U.S. Individual Income Tax Return

2012

Instructions for Form
2555-EZ

Department of the Treasury
Internal Revenue Service

Foreign Earned Income Exclusion
Section references are to the Internal Revenue
Code unless otherwise noted.

Future Developments

For the latest information about
developments related to Form 2555-EZ
and its instructions, such as legislation
enacted after they were published, go to
www.irs.gov/form2555.

What's New
Exclusion amount. For 2012, the
maximum exclusion has increased to
$95,100.

General Instructions
Do not include on Form 1040,
line 62 (federal income tax
CAUTION
withheld), any taxes a foreign
employer withheld from your pay and paid
to the foreign country's tax authority
instead of to the U.S. Treasury.

!

Purpose of Form

If you qualify, you can use Form 2555-EZ
instead of Form 2555, Foreign Earned
Income, to figure your foreign earned
income exclusion. You cannot exclude
more than your foreign earned income for
the year.

General Information

If you are a U.S. citizen or a U.S. resident
alien living in a foreign country, you are
subject to the same U.S. income tax laws
that apply to citizens and resident aliens
living in the United States.
Note. Specific rules apply to determine if
you are a resident or nonresident alien of
the United States. See Pub. 519, U.S. Tax
Guide for Aliens, for details.
Foreign country. A foreign country is
any territory under the sovereignty of a
government other than that of the United
States.
The term “foreign country” includes the
country's territorial waters and airspace,
but not international waters and the
airspace above them. It also includes the
seabed and subsoil of those submarine
areas adjacent to the country's territorial
waters over which it has exclusive rights
under international law to explore and
exploit the natural resources.
Nov 06, 2012

The term “foreign country ” does not
include U.S. possessions or territories. It
does not include the Antarctic region.

Who Qualifies

You can use Form 2555-EZ to claim the
foreign earned income exclusion if all of
the following apply.
You meet the seven conditions listed at
the top of Form 2555-EZ.
Your total foreign earned income
received in 2012 is reported on Form
1040, line 7.
You do not have a housing deduction
carryover from 2011.
You meet either the bona fide residence
test (see the instructions for lines 1a and
1b, later) or the physical presence test
(see the instructions for lines 2a and 2b,
later).
You meet the tax home test (see the
instructions for line 3, later).
Note. Income from working abroad as an
employee of the U.S. Government does
not qualify for the foreign earned income
exclusion. Do not file Form 2555-EZ.

Married Couples

If both you and your spouse qualify for,
and choose to claim, the foreign earned
income exclusion, figure the amount of the
exclusion separately for each of you. You
must each complete separate Forms
2555-EZ.

Community income. The amount of the
exclusion is not affected by the
income-splitting provisions of community
property laws. The sum of the amounts
figured separately for each of you is the
total amount excluded on a joint return.

Travel to Cuba

Generally, if you were in Cuba in violation
of U.S. travel restrictions, the following
rules apply.
Any time spent in Cuba cannot be
counted in determining if you qualify under
the bona fide residence or physical
presence test.
Any income earned in Cuba is not
considered foreign earned income.
Note. If you performed services at the
U.S. Naval Base at Guantanamo Bay, you
were not in violation of U.S. travel
restrictions.

Cat. No. 14623P

Additional Information

Pub. 54, Tax Guide for U.S. Citizens and
Resident Aliens Abroad, has more
information about the bona fide residence
test, the physical presence test, and the
foreign earned income exclusion. You can
get this publication from most U.S.
Embassies and consulates or by writing
to: National Distribution Center, 1201 N.
Mitsubishi Motorway, Bloomington, IL
61705-6613. You can also download this
publication (as well as other forms and
publications) at IRS.gov.

Waiver of Time
Requirements

If your tax home was in a foreign country
and you were a bona fide resident of, or
physically present in, a foreign country
and had to leave because of war, civil
unrest, or similar adverse conditions, the
minimum time requirements specified
under the bona fide residence and
physical presence tests may be waived.
You must be able to show that you
reasonably could have expected to meet
the minimum time requirements if you had
not been required to leave. Each year the
IRS will publish in the Internal Revenue
Bulletin a list of the only countries that
qualify for the waiver for the previous year
and the dates they qualify. If you left one
of the countries during the period
indicated, you can claim the foreign
earned income exclusion on Form
2555-EZ, but only for the number of days
you were a bona fide resident of, or
physically present in, the foreign country.
If you can claim the foreign earned
income exclusion because of the waiver of
time requirements, attach a statement to
your return explaining that you expected to
meet the applicable time requirement, but
the conditions in the foreign country
prevented you from the normal conduct of
business. Also, enter “Claiming Waiver” in
the top margin on page 1 of your Form
2555-EZ.

