Ed note: H&R Block Expat Tax Services is a highly specialized team of tax attorneys, CPAs and enrolled agents whose singular focus is expat tax preparation for Americans abroad. These tax situations can be very complex, so we are featuring some answers to common questions. Today’s post focuses on the foreign income tax exclusion. Due to the complexity of U.S. tax reporting for expats and its highly fact-specific nature, these responses are purely general information.
I was looking at Form 2555, the form for foreign income tax exclusion. I noticed a question about visa status.
Why is this important and what is the purpose of the IRS asking this question?
Form 2555 is used to calculate your foreign earned income exclusion and your housing exclusion or deduction. In order to qualify, you must meet the tax home test and meet either the bona fide residence test or meet the physical presence test. The form asks about the visa status to help determine the nature of your stay and the length of your stay for purposes of determining bona fide resident status. For instance, if you were a permanent resident of the other country there is no issue, but if you only held a year-by-year visa, or a visa for a particular purpose, the chances of being considered a bona fide resident of that country can be reduced.
This Q&A first appeared in an American in Britain magazine article.
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