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ResourcesCorporate and Tax AdvisoryUS Tax LawIRS Form 2555 and the Foreign Earned Income Exclusion (FEIE)

IRS Form 2555 and the Foreign Earned Income Exclusion (FEIE)

Transcript of the above video:

This video is just to provide some brief insight with respect to what is called form 2555. It pertains to Exclusion of Foreign Earned Income and basically this is the form. Go ahead and have a look at that. We will go ahead and put that on the screen. That is the form for 2018. 

It is a common misconception that Americans abroad do not need to file a Tax Return. I hear this not often these days but there was a time when it was sort of the "conventional wisdom" although I wouldn't call it wisdom because Americans are subject to taxation on their worldwide income and as a result the only way to deal with this is to file one's tax returns.  That being stated there are certain exclusions that are granted to American citizens who primarily reside outside of the United States and one of those benefits if you will, is the Foreign Earned Income Exclusion which pertains to this form. Just to quote directly from the IRS website, that is the Internal Revenue Service website, irs.gov . Quoting directly, and this is regarding the 2555 form, "If you qualify you can use this form to figure your foreign earned income exclusion and your housing exclusion or deduction. You cannot exclude or deduct more than your foreign earned income for the year."  So Foreign Earned Income. That is earned income that is earned outside of the United States by an American citizen or lawful permanent resident. There is a certain number and I think currently it is right around US$106,000 or US$108,000. If your foreign earned income does not exceed that number then you are probably not liable to pay any taxes specifically on that foreign earned income. 

So this is the form 2555 that pertains directly to that and if you qualify to use the form you may be able to get a substantial benefit with respect to not needing to go ahead and pay taxes on the income you earn outside the United States so long as you mean the other eligibility criteria.