When To File

Form 1040 is generally due April 15, 2013.
However, you are automatically
granted a 2-month extension of time to file
(to June 17, 2013) if, on the due date of
your return, you live outside the United
States and Puerto Rico and your tax home
(defined later) is outside the United States

and Puerto Rico. If you take this
extension, you must attach a statement to
your return explaining that you meet these
two conditions.
The automatic 2-month extension also
applies to paying the tax. However,
interest is charged on the unpaid tax from
the regular due date until it is paid.
When to claim the exclusion(s). The
first year you plan to take the foreign
earned income exclusion, you may not yet
have met either the physical presence test
or the bona fide residence test by the due
date of your return (including the
automatic 2-month extension, discussed
earlier). If this occurs, you can either:
1. Apply for a special extension to a
date after you expect to qualify, or
2. File your return timely without
claiming the exclusion and then file an
amended return after you qualify.
Special extension of time. To apply
for this extension, complete and file Form
2350, Application for Extension of Time To
File U.S. Income Tax Return, with the
Department of the Treasury, Internal
Revenue Service Center, Austin, TX
73301-0045, before the due date of your
return. Interest is charged on the tax not
paid by the regular due date as explained
earlier.
Amended return. File Form 1040X,
Amended U.S. Individual Income Tax
Return, to change a return you already
filed. Generally, Form 1040X must be filed
within 3 years after the date the original
return was filed or within 2 years after the
date the tax was paid, whichever is later.

Choosing the Exclusion

To choose the foreign earned income
exclusion, complete the appropriate parts
of Form 2555-EZ and file it with your Form
1040 or Form 1040X. Your initial choice to
claim the exclusion must usually be made
on a timely filed return (including
extensions) or on a return amending a
timely filed return. However, there are
exceptions. See Pub. 54 for more
information.
Once you choose to claim the
exclusion, that choice remains in effect for
that year and all future years unless it is
revoked. To revoke your choice, you must
attach a statement to your return for the
first year you do not wish to claim the
exclusion. If you revoke your choice, you
cannot claim the exclusion for your next 5
tax years without the approval of the
Internal Revenue Service. See Pub. 54 for
details.
Figuring tax on income not excluded.
If you claim the foreign earned income
exclusion, you must figure the tax on your
nonexcluded income using the tax rates
that would have applied had you not

claimed the exclusion. See the
Instructions for Form 1040 and complete
the Foreign Earned Income Tax
Worksheet to figure the amount of tax to
enter on Form 1040, line 44. When
figuring your alternative minimum tax on
Form 6251, you must use the Foreign
Earned Income Tax Worksheet in the
instructions for Form 6251.
Earned income credit. You cannot take
the earned income credit if you claim the
exclusion.
Foreign tax credit or deduction. You
cannot claim a credit or deduction for
foreign income taxes paid on income you
exclude. If all of your foreign earned
income is excluded, you cannot claim a
credit or deduction for the foreign taxes
paid on that income. If only part of your
income is excluded, you cannot claim a
credit or deduction for the foreign taxes
allocable to the excluded income. For
details on how to figure the amount
allocable to the excluded income, see
Pub. 514, Foreign Tax Credit for
Individuals.
IRA deduction. If you claim the
exclusion, special rules apply in figuring
the amount of your IRA deduction. For
details, see Pub. 590, Individual
Retirement Arrangements (IRAs).

Specific Instructions
Lines 1a and 1b
Bona Fide Residence Test

To meet this test, you must be one of the
following:
A U.S. citizen who is a bona fide
resident of a foreign country, or countries,
for an uninterrupted period that includes
an entire tax year (January 1–December
31), or
A U.S. resident alien who is 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, or countries, for an
uninterrupted period that includes an
entire tax year (January 1–December 31).
See Pub. 901, U.S. Tax Treaties, for a list
of countries with which the United States
has an income tax treaty in effect.
Whether you are a bona fide resident of
a foreign country depends on your
intention about the length and nature of
your stay. Evidence of your intention may
be your words and acts. If these conflict,
your acts carry more weight than your
words. Generally, if you go to a foreign
country for a definite, temporary purpose
and return to the United States after you
accomplish it, you are not a bona fide
resident of the foreign country. If
accomplishing the purpose requires an
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extended, indefinite stay, and you make
your home in the foreign country, you may
be a bona fide resident. See Pub. 54 for
more information and examples.
If you submitted a statement of
nonresidence to the authorities of a
foreign country in which you earned
income and the authorities hold that you
are not subject to their income tax laws by
reason of nonresidency in the foreign
country, you are not considered a bona
fide resident of that country.
If you submitted such a statement and
the authorities have not made an adverse
determination of your nonresident status,
you are not considered a bona fide
resident of that country.
Line 1b. If you answered “Yes” on line 1a,
enter the dates your bona fide residence
began and ended. If you are still a bona
fide resident, enter “Continues” in the
space for the date your bona fide
residence ended.

Lines 2a and 2b
Physical Presence Test

To meet this test, you must be a U.S.
citizen or resident alien who is physically
present in a foreign country, or countries,
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.

Line 2a. To figure 330 full days of
presence, add all separate periods you
were present in a foreign country during
the 12-month period in which those days
occurred. The 330 full days can be
interrupted by periods when you are
traveling over international waters or are
otherwise not in a foreign country. See
Pub. 54 for more information and
examples.
Line 2b. The 12-month period on which
the physical presence test is based must
include 365 or 366 days, part of which
must be in 2012. The dates may begin or
end in a calendar year other than 2012.
You must enter dates in both
spaces provided on line 2b. Do
not enter “Continues” in the
space for the ending date.

