# Foreign Earned Income Exclusion - the simplest case



## peppera-ann-

Issue 1 of 1
Part IV entries on lines 19, 21, and 22 less line 25 exceeds wages for the taxpayer. Verify all taxable employee income on Form 2555 is included on W-2 and Form 2555 entries are not duplicated.

While I am trying go through an online e file for taxes 2010/11- I am getting the above error. 
Ive completed the 2555 and 1040 forms (paper)- however last year I miscalculated (still not sure where I messed up), and I thought that I could do it online to see where the error was so that the paper forms I send will be correct.

I entered my income (converted to USD) in the form online and it keeps saying that it exceeds wages for the taxpayer?
When I completed the forms last year, the IRS fixed it form me and my error was in lines 37 and 43- and the IRS input a figure that I have no idea where they got it. 

Since I have only UK income (I have been here almost 2 years now) - I thought that my income was to be input in(form 1040) line 38, then minus the 5800 single/married filing separately deduction and that would be my taxable income? 

I've converted the tax deducted from my P60 and input this into line 44 and 46, 55 and 61. It seems so straight forward???

Can someone please tell me where the above error is coming from? I know that online it will do the deductions for me, so I was simply putting my income that was on form 2555 (I have no extra deductions or anything so it is just a case of my income) into the online foreign Earned Income deduction part. 

Thanks for any help yall!
xxPepperxx


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## Joppa

Just wait for Bev to reply!


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## peppera-ann-

Joppa said:


> Just wait for Bev to reply!


 Aye Good ol Bev


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## Bevdeforges

I actually may hijack this thread over to the tax section, since you're probably not the only person having trouble with the forms the first time or so through them.

First of all, I'm not following quite where you're having problems - on the 2555 or on the 1040. The way I do things (for my simple returns) is to start with form 2555. (Actually, to make life simpler for yourself, you may want to use 2555-EZ - fewer lines, less places to go astray.)

If you're using an online program, you have to create a fake W-2 for your salary income. That way, you set up your salary income (in US$) to go onto line line 7 of the 1040, and on the line on your 2555 that asks for "total wages, salaries, bonuses, commission, etc." That's your starting point. Don't adjust your gross salary for anything.

The last line of the 2555-EZ tells you what to put on which line on the 1040 *(front side of the page)* and how to indicate that you got the number from the 2555. Then add in any interest income you may have on line 8a. Add everything up (subtracting the number you got on form 2555 EZ, which should be your whole salary in your case) and enter what you get on line 22, which is *total income*. This should equal only whatever interest you might have received on bank accounts in the US and UK (in your case).

Carry line 22 down to line 37. (I'd be very surprised if you qualify for any of those Adjusted Gross Income things.) 

Now turn the page over, carry line 37 over to line 38 and proceed down the rest of the back of the page, taking your standard deduction, exemption - all of which should bring you down to a nice, satisfying -0- on line 43 for "taxable income."

Sign the forms and send them in. You have done your civic duty.
Cheers,
Bev


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## Bevdeforges

Note to anyone who may be following this thread. Peppera-Ann is a long-time Expat forum member, with what is probably the simplest tax situation for a US expat married to a non-resident alien. All her income is from her job, and she is paid less than the FEIE limit (unless she has neglected to tell us about some super pay raise she has had lately). 

I mention the bank interest only because it's the most common "other" form of income. Anything else starts to get a bit more complicated.

To generalize a bit more on this example, let me just say that if you have $10,000 or more in foreign (i.e. non-US) bank accounts, you have to add a Schedule B to your filing to check the box at the bottom of the form asking you this question. And if the answer is "yes" then you should also file (separately) the Treasury form indicated on the Schedule B. 

That's it. Two forms and you're done, unless you have $10,000 in non-US bank accounts, in which case you file one additional schedule with your income taxes, and the treasury form, which goes to a separate address.
Cheers,
Bev


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## peppera-ann-

Bevdeforges said:


> I actually may hijack this thread over to the tax section, since you're probably not the only person having trouble with the forms the first time or so through them.
> 
> First of all, I'm not following quite where you're having problems - on the 2555 or on the 1040. The way I do things (for my simple returns) is to start with form 2555. (Actually, to make life simpler for yourself, you may want to use 2555-EZ - fewer lines, less places to go astray.)
> 
> If you're using an online program, you have to create a fake W-2 for your salary income. That way, you set up your salary income (in US$) to go onto line line 7 of the 1040, and on the line on your 2555 that asks for "total wages, salaries, bonuses, commission, etc." That's your starting point. Don't adjust your gross salary for anything.
> 
> The last line of the 2555-EZ tells you what to put on which line on the 1040 *(front side of the page)* and how to indicate that you got the number from the 2555. Then add in any interest income you may have on line 8a. Add everything up (subtracting the number you got on form 2555 EZ, which should be your whole salary in your case) and enter what you get on line 22, which is *total income*. This should equal only whatever interest you might have received on bank accounts in the US and UK (in your case).
> 
> Carry line 22 down to line 37. (I'd be very surprised if you qualify for any of those Adjusted Gross Income things.)
> 
> Now turn the page over, carry line 37 over to line 38 and proceed down the rest of the back of the page, taking your standard deduction, exemption - all of which should bring you down to a nice, satisfying -0- on line 43 for "taxable income."
> 
> Sign the forms and send them in. You have done your civic duty.
> Cheers,
> Bev


Hiya Bev- 
Thanks for replying 

I printed the 2555 EZ form off...then read somewhere I couldnt use the EZ so I just printed off the 2555 form. 

