US Expats - IRS form 2555...

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buffalofan
Posts: 350
Joined: Wed Jan 06, 2010 11:08 pm

US Expats - IRS form 2555...

Post by buffalofan »

Here's one for the US tax experts.

For a looong time, I have used form 2555-EZ to report my earnings. It was easy, simple, straightforward - which is probably why the IRS has decided to eliminate this form starting with the 2019 filing season.

So the normal form 2555 is new to me and I am somewhat confused. Unlike the EZ version, there are spots on it to report all non-cash income (e.g. housing + more) as well as cash allowances. None of which were even mentioned on the EZ version. It also asks you to attach a statement on how the market value of your housing was determined - wtf? How should I know? And then later in the form it asks how much of the non-cash income is excludable, and points you to instructions for this that are ambiguous at best. Just wondering if there are any guidelines for a how a typical international teacher with housing provided can fill this form.

What fun.
PsyGuy
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Location: Northern Europe

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Post by PsyGuy »

They eliminated it because they were losing revenue they could capture.

Basically all comp is taxable at some point.
The markt value of your housing if your provided housing as opposed to a housing allowance you can use either retail comparison (IE. you look at the going rate of housing for comparable housing to yours in your area) or you can use management determination (IE. your IS just tells you this is what your getting and its worth X).
Excludable comp is that which occurs in the course of ordinary business and is a necessary business expense. Your IS flies you to PD and pays for your hotel during the training, thats excludable. A housing benefit or allowance that provides a home for you that you would have to pay coin for yourself is generally not excludable. For most ITs their housing and utility allowances are not excludable. Most relocation allowances are not excludable such as shopping, settling, etc. Shipping allowances may be excludable if you transported work tools such as classroom items, technology, books, etc. A mobile phone and service your IS provides is probably excludable. Transportation is a bit grey, local transportation costs (metro, etc.) are likely excludable, but flights to the host country typically arent since its assumed your travel is to take up residence and not a necessary part of ordinary business. PD costs are excludable when the training is specific (IE workshop, etc.) but general education (IE. a masters degree) is not (though may qualify for other deductions and credits).

In the past I just left it out.
Psychometrika
Posts: 74
Joined: Sun Nov 20, 2016 10:08 pm

Re: US Expats - IRS form 2555...

Post by Psychometrika »

What about free tuition for children? That could be a deal breaker for many families if that becomes taxable given the insane tuition many schools charge.
sid
Posts: 1392
Joined: Sat Dec 02, 2006 11:44 am

Re: US Expats - IRS form 2555...

Post by sid »

It used to be and I believe still is, that it didn’t count as income if the housing was provided as a convenience for your employer. Which requires that you’re getting accommodation, not an allowance towards accommodation.
It might be time to consult a professional. There are several groups out there specializing in US expats, and paying their economical fee for a year might be worth it to ensure you’re all squared away and straight with the IRS. Many who try for just one year have reported that they got money back in excess of the fees, and they never changed back to going it alone.
wrldtrvlr123
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Joined: Sat Feb 06, 2010 10:59 am
Location: Japan

Re: US Expats - IRS form 2555...

Post by wrldtrvlr123 »

We always used TurboTax and never had an issue. The software was generally up to date and asked detailed questions about our situation, gave us our options, etc. Might be worth a look to see what it has to say about your situation before going to an accountant. We are now with DoDEA, so don't qualify for the foreign income exclusion, etc.
PsyGuy
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Location: Northern Europe

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Post by PsyGuy »

@Psychometrika

The tax issue of tuition/place waivers/fees isnt yours, its your childrens.
shadowjack
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Re: US Expats - IRS form 2555...

Post by shadowjack »

@PG - tuition for children is part of YOUR job package - YOU are the employee, not your kids. That's why it's taxable in countries like Germany.
PsyGuy
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Location: Northern Europe

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Post by PsyGuy »

@SJ

No its not. If you X have an agreement with employer Y to give your child Z USD$100, you have an agreement the child has USD$100. Tax liability in incurred on coin not on contracts, agreements, or promises. IRS Pub.54 "Employer-provided amounts include:...Amounts paid to you or a third . by your employer for the education of your de- pendents".
Your IS "paid" you nothing, they didnt give you coin, a remittance or a voucher. They didnt give some other third . any of that either. This isnt Acme In. paying coin to you for a childs education or paying an IS coin for your childs education. You were "paid" nothing.
IRS pub.929, Earned Income "earned income also includes any part of a scholarship or fellowship grant that the dependent must include in his or her gross income."
Of course in the vast majority of cases the parent are allowed and most do, to claim the income as there own on the parents return, but in this specific incidence if the tuition/place waiver/fee is high enough its in the family interest for the child to claim it because in normal circumstances (such as private/independent DS in the USA) the deduction for the child is low and produces a tax liability since children typically are able to be claimed (even if they arent claimed) on a parents return. In this very specific circumstance though the child dependent will be able to claim foreign income deduction/exclusion/or credit themselves. This effectively multiplies the amount of the foreign tax deduction/exclusion/credit, although its very high (around USD100K) thats per filer and its possible that a tuition/place waiver/fee would exceed the typical ledger value of $10K and could push the primary filers exemption past the foreign tax limits.
sid
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Re: US Expats - IRS form 2555...

Post by sid »

Hogwash.
Heliotrope
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Re: US Expats - IRS form 2555...

Post by Heliotrope »

I concur with @sid
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