Form 2555
You must attach Form 2555, Foreign Earned Income, to your Form 1040 or 1040X to claim the foreign earned income exclusion, the foreign housing exclusion or the foreign housing deduction. Do not submit Form 2555 by itself.
Form 2555 shows how you qualify for the bona fide residence test or physical presence test, how much of your foreign earned income is excluded, and how to figure the amount of your allowable foreign housing exclusion or deduction. If you claim the exclusion(s) and/or deduction under the bona fide residence test, be sure to enter the type of visa under which you entered the foreign country and the period of your bona fide residence in Part II. Frequently, these items are overlooked.
If you claim the exclusion(s) and/or deduction under the physical presence test, be sure to insert the beginning and ending dates of your 12-month qualifying period(s) and the dates of your arrivals and departures, as requested in the travel schedule in Part III. If you need more space, attach an additional page or statement.
You must fill out Part VI if you are claiming a foreign housing exclusion or deduction. If you are claiming the foreign earned income exclusion, fill out Part VII. If you are claiming the foreign earned income exclusion, the foreign housing exclusion, or both, fill out Part VIII. Finally, if you are claiming the foreign housing deduction, fill out Part IX.
If you and your spouse both qualify to claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you and your spouse must attach separate Forms 2555 to claim these benefits.
Form 2350 – Requesting an extension of time to file
You can file Form 2350, Application for Extension of Time to File U.S. Tax Return, to ask for an extension of time to file your tax return only if you expect to file Form 2555 and you need the time to meet either the bona fide residence test or the physical presence test to qualify for the foreign earned income exclusion and/or the foreign housing exclusion or deduction.
All other taxpayers should file Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return, to request an extension of time to file their returns.
You should file Form 2350 if all three of the following apply.
- You are a U.S. citizen or resident alien.
- You expect to qualify for the foreign earned income exclusion and/or the foreign housing exclusion or deduction by meeting either the bona fide residence test or the physical presence test but not until after your tax return is due.
- Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies.
Form 2350 doesn't extend the time to pay taxes. If you don't pay the amount due by the regular due date, you will owe interest. You may also be charged penalties.
Note: Do not file Form 2350 more than once for each move overseas. If, after meeting the qualifications for the bona fide residence test or the physical presence test, you remain abroad continuously for the following tax year(s) and require an extension, file Form 4868.
Form 673 – Reduce your withholding
Your employer is not required to withhold U.S. income tax from the portion of your wages earned abroad that is equal to the foreign earned income exclusion and foreign housing exclusion if your employer has good reason to believe that you will qualify for these exclusions.
You can give a statement to your employer indicating that you will meet either the bona fide residence test or the physical presence test and indicating your estimated housing cost exclusion.
Form 673, Statement for Claiming Exemption from Withholding on Foreign Earned Income Eligible for the Exclusions Provided by Section 911, is an acceptable statement. You can use Form 673 only if you are a U.S. citizen. You do not have to use the form and can prepare your own statement.
Give the statement to your employer and not to the IRS.
For additional information, refer to the Income Tax Withholding section in Chapter 2 of Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.