Author Topic: US ExPats: tax question on form 2555 (foreign earned income)  (Read 5848 times)

nereo

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US ExPats: tax question on form 2555 (foreign earned income)
« on: April 02, 2015, 08:32:59 AM »
Hi all

preparing my US taxes and I've hit a bump with IRS form 2555 - Foreign Earned Income.  Specifically, I have income from three different sources, but form 2555 has only one space for the employers name, address etc (boxes 3, 4a, 4b).  How do I rectify this? 

The guidance from the IRS has been very clear that I can file only ONE form 2555 - which makes this an even bigger paradox.  Do I add all the income together and just list the employer with the largest contribution?  Note:  I'm so far below the $99,200 foreign income exemption it won't result in paying more taxes, and I meet BOTH the bona-fide residence AND Physical Presence test.

any guidance would be helpful. 

9ft5wt

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Re: US ExPats: tax question on form 2555 (foreign earned income)
« Reply #1 on: April 02, 2015, 09:25:57 AM »
Hello Nereo,
I've been filing my taxes, on my own, for the past 5 years of living overseas. It is a maze, and once we began to invest the process got even worse. Last year, I actually used Turbo-Tax and it was extremely easy. I can't help you with your specific issue, but I would recommend calling a tax professional in the US that deals specifically with ex-pats, or use Turbo-Tax.

nereo

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Re: US ExPats: tax question on form 2555 (foreign earned income)
« Reply #2 on: April 02, 2015, 10:00:44 AM »
Hello Nereo,
I've been filing my taxes, on my own, for the past 5 years of living overseas. It is a maze, and once we began to invest the process got even worse. Last year, I actually used Turbo-Tax and it was extremely easy. I can't help you with your specific issue, but I would recommend calling a tax professional in the US that deals specifically with ex-pats, or use Turbo-Tax.
thanks.  normally I like filing taxes on my own, but I have so far been stymied by form 2555.  So I tried entering it all in HR Block's file prep software, and I hit the exact same problem - at the end I get an error saying I "can only file ONE form 2555" but there is only space to input income from one employer.  Seems the same for Turbo-Tax.
Will call back IRS to ask for guidance - previously I called to ask about whether I should submit multiple forms (resounding 'no!').
Tried a few other forums but the advice seems murky and contradictory at best.  I'll update if I get a definitive, official answer.  I can't possibly be the only person living abroad that has income from >1 source.

lise

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Re: US ExPats: tax question on form 2555 (foreign earned income)
« Reply #3 on: April 02, 2015, 10:32:20 AM »
posting to follow. 
This doesn't apply to me for last year but this year I'm earning income in two countries outside the US this year ...

Cathy

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Re: US ExPats: tax question on form 2555 (foreign earned income)
« Reply #4 on: April 02, 2015, 10:48:53 AM »
You've hit upon a potentially interesting administrative law issue here, nereo. ;) Not because of the Form per se, but because of what I discuss below.

If the only issue were the Form, the solution would be to write "see attached statement" in the fields for the employer's name, address, etc., and then explain that you have multiple employers in a written statement attached to the end of your tax return. The reason that the IRS does not want you to file multiple copies of the Form is because that might result in you incorrectly computing the numbers, not because there's a rule against providing clarifying information on supplemental paper.

However, the usual solution doesn't work here because of a problem with the Treasury regulations. Here's the explanation.

The foreign earned income exclusion is found in 26 USC 911. In particular, 26 USC 911(d)(9) authorises the Secretary of the Treasury to make regulations "as may be necessary or appropriate to carry out the purposes of this section". One of these regulations is 26 CFR 1.911-7(a)(1), which says that in order to receive the foreign earned income exclusion, you must attach a statement (either Form 2555 or "a comparable form"), which must contain "[t]he name of the individual's employer". The regulation does not appear to contemplate that a person could have multiple employers.

There are really two possible ways to approach this.

One approach would be to conclude that the regulation does not allow you to take the exclusion unless you have exactly one employer, because otherwise you cannot comply with the regulation. If that is the effect of the regulation, then the regulation is probably void, and you would (1) ignore the regulation, (2) attach a statement listing all your employers, and (3) attach Form 8275-R (Regulation Disclosure Statement) to your return to explicitly state that you are ignoring the regulation.

Alternatively, you could assume that the regulation actually allows multiple employers and, again, attach a statement listing them, but not include Form 8275-R since you would be complying with the regulation.

Discussing the tradeoffs of the approaches is very complicated. While I could write more later, you may want to retain counsel if you are concerned about this.

nereo

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Re: US ExPats: tax question on form 2555 (foreign earned income)
« Reply #5 on: April 02, 2015, 12:39:01 PM »
Cathy - your posts are some of the most informative ones I have encountered.  Thank you so much. 

A quick update for those following (sadly I have no resolution just yet) - spent 2 hours on hold with the IRS before being disconnected.  Will try again tomorrow. May speak with the HR Block specialist who handles US taxes tomorrow.  Sigh.... such a waste of time.