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Foreign Earned Income Tax Worksheet

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What is the Foreign Earned Income Tax Worksheet

The Foreign Earned Income Tax Worksheet is a tool the IRS (Internal Revenue Service) provides to help U.S. citizens and resident aliens determine the amount of income earned abroad that can be excluded from their U.S. federal income tax. This exclusion allows eligible taxpayers to reduce their tax liability significantly.

The worksheet is designed to be used alongside Form 2555 or Form 2555-EZ, which are used to report your foreign earned income and claim the Foreign Earned Income Exclusion (FEIE).

Why is the Foreign Earned Income Tax Worksheet Important

The main advantage is the potential for tax savings. If you qualify for the FEIE, you may exclude up to a specified amount of your foreign earnings from your U.S. income for tax purposes.
U.S. tax laws require citizens and resident aliens to report worldwide income, including earnings from foreign countries. The worksheet ensures you are compliant while taking advantage of possible exclusions.
While foreign income reporting can be complex, the worksheet provides a step-by-step guide to simplify the process.

Foreign Earned Income Tax Worksheet Instructions

Completing the worksheet can be complicated, but following the instructions step-by-step can make the process manageable. Here's a general overview:

Step 1: Before starting, ensure that you meet the requirements for FEIE. These include passing either the Bona Fide Residence or Physical Presence Test.

Step 2: Collect all documents detailing your foreign-earned income, such as pay stubs, tax forms from foreign governments, and other income records.

Step 3: Get the latest version of Form 2555 or 2555-EZ and the associated worksheet from the IRS website.

Step 4: The Foreign Earned Income Tax Worksheet is divided into sections. Carefully fill in each line, performing the necessary calculations as outlined.

Step 5: Review your numbers to ensure they are accurate. Any mistakes can lead to audits or penalties.

Step 6: Attach the completed worksheet and Form 2555 or 2555-EZ to your federal tax return and file it by the deadline.

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