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How to avoid "revoking" foreign earned income exclusion in a year with no foreign earned income?

Forum|Forum|2 years ago
October 8, 2023
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Hello,

From 2009-21, I took the foreign earned income every year and maintained my bona fide residence abroad.

In 2022, I did not have foreign earned income due to a period of unemployment but I maintained my bona fide residence abroad (I am a dual citizen).

In 2023, I am working again (with same bona fide residence abroad) and I would like to take the foreign earned income exclusion on next year's tax return.

In the instructions for form 2555, the IRS has this note: "Note. It is not necessary to affirmatively revoke your choice if you don’t have any foreign earned income."

Does this mean the IRS will revoke the choice even if I do not affirmatively revoke it? Should I still file form 2555 with values of "0" for 2022 to make it clear I do not want to revoke?

Any advice appreciated!

Best answer by pk12_2

@MonsieurMD1 , you are filing US tax return as a citizen of the USA, being taxed on your world income and for US purposes having a tax home in a country other than USA ( which country ? ).

As you quote , page 2 of the instructions for form 2555, does stipulate (a) once you elect to file use Foreign Earned Income exclusion,, that election remains valid for all future years; (b) to revoke this election you have to actively seek a change by attaching a note declaring your new choice to ameliorate double taxation ( foreign tax credit or deduction ).; (c) once you revoke your election to use Foreign Earned Income Exclusion, you cannot change back for the next five consecutive years and without IRS approval.

For your particular case , as per the statements in your note , your election to use FEIE, remains valid, even if for the year you had no foreign income.

However, if you actually had zero world income for the year , there may be questions as to how you survived that whole year. Just have your records to prove that you had no taxable income for the whole year of 2022.

Is there more one fo us can do for you ?

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pk12_2Answer

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@MonsieurMD1 , you are filing US tax return as a citizen of the USA, being taxed on your world income and for US purposes having a tax home in a country other than USA ( which country ? ).

As you quote , page 2 of the instructions for form 2555, does stipulate (a) once you elect to file use Foreign Earned Income exclusion,, that election remains valid for all future years; (b) to revoke this election you have to actively seek a change by attaching a note declaring your new choice to ameliorate double taxation ( foreign tax credit or deduction ).; (c) once you revoke your election to use Foreign Earned Income Exclusion, you cannot change back for the next five consecutive years and without IRS approval.

For your particular case , as per the statements in your note , your election to use FEIE, remains valid, even if for the year you had no foreign income.

However, if you actually had zero world income for the year , there may be questions as to how you survived that whole year. Just have your records to prove that you had no taxable income for the whole year of 2022.

Is there more one fo us can do for you ?