Definition and Purpose of Form 2555
Form 2555, specifically for the tax year 2013, is a critical document used by U.S. citizens and resident aliens residing abroad to report their foreign earned income. This form allows taxpayers to claim the Foreign Earned Income Exclusion, which enables them to exclude a significant portion of their foreign earnings from U.S. taxation. The intent of this form is to prevent double taxation—where an individual pays taxes on the same income in both the host country and the U.S.
The form includes sections for reporting general taxpayer information, qualifications for the exclusion based on either the bona fide residence test or the physical presence test, and details about foreign earned income, including housing exclusions. By utilizing Form 2555, taxpayers can effectively manage their tax obligations and ensure compliance with IRS rules while maximizing their benefits associated with foreign employment.
Steps to Complete the 2013 Form 2555
Completing Form 2555 requires a systematic approach to ensure accurate reporting of foreign income and claims for exclusions. The following steps provide a clear guideline:
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Gather Required Information
- Collect documentation related to your foreign employment, including pay stubs, tax returns from your host country, and any relevant financial statements.
- Obtain details necessary for the bona fide residence or physical presence test, such as dates of your departure and arrival in the foreign country.
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Fill Out General Information
- Enter your name, address, and taxpayer identification number (TIN).
- Indicate your filing status and specify the foreign country or countries where you reside.
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Choose Your Test for Exclusion
- Determine whether you will use the bona fide residence test or the physical presence test to qualify for the exclusion. Each test has specific criteria to meet, so review the requirements carefully.
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Report Foreign Earned Income
- Input the total amount of income earned while living in a foreign country. This includes wages, bonuses, and compensation for services rendered abroad.
- For those who qualify, the form allows you to claim the exclusion amount, which was $97,600 for 2013, adjusting for any changes in the following years.
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Claim Housing Exclusions
- If applicable, calculate and report any housing allowances which are also eligible for exclusions. This section helps reduce tax burden for those incurring housing expenses while living overseas.
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Review and Submit
- Double-check all entries for accuracy to avoid any filing issues. Once confirmed, submit the form, ideally along with your federal tax return, either online or via mail.
Important Terms Related to Form 2555
Understanding key terminology related to Form 2555 is essential for accurate filing and compliance. Some important terms include:
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Foreign Earned Income: Income earned by a U.S. citizen or resident alien for services performed in a foreign country.
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Housing Exclusion: A benefit that allows taxpayers to exclude a portion of their housing costs from U.S. taxation, thus reducing taxable income.
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Bona Fide Residence Test: A criterion used to determine if a taxpayer has genuinely established residence in a foreign country for a continuous period.
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Physical Presence Test: This test measures the number of days a taxpayer is physically present in a foreign country to qualify for the Foreign Earned Income Exclusion.
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Tax Home: The taxpayer’s regular or principal place of business, generally established in the foreign location of residence.
Understanding these terms helps navigate the complexities of filing and claiming benefits associated with Form 2555 effectively.
Key Elements of the 2013 Form 2555
The 2013 version of Form 2555 includes several key elements that allow taxpayers to report their foreign income comprehensively:
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Part I: General Information provides a space for essential personal and income information.
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Part II: Foreign Earned Income Exclusion facilitates the reporting of income and eligibility test selection.
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Part III: Housing Exclusion allows for the calculation of eligible housing costs for exclusion purposes.
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Part IV: Summary of Exclusions and Deductions summarizes the total exclusions for the year.
Each part of the form serves a specific purpose, ensuring taxpayers can report income accurately while maximizing tax benefits associated with their foreign employment.
Filing Deadlines for the 2013 Form 2555
It is crucial for taxpayers to be aware of specific deadlines related to the filing of Form 2555:
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Filing Due Date: Generally, for the 2013 tax year, the form must be filed by April 15, 2014. However, if residing overseas, taxpayers may qualify for an automatic two-month extension.
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Extension Requests: Taxpayers needing more time can request an extension through Form 4868. This allows for an additional six-month extension, with the final filing due by October 15, 2014.
Knowing these deadlines helps taxpayers avoid penalties and ensures timely submission of their tax returns.
Examples of Utilizing Form 2555
Understanding practical scenarios illustrates the effectiveness of Form 2555. Here are two examples:
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Example 1: John, a U.S. citizen living in Germany, earns $80,000 as a software engineer. By completing and submitting Form 2555, he can exclude the full amount under the Foreign Earned Income Exclusion, dramatically reducing his U.S. tax liability.
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Example 2: Sarah, who lives in Australia, receives $60,000 in salary and incurs $20,000 in qualifying housing expenses. By filling out Form 2555, she can claim both the income exclusion and a housing exclusion, minimizing her taxable income effectively.
These examples highlight the opportunities for tax relief that Form 2555 provides for individuals employed abroad.
