Generating and reporting Form 2555 in ProConnect Tax

This article will walk you through the basics of Form 2555 - Foreign Income Exclusion, including its general generation, generating from Schedule C, for physical presence test, as well as how to report the form.

Table of contents:

Generating Form 2555

1. Go to the Input Return tab.
2. On the left-side menu, select Deductions.
3. Click on Foreign Income Exclusion (2555).
4. Fill out the appropriate input fields. Your entry in Employer Name will be used to link excluded income to this form.
5. Click on Form 2555 General Info on the left panel and scroll down to the Travel Information section
6. Click inside the Name of country (if not United States) field.
7. Click the plus sign (+) that appears to expand the input.
8. Enter the travel information:
   • Select the Travel Type.
   • Enter the Name of Country (if not US).
   • Enter the Date Arrived.
   • Enter the Date Left.
   • Enter the Days in US on Business.
9. Repeat step 8 for all travel dates.
10. Click OK.
11. Scroll down to the Bona Fide Residence Test section.
12. Enter all applicable information.

After completing the Foreign Income Exclusion (2555) screen, you will need to enter the foreign W-2 or foreign Schedule C income and link it to these entries. See the other sections below for further instruction.

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 2023 and 2024 see here.

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Linking Form 2555 to Schedule C

It's important to note that, for this section, it is assumed that you have generated Form 2555 already. See the section above for steps on how.

1. Go to the Input Return tab.
2. Select Income from the left menu.
3. Select Business Income (Sch C).
4. Complete all applicable Schedule C information. Refer to here for more information.
5. Go to the tab Less Common Scenarios.
6. Scroll to the Foreign Income Information section.
7. Select the form in Form 2555 name or number (Click on arrow to select from list).
   • If Form 2555 isn't listed here, follow the steps here.
8. Enter the Percentage foreign if not 100% (.xxxx) if applicable. The program limits net income and expenses by this percentage to carry to Form 2555.

Don't make entries in Form 1116 name or number, Name of foreign country, or Category of Income. When the Schedule C is linked to Form 2555, additionally linking it to Form 1116 may cause income from the activity to be overstated.

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Generating Form 2555 for physical presence test

1. Go to the Input Return tab.
2. Go to Deductions and select Foreign Income Exclusion (2555).
3. Select Form 2555 General Info.
4. Enter the Foreign Address of Taxpayer (if different from Form 1040).
5. Under the General Information section, locate the Employer subsection and enter the Name and the US or Foreign address.
6. Under the Employer subsection, select the Type from the dropdown menu.
7. Under the Travel Information section, enter the Name of Country (if not United States).
   • Select the "+" button in the input field to Expand details.
8. Enter the Date Arrived, Date Left, and Days in US on Business.
9. Complete Steps 4–8 for all travel dates.
   

 If your client (or their spouse) traveled to a foreign country for business and they're still abroad, complete steps 4–6 and leave Date Left blank. See here for more information on how to enter dates without overlapping them.

After completing the General Information section in Deductions, Foreign Income Exclusion (2555), you must enter any wages and foreign income to generate Form 2555. See the section below for steps on how.

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Reporting foreign wages on Form 2555

1. Go to the Input Return tab.
2. Select Deductions > Foreign Wages (2555) from the left menu.
3. Select the employer's name in the field Form 2555 name or number (MANDATORY to compute exclusion).
4. Scroll to the Employer Information (MANDATORY for e-file) section.
5. Enter the (b) Employer identification number (EIN) (if no federal EIN was provided, leave this field blank).
6. Enter the (c) Name of employer and Street address.
7. Complete the applicable address fields:
   • For US addresses, enter the City, State, and ZIP code.
   • For foreign addresses, enter the City only. Then, select the Foreign address box, and enter the Region, ZIP code, and Country.
8. Scroll to the Foreign Wages section.
9. Select inside the (1) Wages, tips, other compensation field.
10. Select the plus sign (+) that appears to expand the input field.
11. Enter the amount.
12. Select an Allocation Method from the list, then select OK.
    • ProConnect Tax uses this entry to determine how to allocate wages between US and foreign earned income.
13. Enter all other applicable information.
14. Scroll down to the Electronic Filing (W-2) section.
15. Locate the Foreign Employer Compensation subsection.
16. Select the box Compensation not reported on W-2, if applicable. This entry is mandatory for e-filing if no federal EIN was provided.
17. Either select the box Employee performed services while residing in US, or select the appropriate Country code if work not performed while residing in US.
18. Enter the Foreign employer's tax identification number if no federal EIN was provided.

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