555 and file it with your Form 1040 or

deduction allocable to 2007 that is

you earned income and the authorities

Form 1040X, Amended U.S. Individual

included in your 2007 gross income. For

hold that you are not subject to their

Income Tax Return. Your initial choice to

details, see Moving Expense Attributable

income tax laws by reason of

claim the exclusion must usually be made

to Foreign Earnings in 2 Years under

nonresidency in the foreign country, you

on a timely filed return (including

Moving Expenses in Pub. 54.

are not considered a bona fide resident of

extensions) or on a return amending a

•

Amounts paid to you by the U.S.

that country.

timely filed return. However, there are

Government or any of its agencies if you

exceptions. See Pub. 54 for details.

If you submitted such a statement and

were an employee of the U.S.

the authorities have not made an adverse

Once you choose to claim an

Government or any of its agencies.

determination of your nonresident status,

•

exclusion, that choice remains in effect for

Amounts received after the end of the

you are not considered a bona fide

that year and all future years unless it is

tax year following the tax year in which

resident of that country.

revoked. To revoke your choice, you must

you performed the services.

•

attach a statement to your return for the

Amounts you must include in gross

Part III

first year you do not wish to claim the

income because of your employer’s

exclusion(s). If you revoke your choice,

contributions to a nonexempt employees’

Physical Presence Test

you cannot claim the exclusion(s) for your

trust or to a nonqualified annuity contract.

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

next 5 tax years without the approval of

Income received in prior year. Foreign

citizen or resident alien who is physically

the Internal Revenue Service. See Pub.

earned income received in 2006 for

present in a foreign country, or countries,

54 for more information.

services you performed in 2007 can be

for at least 330 full days during any period

Figuring tax on income not excluded.

excluded from your 2006 gross income if,

of 12 months in a row. A full day means

If you claim the foreign earned income

and to the extent, the income would have

the 24-hour period that starts at midnight.

exclusion, the housing exclusion, or both,

been excludable if you had received it in

To figure the minimum of 330 full days,

you must figure the tax on your

2007. To claim the additional exclusion,

add all separate periods you were present

nonexcluded income using the tax rates

you must amend your 2006 tax return. To

in a foreign country during the 12-month

that would have applied had you not

do this, file Form 1040X.

period shown on line 16. The 330 full

claimed the exclusions. To do this, use

Income earned in prior year. Foreign

days can be interrupted by periods when

the Foreign Earned Income Tax

earned income received in 2007 for

you are traveling over international waters

Worksheet in Pub. 4655, not the

services you performed in 2006 can be

or are otherwise not in a foreign country.

worksheet on page 34 of the 2007

excluded from your 2007 gross income if,

See Pub. 54 for more information and

Instructions for Form 1040. When figuring

and to the extent, the income would have

examples.

your alternative minimum tax on Form

been excludable if you had received it in

6251, you must use the Foreign Earned

Note. A nonresident alien who, with a

2006.

Income Tax Worksheet in the instructions

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

If you are excluding income under this

for Form 6251.

chooses to be taxed as a resident of the

rule, do not include this income in Part IV.

United States can qualify under this test if

Earned income credit. You cannot take

Instead, attach a statement to Form 2555

the time requirements are met. See Pub.

the earned income credit if you claim

showing how you figured the exclusion.

54 for details on how to make this choice.

either of the exclusions or the housing

Enter the amount that would have been

deduction.

Part IV

excludable in 2006 on Form 2555 to the

left of line 45. Next to the amount enter

Foreign Earned Income

“Exclusion of Income Earned in 2006.”

Specific Instructions

Include it in the total reported on line 45.

Enter in this part the total foreign earned

Note. If you claimed any deduction,

income you earned and received

credit, or exclusion on your 2006 return

Part II

(including income constructively received)

that is definitely related to the 2006

during the tax year. If you are a cash

foreign earned income you are excluding

Bona Fide Residence Test

basis taxpayer, report on Form 1040 all

under this rule, you may have to amend

income you received during the tax year

To meet this test, you must be one of the

your 2006 income tax return to adjust the

regardless of when you earned it.

following:

amount you claimed. To do this, file Form

•

Income is earned in the tax year you

A U.S. citizen who is a bona fide

1040X.

perform the services for which you

resident of a foreign country, or countries,

Line 20. If you engaged in an

receive the pay. But if you are a cash

for an uninterrupted period that includes

unincorporated trade or business in which

basis taxpayer and, because of your

an entire tax year (January 1 – December

both personal services and capital were

employer’s payroll periods, you received

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

•

material income-producing factors, a

your last salary payment for 2006 in 2007,

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

reasonable amount of compensation for

that income may be treated as earned in

national of a country with which the

your personal services will be considered

2007. If you cannot treat that salary

United States has an income tax treaty in

earned income. The amount treated as

payment as income earned in 2007, the

effect and who is a bona fide resident of a

earned income, however, cannot be more

rules explained under Income earned in

foreign country, or countries, for an

than 30% of your share of the net profits

prior year, discussed later, apply. See

uninterrupted period that includes an

from the trade or business after

Pub. 54 for more details.

entire tax year (January 1 – December 31,

subtracting the deduction for one-half of

if you file a calendar year return). See

Foreign earned income for this

self-employment tax.

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

purpose means wages, salaries,

countries with which the United States

If capital is not an income-producing

professional fees, and other

has an income tax treaty in effect.

compensation received for personal

factor and personal services produced the

business income, the 30% rule does not

services you performed in a foreign

No specific rule determines if you are a

country during the period for which you

apply. Your entire gross income is earned

bona fide resident of a foreign country

income.

meet the tax home test and either the

because the determination involves your

bona fide residence test or the physical

intention about the length and nature of

Line 25. Enter the value of meals and/or

presence test. It also includes noncash

your stay. Evidence of your intention may

lodging provided by, or on behalf of, your

income (such as a home or car) and

be your words and acts. If these conflict,

employer that is excludable from your

allowances or reimbursements.

your acts carry more weight than your

income under section 119. To be

words. Generally, if you go to a foreign

Foreign earned income does not

excludable, the meals and lodging must

country for a definite, temporary purpose

include amounts that are actually a

have been provided for your employer’s

and return to the United States after you

distribution of corporate earnings or

convenience and on your employer’s

-2-

Instructions For Form 2555 - Foreign Earned Income - Internal Revenue Service - 2007 Page 2

Related Articles

Related forms

Related Categories