Form 2555 - Instructions and Tips for US Expat Tax Payers

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• published: 22 Sep 2015
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Form 2555 - Instructions and Tips for US Expat Tax Payers - Patrick Evans CPA, CGMA, takes you through the Foreign Earned Income Exclusion and the Foreign Housing Exclusion SHARE this video: https://youtu.be/9iG2-iOwFo8 SUBSCRIBE to our YouTube channel for news and updates tips on US Tax: http://www.youtube.com/channel/UCgEa_skdgaL32KH1ktXXhOQ?sub_confirmation=1 WEBSITE: http://www.USTaxPractice.com 0:23 Form 2555 is extremely important because it allows US tax payers living and working abroad to exclude all or most of their foreign earned income. 0:38 Foreign Earned Income is earned income from a foreign business or a job which you have while living abroad. This includes wages, bonus, stock options, fringe benefits, etc. 0:56 Generally speaking if you are making more than $10,000, you need to file taxes. And it is important you file Form 2555 to exclude that foreign earned income. Even if you are above that $100,000 threshold, we are able to take credits and other deductions, to even get your tax liability to zero or minimize it. 1:40 PART 4. This is where you put wages, salaries, commission, bonus, business income, and any non-cash income such as housing allowance, car allowance, business representation, etc. 1:51 One question I often get is, “How do I translate from a foreign currency to US dollars?” You simply use the IRS published foreign currency exchange rates. 2:05 Let’s just say you are a US citizen, sent out on international assignment for less than one year. In this case you may not qualify for the foreign earned income exclusion. 2:17 There are two ways to qualify. One is the physical presence test, and the other is the bona fide residence test. 2:33 The bona fide residence test is part 2 of Form 2555. It requires you to stay outside the United States for one uninterrupted taxable year i.e. January through December. You can take visits back to the United States for business or vacation but you have to have your residence outside the United States. This requires you to be part of clubs, organizations, churches, and the community in a country or location outside the U.S. 3:08 The physical presence test is part 3 of Form 2555. It requires you to be outside the U.S. for 330 days out of a 12-month period. 3:30 In the first year you are abroad, we normally qualify clients through the physical presence test because they haven’t been in the country for one full taxable year. In the years after that, we usually qualify through the bona fide residence test because at that point they have been in the country for a full taxable year and they are integrating into the community of that country. 3:56 The foreign housing exclusion is an exclusion that you can get for your foreign housing expenses. This includes rent, utilities, repairs and maintenance, rental furniture, parking, etc. However, please note that telephone, television, and internet charges cannot be included. 4:16 How is this calculated? This is simply 16% of the foreign earned income exclusion i.e. roughly $16,000 or any amounts you spend above that, capped at a certain threshold based on the city you live in. 4:44 If you don’t file Form 2555 after a series of years, this could be considered a revocation in the eyes of the IRS, which means you won’t be allowed to file this form or exclude foreign earned income for the next five years. So don’t forget to fill out this form. 5:15 One last tip – keep a travel journal of where you travel, when you travel, the amount of income earned, and the number of days on business because you may need to enter this information in parts 2 or 3. BLOG Form 2555 Transcipt - http://bit.ly/1FY4r15 US Tax Deadline For Citizens Living Abroad - http://bit.ly/1NHBfSf WATCH OUR FULL TAX FORMS VIDEO SERIES https://www.youtube.com/playlist?list=PLKEUCurmGJ41eLyWjbo1w-0mdPyCplGHL FOLLOW US: Facebook https://www.facebook.com/USTaxPractice Twitter https://twitter.com/US_Tax_Practice Google+ https://plus.google.com/+USTaxPractice LinkedIn http://www.linkedin.com/company/us-tax-practice SUBSCRIBE to our YouTube channel for updates and tips on US tax news: http://www.youtube.com/channel/UCgEa_skdgaL32KH1ktXXhOQ?sub_confirmation=1 CALL US for a free consultation. +41 (0) 52 533 45 81 US Tax Practice Switzerland Ahornstrasse 1, 8200 Schaffhausen, Switzerland http://www.USTaxPractice.com Form 2555 - Instructions and Tips for US Expat Tax Payers