Ive completed the 2555 forms, and the 1040 forms on paper. I thought I might just see if it would work online for H & R Block as a fellow expat told me he had done his online with no problems. The error I posted is what comes up when I convert my P60 UK income amount to dollars and enter this amount on the online form that represents the 2555 foreign earned income deduction. It shows on the tax screen summary as (19771.50)- and this error Issue 1 of 1
Part IV entries on lines 19, 21, and 22 less line 25 exceeds wages for the taxpayer. Verify all taxable employee income on Form 2555 is included on W-2 and Form 2555 entries are not duplicated.

Where you said to create fake W2 form- the employee reference number will not register as a company and inturn wont let me set up for the income. 

Im going to redo all of the numbers - however I just dont understand where the error is coming from. I hope they will do it like last year, and if I made a mistake then they will simply correct it for me (just wish they would say how to avoid the same mistake!) 

Thanks Bev, you are always a star :clap2:

xxPepper Annxx


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## peppera-ann-

" all of which should bring you down to a nice, satisfying -0- on line 43 for "taxable income.""

my line 43 shows my taxable income...Im so doing this wrong arent I

For line 43:Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0- 
My line 42 shows 0 exemptions and 41 shows my total income. so therefore 43 is my full income?

As well - line 62
Federal income tax withheld from Forms W-2 and 1099
is this the tax deducted from my P60? or should I have been at 0 from line 43 and not having to worry about this ??


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## Bevdeforges

peppera-ann- said:


> " all of which should bring you down to a nice, satisfying -0- on line 43 for "taxable income.""
> 
> my line 43 shows my taxable income...Im so doing this wrong arent I
> 
> For line 43:Taxable income. Subtract line 42 from line 41. If line 42 is more than line 41, enter -0-
> My line 42 shows 0 exemptions and 41 shows my total income. so therefore 43 is my full income?
> 
> As well - line 62
> Federal income tax withheld from Forms W-2 and 1099
> is this the tax deducted from my P60? or should I have been at 0 from line 43 and not having to worry about this ??


Yup, you're doing something wrong.

Nope, line 42 should show 1 exemption (for you). Make sure you have checked the box on line 6a saying that you are taking yourself as an exemption.

Line 38 should be your AGI from the front side of the form. (0 unless you have bank interest income). Line 40a is your standard deduction (take the one for married, filing separately). Line 41 should be negative unless you've got a sh## load of interest from somewhere.

Ultimately, line 43 taxable income should be -0- (like they say, if line 42 is more than line 41, enter -0-).
Cheers,
Bev


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## peppera-ann-

Bevdeforges said:


> Yup, you're doing something wrong.
> 
> Nope, line 42 should show 1 exemption (for you). Make sure you have checked the box on line 6a saying that you are taking yourself as an exemption.
> 
> Line 38 should be your AGI from the front side of the form. (0 unless you have bank interest income). Line 40a is your standard deduction (take the one for married, filing separately). Line 41 should be negative unless you've got a sh## load of interest from somewhere.
> 
> Ultimately, line 43 taxable income should be -0- (like they say, if line 42 is more than line 41, enter -0-).
> Cheers,
> Bev


OK I will redo it all  Does anyone get any money back or since its 0 is that it? I did receive a bit last year but that may have been since it was 6 months of US income as well?

OK so Ive done this now:
Line 38 = Income
Line 40 = 5800 (standard deduction)
Line 41 = 40 from 38 (negative amount)
Line 42 = 3700 x1 = 3700
Line 43= 0 all the way down 

It was the negative bit....I wasnt doing it right on the calculator nor did I realize its ok for a negative amount.


Bev you always help me out so much- Thank you for everything. Your a star 
xxPepperxx


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## Bevdeforges

Nah, it's not normally possible to get money back if you're not having anything withhold for the IRS. (Let's not get greedy, here. The US economy has enough problems as it is.)
Cheers,
Bev


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## peppera-ann-

Bevdeforges said:


> Nah, it's not normally possible to get money back if you're not having anything withhold for the IRS. (Let's not get greedy, here. The US economy has enough problems as it is.)
> Cheers,
> Bev


lol no no not greedy just wanting to make sure I wasnt missing any thing! 
Thanks again Bev


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