Form 2555-EZ, titled "Foreign Earned Income Exclusion," is a specific tax form used by U.S. citizens or resident aliens living and working abroad to exclude a portion of their foreign earned income from U.S. taxation. Here are a few circumstances when you may need to complete Form 2555-EZ:
1. Qualifying for Foreign Earned Income Exclusion: If you meet the requirements to qualify for the Foreign Earned Income Exclusion, which include either a bona fide residence or physical presence test, you may need to complete Form 2555-EZ. This form helps determine the amount of foreign earned income you can exclude from U.S. income tax.
2. Working Abroad: If you are a U.S. citizen or resident alien and work abroad, either as an employee or self-employed individual, Form 2555-EZ allows you to claim the foreign earned income exclusion. This exclusion can reduce your taxable income and potentially lower your overall tax liability.
3. Filing Status: Form 2555-EZ is applicable for individuals filing their taxes as single or married filing jointly. It cannot be used by those filing as head of household or married filing separately.
4. Qualifying Income: The form covers foreign earned income, which includes wages, salaries, professional fees, self-employment income, and other compensation earned abroad. However, it does not cover other types of income such as rental income, interest, dividends, or capital gains.
5. Simplified Version: Compared to its counterpart, Form 2555, Form 2555-EZ is a simplified version that can be used if you meet specific criteria. It has streamlined requirements and is generally less complex to complete.
6. Income Threshold: Form 2555-EZ can only be utilized if your foreign earned income is below the income threshold set each tax year. As of 2021, the threshold is $109,600.
Remember, this content is for informational purposes only, and it is always recommended to consult with a tax professional or use tax software to ensure you are accurately completing the required tax forms based on your individual circumstances.