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Instructions to File Form 2555-EZ for 2018

Last Update Date : April 30, 2019
Estimated Read Time: 7 min

how to file form 2555-ez

Form 2555-EZ is a form that can be used to claim the Foreign Earned Income Exclusion. It is a simpler version of the Form 2555 that has fewer lines. The maximum exclusion has increased to $103,900 for 2018.

Who can File Form 2555-EZ?

You can use the Form 2555-EZ to claim the Foreign Earned Income Exclusion if you satisfy the following conditions:

  1. Meet the seven conditions listed at the top of the Form 2555-EZ.
  2. Report the total foreign earned income received in 2018 in Form 1040, line 1.
  3. You do not have a housing deduction carry over from 2017.
  4. Qualify the Physical Presence Test (PPT) or the Bona Fide Residence Test.
  5. Qualify the Tax Home Test.

Additional Note

  1. For married couples – If both you and your spouse qualify for the Form 2555-EZ and choose to claim the Foreign Earned Income Exclusion, you need to figure out the amount of exclusion separately for each of you and complete separate Form 2555-EZs.
  2. Travel to Cuba – Cuba falls under the U.S. travel restriction. So, if you travel to Cuba, your eligibility for the Form 2555-EZ will also depend on the following:
    • Any time spent in Cuba is not counted in determining whether you qualify for the Bona Fide test or the Physical Presence test.
    • Any income earned in Cuba is not considered as foreign earned income.
      • Note – If you performed services under the U.S. Naval Guantanamo Bay, you were not in violation of the aforesaid travel restrictions (refer to Pub. 54 for more information).
  3. Waiver of Time Requirements – The minimum time requirements specified in the Bona Fide Residence and Physical Presence test may be waived off under the following situations:
    1. if your tax home was in a foreign country and
    2. you were a bona fide resident of, or physically present in a foreign country and
    3. had to leave because of war, civil unrest or similar adverse conditions.

When to File?

You may not be able to claim the exclusion on the first year you plan to, as you may have not met with either of the two qualifying tests by the due date of your return (including the automatic 2-month extension). In this situation, you can either:

  1. Apply for a special extension to a date after which you expect to qualify, or;
  2. File your return on time without claiming the exclusion and afterwards file an amended return after you qualify for it (for amending a return you need to file Form 1040X).

Note: To apply for the special extension you need to complete and file Form 2350 with the department of treasury, IRS Center, Austin, TX 73301 before the due date of the return.

How to File?

The preparation to file Form 2555-EZ begins at the start of the financial year itself. There are some pre-requisites to file the form:

Preparing to File Form 2555-EZ

  • Prepare yourself in advance by keeping the accurate records of all the activities done throughout the year.
  • Before filing, gather all the information such as employer’s name and address, international travel calendar, prior year Form 2555-EZ, foreign income earning statements.
  • Start filing the form. The process consists of filling up the form and sending the completed form to the IRS’ office.

How to Fill Form 2555-EZ?

Below are the detailed steps to fill the Form 2555-EZ. The Form is divided into four parts. You need to fill each part one-by-one as instructed below:

