For help entering foreign income see Entering foreign income for Form 2555 in ProSeries.
How ProSeries calculates Form 2555, Foreign Earned Income Exclusion
Calculations and limitations addressed in this article may be impacted by inflation adjustments for the year. To see the IRS annual inflation adjustments for tax year 2021 and 2022 see here.
ProSeries includes two Forms 2555, one for the taxpayer and one for the spouse.
To complete these forms:
- Complete Part I of Form 2555. This section includes information such as the client's foreign address and employer information.
- If you're e-filing the return, complete the Address Smart Worksheet for Electronic Filing on Part I.
- Complete Part II (Bona Fide Residence Test) or Part III (Physical Presence Test).
- Complete the Foreign Earned Income Allocation Worksheet.
- You can find the QuickZoom to this worksheet on Part IV of Form 2555.
- Complete the Foreign Earned Income Deductions Allocation Worksheet.
- You can find the QuickZoom to this worksheet on Part IV of Form 2555.
The exclusion will flow from Form 2555, line 45 to Form 1040 as Other Income.
ProSeries Basic 2021 and prior doesn't include the Foreign Earned Income Allocation Worksheet or the Foreign Earned Income Deductions Allocation Worksheet. To complete Form 2555, complete Parts IV and V, then complete Parts VI, VII, VIII, and XI. ProSeries Basic 2022 now includes these worksheets.
Entering Form 2555 physical presence test
For tax year 2020, the IRS is offering COVID-19 emergency relief related to the time requirement necessary to meet the physical presence test. Refer to the IRS's Instructions for Form 2555 for more information.
Qualifications for the physical presence test
To meet the physical presence test, you must be a US citizen or resident alien who's physically present in a foreign country for at least 330 full days during any period of 12 months in a row.
A full day means the 24-hour period that starts at midnight. To figure 330 full days, add all seperate periods the client was present in a foreign country during the 12-month period shown on line 16. The 330 full days can be interrupted by periods when the client was traveling over international waters or was otherwise not in a foreign country.
Refer to IRS Pub. 54 for more information and examples.
Entering physical presence test data in ProSeries
You can enter information for the physical presence test on Form 2555, Part III. Here's some more important information:
- If the client qualifies under the physical presence test, enter the most advantageous 12-month period and all other information as it applies on Part III, lines 16–18.
- If the taxpayer didn't travel during the period they were physically present during the year, select the Check here if you have no travel to report during the period checkbox. Otherwise, enter the travel information in the grid on line 18.
Entering bona fide residence data for Form 2555 in ProSeries
Qualifications for the bona fide residence test
The bona fide residence test applies to US citizens and any US resident alien who's a citizen or national of a country that has tax treaties in effect with the US.
- To see a list of countries that have US tax treaties in effect, see the IRS's List of Tax Treaties.
- For more information on the Foreign Earned Income Exclusion and the bona fide residence test, see the IRS's Foreign Earned Income Exclusion - Bona Fide Residence Test.
Entering bona fide residence data in ProSeries
You may enter bona fide residence information in Part II of Form 2555, lines 10–15a.
- If the taxpayer still lives in the foreign country, enter Continues for the date ended on line 10.
- If you were present in the US or its territories during the tax year, complete columns a–d of line 14.
- Report income from column d on Form 1040, not in Part IV.
