Department of the Treasury 2003 Internal Revenue Service

Instructions for Form

2555-EZ

Foreign Earned Income Exclusion

General Instructions 4. You meet either the bona fide Additional Information

residence test (see the instructions for Pub. 54, Tax Guide for U.S. Citizens and lines 1a and 1b on page 2) or the Do not include on Form 1040, line Resident Aliens Abroad, has more physical presence test (see the 61 (Federal income tax withheld), information about the bona fide residence instructions for lines 2a and 2b on CAUTION any taxes a foreign employer test, the physical presence test, and the

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page 2). withheld from your pay and paid to the foreign earned income exclusion. You can 5. You meet the tax home test (see foreign country’s tax authority instead of get this publication from most U.S. the instructions for line 3 on page 2). to the U.S. Treasury. embassies and consulates or by writing

to: Eastern Area Distribution Center, P.O. Purpose of Form Note: If your only earned income from Box 85074, Richmond, VA 23261-5074.

If you qualify, you may use Form 2555-EZ work abroad is pay you received from the You can also download this publication

U.S. Government as its employee, you do (as well as other forms and publications) instead of Form 2555, Foreign Earned

not qualify for the foreign earned income from the IRS website at www.irs.gov. Income, to exclude a limited amount of

your foreign earned income. You may not exclusion. Do not file Form 2555-EZ.

exclude more than your foreign earned Waiver of Time Married Couples income for the year. If both you and your spouse qualify for, Requirements

Remember, U.S. citizens and U.S. and choose to claim, the foreign earned If your tax home was in a foreign country

resident aliens living in a foreign country and you were a bona fide resident of, or income exclusion, figure the amount of are subject to the same U.S. income tax physically present in, a foreign country the exclusion separately for each of you. laws that apply to citizens and resident You must each complete separate Forms and had to leave because of war, civil

aliens living in the United States. unrest, or similar adverse conditions, the 2555-EZ. minimum time requirements specified Foreign country. A foreign country is Community income. The amount of the under the bona fide residence and any territory (including the air space, exclusion is not affected by the physical presence tests may be waived. territorial waters, seabed, and subsoil) income-splitting provisions of community You must be able to show that you under the sovereignty of a government reasonably could have expected to meet other than the United States. It does not property laws. The sum of the amounts the minimum time requirements if you had include U.S. possessions or territories. figured separately for each of you is the not been required to leave. Each year the total amount excluded on a joint return. Note: Specific rules apply to determine if IRS will publish in the Internal Revenue

you are a resident or nonresident alien of Bulletin a list of countries and the dates

the United States. See Pub. 519, U.S. Violation of Travel they qualify for the waiver. If you left one

Tax Guide for Aliens, for details. of the countries during the period Restrictions indicated, you can claim the foreign

Who Qualifies Generally, if you were in a foreign country earned income exclusion on Form

in violation of U.S. travel restrictions, the 2555-EZ, but only for the number of days You may use Form 2555-EZ to claim the following rules apply. you were a bona fide resident of, or foreign earned income exclusion if all five 1. Any time spent in that country may physically present in, the foreign country. of the following apply. not be counted in determining if you If you can claim the foreign earned 1. You meet the seven conditions qualify under the bona fide residence or income exclusion because of the waiver

listed at the top of Form 2555-EZ. physical presence test and of time requirements, attach a statement 2. Your total foreign earned income 2. Any income earned in that country to your return explaining that you received in 2003 is reported on Form is not considered foreign earned income. expected to meet the applicable time 1040, line 7. See the list below for countries to which requirement, but the conditions in the 3. You do not have a housing U.S. travel restrictions apply. foreign country prevented you from the deduction carryover from 2002. normal conduct of business. Also, enter

“Claiming Waiver” in the top margin on

List of Countries To Which Travel Restrictions Apply page 1 of your 2003 Form 2555-EZ.

Time Periods When To File

Form 1040 is generally due April 15, Country Beginning and Ending 2004.