  1. Part I – This is the first part of the Form that covers the tests required to determine whether you can take the Foreign Earned Income Exclusion which can be figured out with the Bona Fide Residence Test, Physical Present Test and Tax Home Test. The line-wise instructions for Part 1 are as follows:
    1. Lines 1a and 1b – Bona Fide Residence Test – To meet this test you must be any one of the following:
      • A U.S. citizen who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes the entire tax year, i.e. from January 1 to December 31.
      • A U.S. resident alien who is a citizen or national of a country with which the United State has an income tax treaty in effect and who is a bona fide resident of a foreign country, or countries, for an uninterrupted period that includes an entire tax year, i.e. from January 1–December 31.
        In line 1a, check the boxes for Yes or No. If you answer Yes, you meet the test and if you answered No, then you don’t.
        In line 1b, if you answered Yes in line 1a, then you need to enter the dates your bona fide residence began and ended.
    2. Lines 2a and 2b – Physical Presence Test – To meet this test you must be either a U.S. citizen or resident alien who is physically present in a foreign country or countries for at least 330 full days for any period of 12 months in a row.
      • In line 2a, you need to figure out 330 full days of presence by adding up all separate periods you were present in a foreign country during the 12-month period in which those days occurred and the 330 full days can be interrupted by periods if you are travelling over international waters or are otherwise not in a foreign country.
      • In line 2b, the 12-month period on which the physical presence test is based must include 365 days, a part of which must be in 2018 and the dates may begin or end in a calendar year other than the year of 2018.
      • You are required to enter dates in both the spaces provided on line 2b.
    3. Line 3 – Tax Home Test – To meet this test, your tax home must be in a foreign country or countries, throughout the period of your bona fide residence or physical presence, whichever applies to the case. For this purpose, your period of physical presence must be 330 full days during which you were present in a foreign country and not the 12 consecutive months during which those days occurred. In line 3, if you answer Yes then you can claim the exclusion otherwise don’t file the Form.
  2. Part II – After filling the first part of the Form, the second part covers all the general information. You are required to fill in the details regarding your address, occupation, employer’s name and address, etc. The line-wise instruction is as follows:
    1. Line 4 – In line 4, you are required to enter the entire address including the city, province or state, country, and postal code. If you are using a military or diplomatic address, then include the country in which you are living or stationed at.
    2. Line 5 – In line 5, you are required to fill in details regarding your occupation.
    3. Line 6 – In this line, you are required to mention the employer’s name.
    4. Line 7 – Here, you need to mention the employer’s U.S. address.
    5. Line 8 – In this line, enter the employer’s foreign address.
    6. Lines 9a, 9b and 9c – Here you are required to check the box (whichever applies) regarding the business type.
    7. Lines 10, 10b, 10c and 10d – In line 10a, you need to enter the information if you filed the Form 2555 or 2555-EZ previously.
    8. In line 10b, check the box if you didn’t previously file the Forms and go to line 11a.
    9. In line 10c, mention if you have ever revoked the foreign earned income exclusion.
    10. In line 10d, if you answer Yes then enter the tax year for which it was revoked.
    11. Line 11a and 11b – Here, you need to enter your tax home(s) during 2018 and date(s) established in line 11a and mention what country you are a citizen or national.
  3. Part III – The third part requires you to fill in the information regarding the number of days you were present in the United States or its possessions during 2018. The line-wise instructions are as follows:
    1. Line 12a through 12d – Here, you need to mention the date(s) arrived in the U.S., date left the U.S., The no. of days in the U.S. on business and the income earned in the U.S. on business (attach computation).
  4. Part IV – The fourth and the last part figures out your Foreign Earned Income Exclusion. The line-wise instructions are as follows:
    1. Line 13 – Enter the maximum foreign earned income exclusion.
    2. Line 14 – Here, enter the number of days in your qualifying period that fall within 2018.
    3. Line 15 – Check the box Yes if you entered 365 on line 14 otherwise check No.
    4. Line 16 – Enter the total amount I line 16 by multiplying line 13 by line 15.
    5. Line 17 – Enter the total foreign earned income you earned and received in the year 2018 in line 17 and report the amount in U.S. dollars using the exchange rates that are in effect when you have received the income. If the amount exceeds $103,900, don’t file this form and instead file Form 2555.
    6. Line 18 – Compare the amounts of lines 16 and 17 and enter the smaller amount in line 18 and parentheses on Schedule 1 of Form 1040, line 21. Enter 2555-EZ next to the amount. On the Schedule 1 of Form 1040, subtract this amount from your additional income to arrive at the amount reported on Schedule 1 of Form 1040, line 22.

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Mohammadfaruq Memon
Mohd. Faruq Memon is the Head of U.S. Expat Tax Services at H&R Block (India) with an industry experience of fifteen years. He holds a masters-level qualification and his expertise lies in Dual Taxation. On weekends, Faruq is a movie buff who also enjoys watching cricket!

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