Everything You Need to Know About Form 2555

Knowing the Basics and Instructions for the Foreign Earned Income Tax Form

Deciphering legalese is often a frustrating, overwhelming experience. Indeed, some texts are best left to professionals. However, sometimes it is necessary to understand and manage documents on your own.

Let professionals interpret it

A prime example of this is IRS Form 2555. While filing a Form 2555 may not be the most fun you’ve had this year, it is important, and you can certainly complete it with confidence. Here are a few helpful pointers.

What Is Form 2555?

Be careful not to confuse Form 2555 with other IRS forms. There’s the Form 2055 for household appraisal, and Form 255 for the declaration of unaccompanied articles. Although similar in title, the substance and uses of these forms couldn’t be more different.

The actual IRS Form 2555

At its most basic level, IRS Form 2555 is an optional foreign income tax document for people who have earned substantial income from international employers.

The Form 2555 is used to calculate foreign earned income, and deduct certain expenses such as international housing. If you opt to apply for the Foreign Earned Income Exclusion, use this form to determine the precise amount of foreign income earned in a year (minus any deductions or credits).

Form 2555 is not necessary for all US citizens, of course. However, it is a great tool for expats who are living and working overseas for any extended period of time. 

As anyone who has worked abroad knows, you are not exempt from paying the required U.S. taxes even if the majority of your earned income is from international employers. That’s where the Foreign Earned Income Exclusion can really come in handy.

Basics of the Foreign Earned Income Exclusion

The Foreign Earned Income Exclusion (FEIE) allows qualifying U.S. expats to exclude a certain amount of wages earned abroad. The precise amount changes from year to year. For example, in 2016 it was $101,300. The amount rose to $102,100 for the 2017 tax year. For 2018, the FEIE amount is $104,100.

How Can You Qualify for Foreign Earned Income Exclusion?

There are two ways to qualify for FEIE:

This is for expats who are overseas only part of a tax year. The Physical Presence qualification requires a citizen to live abroad for 330 days out of a consecutive 365 days. Those days do not have to fall entirely within a calendar year.

For a bona fide residence test, you must show that you do not intend to return to the US for the foreseeable future, and you have an established residence on record in the country in which you reside. Additionally, you must reside outside of the United States for an entire calendar year to qualify.

What’s the difference between the two? Click here to learn more.

Form 2555 vs. 2555-EZ

If you are preparing your own tax forms, you’ll likely opt for the form 2555-EZ. While the standard Form 2555 is doable on your own, the 2555-EZ is much simpler. Here’s how you qualify:

  • You are a U.S. citizen or permanent resident.
  • You made less than $104,100 for 2018.
  • You will not claim Foreign Housing Exclusion.
  • A tax return must be filed for a calendar year, rather than a fiscal year.

If these basic requirements are met, you can use the Form 2555-EZ. Congratulations!

Foreign Earned Income 2555 EZ

Form 2555-EZ Instructions

The form may appear confusing at first glance. Let’s be honest, most IRS forms do. However, it’s a fairly straightforward document. Here is the info you’ll need to have handy:

  • Travel information. This includes dates you might have worked in the U.S. and your dates of travel and work abroad.
  • Previously filed 2555-EZ forms, if you have them.
  • Employer information, both U.S. and otherwise.
  • Earning statement(s) from foreign work.

Unlike some tax forms, the 2555 must be filed by each individual. That means married couples must submit multiple forms. You can't file jointly.

With this guide, you should be well on your way to understanding and filing your 2555 forms this tax season. Download IRS Form 2555 here.