The process of filing your taxes if you are living abroad is not easy. If you are a US citizen it's very important you put together the right paperwork so that you can file taxes when you are living in a different country. In this article, we are going to go through one of the most important forms and filing your US taxes abroad. Form 2555.
Form 2555 is a statement of foreign earned income is required by the IRS for you to file when you are living in a different country. If you earned any type of income such as rental income, working income or even a part-time job in a different country, you will need to fill out this form alongside your taxes. The nature of this form will report any earnings that you had outside of the US to the IRS. This will be required if you're a US citizen even if you are living in a different country when you have to file your taxes.
One of the only ways that you can exclude yourself from taxes owed on foreign income is through a bona fide residence test. In this test you can provide a series of proofs that the foreign earned income you have can be excluded from taxes.
There are a number of determining factors available on this test. The test has questions on your individual intention, the purpose of your trip and travel, the length of your stay as well is the reason why you are staying in a different country. Different types of exclusions and deductions can be applied based on your determining factors in the residence test.
The physical presence test is based off of the amount of time that you're staying in a foreign country or away from the United States. It usually is a factor of 330 full days outside of the United States. This test is used to determine the residence that you will be taxed from and the basic idea of the currency exchange for your income in these places.
The main determining factor with the physical presence test is the amount of time that you have spent within a given year in foreign countries. If there is a period of civil unrest or a war that causes a person to leave, the physical presence test can have some exceptions however. There are many people that try to get around this test by coming back to the United States over a brief amount of time through the year. A trip of less than 24 hours in the United States will not be considered a break in foreign stay however.
If you could use taxation help as a US citizen living abroad, we can provide assistance today. We can help you with filling out form 2555.
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