TIP

Note. A nonresident alien who, with a
U.S. citizen or U.S. resident alien spouse,
chooses to be taxed as a resident of the
United States can qualify under this test if
the time requirements are met. See Pub.
54 for details on how to make this choice.

Line 3
Tax Home Test

To meet this test, your tax home must be
in a foreign country, or countries (see
Foreign country, earlier), throughout your
period of bona fide residence or physical

presence, whichever applies. For this
purpose, your period of physical presence
is the 330 full days during which you were
present in a foreign country, not the 12
consecutive months during which those
days occurred.
Your tax home is your regular or
principal place of business, employment,
or post of duty, regardless of where you
maintain your family residence. If you do
not have a regular or principal place of
business because of the nature of your
trade or business, your tax home is your
regular place of abode (the place where
you regularly live).
You are not considered to have a tax
home in a foreign country for any period
during which your abode is in the United
States. However, if you are temporarily
present in the United States, or you
maintain a dwelling in the United States
(whether or not that dwelling is used by
your spouse and dependents), it does not
necessarily mean that your abode is in the
United States during that time.
Example. You are employed on an
offshore oil rig in the territorial waters of a
foreign country and work a 28-day on/
28-day off schedule. You return to your
family residence in the United States
during your off periods. You are
considered to have an abode in the United
States and do not meet the tax home test.
You cannot claim the foreign earned
income exclusion.

Line 4

Enter your entire address including city,
province or state, country, and postal
code. If using a military or diplomatic
address, include the country in which you
are living or stationed.

Line 12

Complete columns (a) through (d) if you
were present in the United States or any of
its possessions in 2012. Do not include
time spent in the United States or its
possessions before your period of bona
fide residence or physical presence,
whichever applies, began or after it ended.
Column (d). Enter, in U.S. dollars, the
amount of income earned in the United

States on business (such as meetings or
conventions). Attach a statement showing
how you determined the amount. Do not
include this income on line 17. Even if you
live and work in a foreign country, any
income earned during the time spent in
the United States on business is
considered U.S. source income and
cannot be excluded.

Line 14

Enter the number of days in your
qualifying period that fall within 2012. Your
qualifying period is the period during
which you meet the tax home test and
either the bona fide residence test or the
physical presence test.
Example. You establish a tax home and
bona fide residence in a foreign country on
August 14, 2012. You maintain the tax
home and residence until January 31,
2014. The number of days in your
qualifying period that fall within 2012 is
140 (August 14 through December 31,
2012).

Line 17

Enter the total foreign earned income you
earned and received in 2012. Report the
amount in U.S. dollars using the exchange
rates in effect when you actually received
the income. If you are a cash-basis
taxpayer, include in income on Form 1040
the foreign earned income you received in
2012 regardless of when you earned it.
(For example, include wages on Form
1040, line 7.)
Income is earned in the year you
performed the services for which you
received the pay. But if you received your
last wage or salary payment for 2011 in
2012 because of your employer's payroll
period, that income can be treated as
earned in 2012. If you cannot treat that
wage or salary payment as earned in
2012, the rules explained later under
Income earned in prior year apply. See
Pub. 54 for more details.
Foreign earned income. For purposes
of this form, foreign earned income means
only the following types of income
received for personal services you
performed in a foreign country during the
period for which you meet the tax home

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test and either the bona fide residence test
or the physical presence test.
Wages, salaries, tips, and bonuses.
Noncash income (such as a home or
car) if reported as income on Form 1040,
line 7.
Allowances or reimbursements if
reported as income on Form 1040, line 7.
Foreign earned income does not
include:
Income earned in the United States on
business ( Form 2555-EZ, line 12, column
(d)),
Amounts paid to you by the U.S.
Government or any of its agencies if you
were an employee of the U.S.
Government or any of its agencies,
Amounts that are actually a distribution
of corporate earnings or profits rather than
a reasonable allowance as compensation
for your personal services,
Amounts received after the end of the
tax year following the tax year in which you
performed the services, or
Amounts you must include in gross
income because of your employer's
contributions to a nonexempt employees'
trust or to a nonqualified annuity contract.
Income earned in prior year. Foreign
earned income received in 2012 for
services you performed in 2011 can be
excluded from your 2012 gross income if,
and to the extent, the income would have
been excludable if you had received it in
2011.
If you are excluding income under this
rule, do not include this income on line 17.
Instead, attach a statement to Form
2555-EZ showing how you figured the
exclusion. Enter the amount that would
have been excludable in 2011 on Form
2555-EZ to the left of line 18. Next to the
amount enter “Exclusion of Income
Earned in 2011.” Include it in the total
reported on line 18.
Note. If you claimed any deduction,
credit, or exclusion on your 2011 return
that is definitely related to the 2011 foreign
earned income you are excluding under
this rule, you may have to amend your
2011 income tax return to adjust the
amount claimed. To do this, file Form
1040X.