ID Form 2555 2024-2025

ID Form 2555: What You Should Know

FEE Form 2555: The 2555 Exclusion If you've claimed the foreign earned income exclusion and the foreign housing exclusion or deduction, the following questions arise: What will you have to pay in connection with filing Form 2555 (including an information statement)? The tax code says only that the IRS must collect taxes for the exclusion. But the rules of the Internal Revenue Code also say that the tax must be due and payable with interest.   Who pays the tax and interest on the exclusion? The Internal Revenue Code authorizes the IRS to set the taxes owed on an exclusion for “exempted persons” — that is, the citizens of certain countries who meet certain special residency requirements. These include: United States citizens employed in certain jobs for a foreign company. Citizens of certain countries who own foreign businesses, including “subpart F” (Partnership Interest) holders who own an “asset” or “partnership interest.” In those categories are not only citizens and companies but also their partners and shareholders in a business. They may or may not have a physical place of living in the United States. Is there a minimum amount of property owned that must be in the United States (i.e., on which federal and state taxes are paid)? Yes. As defined by Section 911 of the Internal Revenue Code, the minimum amount of property that can be excluded is 10 million at most. That's a minimum, of course. Anything less than 10 million is a deduction.  How much of the income of the U.S. owner of the foreign business must be considered foreign? As of now there's no set number. But there has been some discussion of whether the amount of income must be greater than or equal to 25,000 per year per foreign resident for the purposes of the exclusion. The question is important since, say, the owner of the business in Bermuda is a U.S. citizen and his business gross revenue is 150 million. To be taxed on only 75 million of his income, he would be entitled to a 10% deduction. And the rest, 25 million, would be foreign income taxed to him at the U.S. rates. In Bermuda, however, the gross revenue is 75 million — no deduction allowed on his Bermuda income. In that case, he would be taxed again 10% on his taxable income in the United States.

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