| If you are a US citizen but you are working outside the | | | | Foreign Earned Income Exclusion allows you to deduct |
| country for a significant period of time you do not get | | | | up to $87,600 in the year 2008 and $91,400 for 2009. |
| to evade the requirement of filing a US tax return in | | | | This means if you made $87,500 abroad, the US |
| most cases. If you made more than $9,000 dollars | | | | cannot claim any taxes you owe for 2008 although |
| abroad or overseas then the bad news you need to | | | | you still need to file. For this exclusion you will need to |
| file a return. The good news is we detail how to do it | | | | fill out Form 2555 (Foreign Earned Credit). You have |
| as well as forms you need to complete if you are | | | | probably heard of form Form 2555-EZ and trying to |
| working abroad. | | | | understand which on you need. If you do not plan on |
| Let's start with what forms are recommended that | | | | requesting the Foreign Housing Exclusion (discussed |
| you complete, irregardless of filing. One important form | | | | below) then Form 2555-EZ is all you need. |
| that needs to be completed if you have over ten | | | | In addition to the Foreign Earned Income Exclusion, |
| thousand in a foreign bank or financial institution is form | | | | there is another exclusion which can cover you for |
| TD F90-22.1 This is not related to a 1040 or individual | | | | another 10-15k depending on your living expenses |
| tax return so do not send it in or to the same address | | | | abroad. In other words, if you made say $100k abroad |
| with your income tax return. This is a form that is | | | | (converted to US dollars) you still may not owe the US |
| required solely if you are a US citizen and your money | | | | any taxes if your housing exclusion and Foreign |
| is being held in a foreign financial institution. | | | | Earned Income Exclusion combined covers your total |
| If you are trying to complete tax returns you forgot to | | | | income. To calculate your housing exclusion, take 16% |
| fill out (from previous years or recent) then you will | | | | (.16) and multiply it by the Foreign Earned Exclusion |
| start with a Schedule C (1040). If you were given gifts | | | | ($87,500) and you will get around $14k. Remember |
| from a foreign national or trust, then you will need to | | | | you need to be abroad at least a year (Bona Fide |
| complete Form 3520 or 3520A (see our site details | | | | Residence Test) or out of the US 330 out of 365 |
| below for form links). Remember, when reporting your | | | | days last year (based on 12 consecutive month |
| income the IRS wants the filing in US dollars, so you will | | | | periods). |
| need to use current exchange rates. | | | | Overall, it is recommended that you file a tax return if |
| Realize to avoid any double taxation (taxes from the | | | | you make over $9k and take advantage of exclusions |
| country or countries you resided in as well as the US) | | | | so you do not become a victim of double taxation. |
| there are certain exclusions you can apply for. First, | | | | Moreover, it is best to act quickly, be proactive, and |
| there is a Foreign Earned Income Exclusion. The | | | | work a tax professional for guidance. |