Filing Form 2555

[skparker 0]

My husband is originally from the UK. He moved here in March of 2009 and started working in July of 09. He received income from the UK from Jan-March while he was still living there until he offically moved here.

We are filing, jointly, married (he has a green card & ss#) with the 1040.

I have called the IRS numerous times with questions, but this one I hope someone could help....

I first called and found out when filing 2555 on line 7 you are to report all income (I am using Turbo Tax by the way) (all income in my case would be mine, my husbands-usa, and my husbands-uk). On line 21, or reporting your foreign earned income (his wages, salaries, etc.), I reported how much he had earned in the UK from Jan-March 09. Now on line 22, this is your total adjusted income (which would be line 7 minus 21). So you are technically adding your foreign earned income to your total income so that you can adjust it off.

He passed the physical presence test, therefore qualifies for the foreign earned income exclusion. From what I read...doesn't the foreign earned income exclusion mean that we WONT get taxed on our UK earned income??

In the beginning of filing the 1040, we didn't know anything about filing the 2555, so we did our taxes as normal and i wrote down the amounts we were supposed to get back from federal and state. Now when I did the 2555, it said we are supposed to get about $300+ less on our return....

are we supposed to getting taxed on his foreign earned income when he qualified for the exclusion?????

please help! thanks!!

skparker

[skparker 0]

no one has a answer????

when i put how much he made in the uk and put that amount in the exclusions...what we were supposed to get back from federal went down exactly $300....i dont know if its a turbo tax problem or just how im entering things....

but im not going to send it in and lose $300.

please help

[Nich-Nick 3,354]

I haven't commented because I didn't exactly follow what you were describing. You can check things if you have TurboTax installed on your computer by going to the forms view. View > Forms ( I don't know if you can view forms on the online version.)

Then look for the form "Wages, Salaries, and Tips Worksheet." It will break down the income. Line 1 will have Tax Payer and Spouse wages from a W2. Line 8b will have his foreign wages in his column, with the box underneath having an X in it. Check that page to make sure you don't have extra money in there somewhere. Did you convert the pounds to US dollars?

Line 7 will have your total income from all 3 sources.

Line 21 of the 1040 will be a minus number for the excluded income. (also in US $)

His foreign income will affect your taxes if you have a high income....like $150,000 or so combined, or if you have a good sum of money in schedule D dividends or capital gains.

Make sure you filing status is joint.

Your other option is to each file separate returns....Married Filing Separately using your US incomes. Don't look at refunds, but look at the line 44 TAX. Compare:

A. How much is your tax liability if filing Married Filing Joint and claiming the foreign income?

B. How much is his tax + your tax on the Married Filing Separately returns?

Compare the two different ways and see which way offers you the least taxation as a couple.

Edited February 12, 2010 by Nich-Nick