Hi, my name is Balaji Jo Merriman, an indole agent. I thought of making this video presentation about the foreign earned income exclusion. So, let's start with the foreign earned income exclusion. Taxpayers can enjoy the benefit of exclusion if they meet certain requirements. If you are a US citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income an amount of your foreign earnings. Now, who can claim this benefit and what is the eligibility criteria? First, you must have foreign earned income. Second, your tax home has been in a foreign country. And lastly, you must be one of the following: a US citizen who was a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year; a US resident alien who was a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country for an uninterrupted period that includes an entire tax year; or a US citizen or a US resident alien who is physically present in a foreign country or countries for 330 full days during any period of 12 consecutive months. Additionally, another important factor is the self-employment income. A qualifying individual may claim the foreign earned income exclusion for both earned and self-employment income. The excluded amount will reduce an individual's regular income tax, but it will not reduce the individual's self-employment tax. So, the individual must still pay the self-employment tax, which consists of Social Security and Medicare. Next, let's discuss the bona fide resident test. What does it mean? You meet the bona fide resident test if you are a bona...
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Foreign Earned Income Exclusion Form: What You Should Know
Foreign Earned Income Exclusion, Part VI You must file Form 2555, Report of Foreign Earned Income, with your U.S. income tax return each year Form 2555: How to Claim the Foreign Earned Income Exclusion for U.S. Expats The amount of foreign earned income you claim can exclude amounts including income from foreign sources (including any income earned outside the U.S.) and housing expenses paid in the U.S. If You need help filing or understanding Form 2555: How to Claim the Foreign Earned Income Exclusion for U.S. Expats, or How to claim the foreign earned income exclusion for U.S. Expats. Doing Business in Cuba as a Foreign Personal Holding If you are a U.S. citizen or resident doing business in Cuba on or after January 1, 2008, you can claim a deduction that reduces your U.S. tax liability on the income from such activity. This deduction is called the foreign personal holding amount, and is calculated as the least of: Your earned income during the tax year from a trade or business involving a non-U.S. holder of foreign interests; or A one-quarter mirror corporation's foreign personal holding amount for the tax year. If you aren't sure which is best, consult the IRS Publication 550, U.S. Tax Guide for Aliens, for information about a tax-exempt private foundation as an alternative way to figure your FPU. A Nonresident of the United States as a Trustee on a Contract for Trust Property If you are a U.S. citizen or permanent resident, and you are a trustee of a contract for trust property the foreign income you earn in the U.S. from the trust property is taxable here to you, and if you aren't exempt from U.S. U.S. income tax, the FUNFAIR section 7871 will generally require the trust to provide for you to include in income the income from the trust property. If you are not exempt from U.S. U.S income tax, the IRS may ask you to file a return to provide evidence indicating why you aren't exempt. You are a U.S. citizen or permanent resident. You are carrying on a trade or business in the United States, in excess of your total income from all sources (including foreign income) in the accounting period for income tax purposes.
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