[calphurnia7]

Hello,

Just trying to fix all my backfiling and I am still confused at where the foreign income and foreign taxes paid goes on these forms. Does anyone else know? My husband keeps saying the tax credit field but I think that is something else and he says if you don't put it on the 1040 then the calcualtions don't add up.

 

[Bevdeforges]

As you will see, I've moved your question over to the Expat tax section here.

Start with the form 2555, on which you declare your foreign earned income (i.e. the income subject to the foreign earned income exclusion). Work your way through the calculations and at the end of the form, it tells you which lines on form 1040 the resulting numbers go.

Your salary income gross goes on line 7 of the 1040 like always - the form 2555 tells you to put your total exclusion amount on another line in parentheses to indicate that you are subtracting it from your income.

If your earned income is less than the FEIE limit, you don't have to worry about taxes you paid elsewhere. As long as your "taxes due" line comes out to be -0- then you're home free.

If, however, you owe taxes even after the exclusion, then you need to file a form 1116, which is for the foreign tax credit to offset any taxes due against foreign taxes already paid.
Cheers,
Bev

 

[calphurnia7]

Thank you for your quick reply, Bev. I appreciate it. I have tried to do what you said, but somehow it doesn't add up. If I fill out 2555 first and then put the amounts in parentheses on 1040, my income would double on paper, no? As far as I understand, I have to include my foreign income in line 7 on form 1040, no? I have not lived in the US for 10 years and hence haven't had any income there. What do I have to put down in line 7? Also, you said that as long as my 'taxes due' line comes out -0- everything is fine. Wouldn't that automatically be the case if I only have my foreign earned income to declare, and, as you said, don't put any taxes in on 1040?

 

[Bevdeforges]

You declare your foreign earned income (i.e. salary) on line 7. Then, following the instructions on form 2555, you put your foreign earned income in parens on the line they indicate.

Assume $ 35,000 in salary, then ($35,000) on the line they indicate. That yields -0- in AGI at the bottom of the first page of the 1040. (Parens mean that you subtract.) If you have interest income or any other non-salary income, then that winds up being your AGI.

Turn the page and you subtract your exemption and your standard deduction from your interest or other income and with any kind of luck, you wind up with 0 taxable income.
Cheers,
Bev

 

[calphurnia7]

Thanks for everything Bev I've sent it off now so fingers crossed.