Cuba January 1, 1987 Still in effect However, you are automatically Iraq* August 2, 1990 Still in effect granted a 2-month extension of time to Libya January 1, 1987 Still in effect file (to June 15, 2004) if, on the due date

*Individuals whose activities in Iraq are permitted by a specific or general license issued by the Office of Foreign of your return, you live outside the United

Assets Control are not in violation of U.S. law. Accordingly, the restriction does not apply to such individuals with States and Puerto Rico and your tax

respect to the activities permitted by the license. home (defined later) is outside the United

States and Puerto Rico. If you take this

Cat. No. 14623P
extension, you must attach a statement to the 12-month period in which those days

your return explaining that you meet Specific Instructions occurred. The 330 full days may be

these two conditions. interrupted by periods when you are

traveling over international waters or are

The automatic 2-month extension also Lines 1a and 1b otherwise not in a foreign country. See

applies to paying the tax. However, Pub. 54 for more information and Bona Fide Residence Test interest is charged on the unpaid tax from examples.

the regular due date until it is paid. To meet this test, you must be one of the Note: A nonresident alien who, with a following: U.S. citizen or U.S. resident alien spouse, Special extension of time. The first year • A U.S. citizen who is a bona fide chooses to be taxed as a resident of the you plan to take the foreign earned resident of a foreign country, or countries, United States may qualify under this test income exclusion, you may not expect to for an uninterrupted period that includes if the time requirements are met. See qualify until after the automatic 2-month an entire tax year (January 1–December Pub. 54 for details on how to make this extension period described above. If this 31) or choice. occurs, you may apply for an extension to • A U.S. resident alien who is a citizen or

a date after you expect to qualify. national of a country with which the

United States has an income tax treaty in Line 3

To apply for this extension, complete effect and who is a bona fide resident of a Tax Home Test and file Form 2350, Application for foreign country, or countries, for an Extension of Time To File U.S. Income uninterrupted period that includes an To meet this test, your tax home must be

Tax Return, with the Internal Revenue entire tax year in a foreign country, or countries, (January 1–December Service Center, Philadelphia, PA 19255, 31). See Pub. 901, U.S. Tax Treaties, for throughout your period of bona fide

before the due date of your return. a list of countries with which the United residence or physical presence,

Interest is charged on the tax not paid by States has an income tax treaty in effect. whichever applies. For this purpose, your

the regular due date as explained earlier. No specific rule determines if you are a period of physical presence is the 330 full

bona fide resident of a foreign country days during which you were present in a

because the determination involves your foreign country, not the 12 consecutive Choosing the Exclusion intention about the length and nature of months during which those days

To choose the foreign earned income your stay. Evidence of your intention may occurred.

exclusion, complete the appropriate parts be your words and acts. If these conflict, Your tax home is your regular or of Form 2555-EZ and file it with your your acts carry more weight than your principal place of business, employment, Form 1040 or Form 1040X, Amended words. Generally, if you go to a foreign or post of duty, regardless of where you U.S. Individual Income Tax Return. Your country for a definite, temporary purpose maintain your family residence. If you do initial choice to claim the exclusion must and return to the United States after you not have a regular or principal place of usually be made on a timely filed return accomplish it, you are not a bona fide business because of the nature of your (including extensions) or on a return resident of the foreign country. If trade or business, your tax home is your amending a timely filed return. However, accomplishing the purpose requires an regular place of abode (the place where there are exceptions. See Pub. 54 for extended, indefinite stay, and you make you regularly live). more information. your home in the foreign country, you You are not considered to have a tax may be a bona fide resident. See Pub. 54 Once you choose to claim the home in a foreign country for any period for more information and examples. during which your abode is in the United exclusion, that choice remains in effect for If you submitted a statement of States. However, if you are temporarily that year and all future years unless it is nonresidence to the authorities of a present in the United States, or you revoked. To revoke your choice, you must foreign country in which you earned maintain a dwelling in the United States attach a statement to your return for the income and the authorities hold that you (whether or not that dwelling is used by first year you do not wish to claim the are not subject to their income tax laws by your spouse and dependents), it does not exclusion. If you revoke your choice, you

may not claim the exclusion for your next reason of nonresidency in the foreign necessarily mean that your abode is in country, you are not considered a bona the United States during that time. 5 tax years without the approval of the fide resident of that country. Internal Revenue Service. See Pub. 54 Example. You are employed on an

for details. If you submitted such a statement and offshore oil rig in the territorial waters of a the authorities have not made an adverse foreign country and work a 28-day on/ Earned income credit. You cannot take determination of your nonresident status, 28-day off schedule. You return to your the earned income credit if you claim the you are not considered a bona fide family residence in the United States exclusion. resident of that country. during your off periods. You are

