Common questions for Form 2555 in Lacerte

Table of contents:

Entering Bona Fide Residence Data for Form 2555:

Follow these steps to enter information for Bona Fide Residence Test:

1. Go to Screen 31.1, Foreign Income Exclusion (2555)
2. Enter the Foreign Address of Taxpayer (if different from Form 1040) & Employer Name under the General Information section
3. Scroll down to the Bona Fide Residence Test section
4. Enter the Beginning date for bona fide residence (code 24) (M/D/YYYY)
5. Enter the Ending date for bona fide residence: blank = continues" (code 25) (M/D/YYYY)
6. Complete all other applicable information for bona fide residence

   Note:  The Travel Information dates are used for the Physical Presence Test. When the Taxpayer qualifies under the Bona Fide Residence test, Lacerte does not include any travel to foreign countries in the trip information requested within Part II of Form 2555.

Follow these steps to enter Foreign Wages:

1. Click on Foreign Wages from the left navigation panel, this will take you to screen 31.2, Foreign Income Exclusion (2555)
2. Enter the Employer Name
3. Select the Form 2555 Name or Number, from the drop-down menu (this will tie Screen 31.1 and 31.2 together)
4. Complete all applicable information
   1. Wages (Ctrl+E for Allocation Method)
   2. Federal W/H" (if applicable)...

Calculation of Qualifying Days for Physical Presence Test on Form 2555

Lacerte will optimize the physical presence test period to give the taxpayer the greatest number of qualifying days for the current year, or if optimal, the program may calculate an overlapping period per IRS Publication 54.

If physical presence began in the current year, the program uses the first arrival date and counts forward 330 qualifying days. The 330th day is the last day of the qualifying period, while 365 days before is the first day of qualifying period. If physical presence ended in the current year, the program uses the last departure date and counts backward 330 qualifying days. The 330th day is the first day of the qualifying period, while 365 days later is the last day of qualifying period.

Per IRS Publication 54:

How to figure the 12-month period. There are four rules you should know when figuring the 12-month period.

• Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later.
• Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period.
• You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion.
• In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another.

Housing Exclusion on Form 2555 Part VI is Not Generating.

The housing exclusion on Form 2555 will not generate in Lacerte unless the expenses are greater than the number of qualified days multiplied by the daily expense rate. Additionally part VI will not generate if the expenses are less than the threshold amount on line 32.

Follow these steps to enter the Housing Exclusion information:

1. Navigate to screen 31.1 Foreign Income Exclusion (2555)
2. Scroll down to the Housing Exclusion or Deduction section.
3. Enter the Qualified Housing Expenses.
4. Click into the Location Field, hold down Ctrl+E and enter the Location and Qualifying Days.

Based on the criteria above if the expenses are greater than the number of qualified days multiplied by the daily expense rate then Form 2555, will generate.

Note: If you or your spouse received a nontaxable housing allowance as a military or civilian employee of the U.S. Government, see Pub. 54 (https://www.irs.gov/pub/irs-pdf/p54.pdf) for information on how that allowance may affect your housing exclusion or deduction.

Generating Form 2555 with 1040NR

Form 2555 will not generate when Form 1040NR is generated because:

• Form 2555 is for use by U.S. Citizens and Resident Aliens only.
• Form 1040NR is for use by U.S. Nonresident Aliens.

Form 2555 EIN Diagnostics

To resolve the diagnostic,  e-file: Form 2555 - W-2 Employer identification number (EIN) is missing or invalid:

1. Go to the Deductions section and then go to the screen, Foreign Wages (2555).
2. Scroll down to the Electronic Filing (W-2) section.
3. Check the Compensation not reported on W-2 box under the Foreign Employer Compensation subsection.
4. Select the Country from Country code if work not performed while residing in US.

Note: Verify the Employer identification number (EIN) is empty under the Employer Information (MANDATORY for e-file) section; if anything has been entered there the diagnostic will not be cleared.

To resolve diagnostic, e-file: Form 2555 - W-2 #X: Employer identification number (EIN) is invalid. A valid EIN is a nine digit number, is all numerics, cannot equal NONE or the taxpayer's or spouse's SSN, and must not be all 0s or 9s:

1. Go to the Deductions section and then go to the screen, Foreign Wages (2555).
2. Locate the Employer Information (MANDATORY for e-file) section and complete one of the following solutions:
   • Solution #1- If the EIN entered is incomplete:
     • Enter/Complete the EIN in, (b) Employer identification number (EIN).
   • Solution #2- If the EIN is invalid:
     • Enter the correct EIN in, (b) Employer identification number (EIN).
   • Solution #3- If no federal EIN was received:
     • Delete the entry in, (b) Employer identification number (EIN).
     • Scroll down to the Electronic Filing (W-2) section.
     • Check the Compensation not reported on W-2 box under the Foreign Employer Compensation subsection.
     • Select the Country from Country code if work not performed while residing in US.