Line 1b. If you answered “Yes” on line considered to have an abode in the Foreign tax credit or deduction. You 1a, enter the dates your bona fide United States and do not meet the tax may not claim a credit or deduction for residence began and ended. If you are home test. You may not claim the foreign foreign income taxes paid on income you still a bona fide resident, enter earned income exclusion. exclude. If all of your foreign earned “Continues” in the space for the date your income is excluded, you may not claim a bona fide residence ended. Line 12 credit or deduction for the foreign taxes Complete columns (a) through (d) if you paid on that income. If only part of your Lines 2a and 2b were present in the United States or any income is excluded, you may not claim a of its possessions in 2003. Do not include credit or deduction for the foreign taxes Physical Presence Test time spent in the United States or its allocable to the excluded income. For To meet this test, you must be a U.S. possessions before your period of bona details on how to figure the amount citizen or resident alien who is physically fide residence or physical presence, allocable to the excluded income, see present in a foreign country, or countries, whichever applies, began or after it Pub. 514, Foreign Tax Credit for for at least 330 full days during any ended. Individuals. period of 12 months in a row. A full day Column (d). Enter, in U.S. dollars, the means the 24-hour period that starts at IRA deduction. If you claim the amount of income earned in the United

exclusion, special rules apply in figuring midnight. States on business (such as meetings or

the amount of your IRA deduction. For To figure the minimum of 330 full days’ conventions). Attach a statement showing

details, see Pub. 590, Individual presence, add all separate periods you how you determined the amount. Do not

Retirement Arrangements (IRAs). were present in a foreign country during include this income on line 17. Even if you

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live and work in a foreign country, any performed in a foreign country during the foreign earned income you are excluding

income earned during the time spent in period for which you meet the tax home under this rule, you may have to amend

the United States on business is test and either the bona fide residence your 2002 income tax return to adjust the

considered U.S. source income and may test or the physical presence test. amount claimed. To do this, file Form

not be excluded. • Wages, salaries, tips, and bonuses. 1040X.

• Noncash income (such as a home or

Line 14 car) if reported as income on Form 1040, Paperwork Reduction Act Notice. We Enter the number of days in your line 7. ask for the information on this form to • Allowances or reimbursements if qualifying period that fall within 2003. carry out the Internal Revenue laws of the Your qualifying period is the period during reported as income on Form 1040, line 7. United States. You are required to give us which you meet the tax home test and Foreign earned income does not the information. We need it to ensure that either the bona fide residence test or the include— you are complying with these laws and to • Amounts from line 12, column (d), physical presence test. allow us to figure and collect the right • Amounts paid to you by the U.S. Example. You establish a tax home and amount of tax. Government or any of its agencies if you bona fide residence in a foreign country were an employee of the U.S. You are not required to provide the on August 14, 2003. You maintain the tax Government or any of its agencies, information requested on a form that is home and residence until January 31, • Amounts that are actually a distribution subject to the Paperwork Reduction Act 2005. The number of days in your of corporate earnings or profits rather unless the form displays a valid OMB qualifying period that fall within 2003 is than a reasonable allowance as control number. Books or records relating 140 (August 14 through December 31, compensation for your personal services, to a form or its instructions must be 2003). or retained as long as their contents may

• Amounts received after the end of the become material in the administration of Line 17 tax year following the tax year in which any Internal Revenue law. Generally, tax

Enter the total foreign earned income you you performed the services. returns and return information are

earned and received in 2003. Report the confidential, as required by Internal Income earned in prior year. Foreign amount in U.S. dollars using the Revenue Code section 6103. earned income received in 2003 for exchange rates in effect when you services you performed in 2002 may be The time needed to complete and file actually received the income. Be sure to excluded from your 2003 gross income if, this form will vary depending on individual report on Form 1040 all income you and to the extent, the income would have circumstances. The estimated average received in 2003 regardless of when you been excludable if you had received it in time is: earned it. 2002.

Income is earned in the year you Recordkeeping . . . . . . . . . . . 26 min. If you are excluding income under this performed the services for which you rule, do not include this income on line Learning about the law or the received the pay. But if you received your 17. Instead, attach a statement to Form form . . . . . . . . . . . . . . . . . . . 17 min. last wage or salary payment for 2002 in 2555-EZ showing how you figured the Preparing the form . . . . . . . . 42 min. 2003 because of your employer’s payroll exclusion. Enter the amount that would Copying, assembling, and period, that income may be treated as have been excludable in 2002 on Form sending the form to the IRS 31 min. earned in 2003. If you cannot treat that 2555-EZ to the left of line 18. Next to the wage or salary payment as earned in amount enter “Exclusion of Income If you have comments concerning the 2003, the rules explained on this page Earned in 2002”. Include it in the total accuracy of these time estimates or under Income earned in prior year suggestions for making this form simpler, reported on line 18. apply. See Pub. 54 for more details. we would be happy to hear from you. See Note: If you claimed any deduction, Foreign earned income. For purposes the Instructions for Form 1040. credit, or exclusion on your 2002 return of this form, foreign earned income that is definitely related to the 2002 means only the following types of income

received for personal services you

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