Foreign Earned Income Tax Worksheet

While the Foreign Earned Income (FEI) Tax Worksheet is linked to Federal Form 1040 U.S. Individual Income Tax Return, it is only used if the return reports an amount on Form 2555 Foreign Earned Income, Line 45 for the Foreign Earned Income Exclusion. If that information is not present on Form 2555, the tax amount will be determined directly from the tax tables put out by the IRS or Schedule D (Form 1040) Capital Gains and Losses, whichever is applicable and the worksheet will not be used.

The Internal Revenue Code (IRC) explains that you must figure tax on the non-FEI using the rates that would have applied if the exclusion wasn’t taken. The Foreign Earned Income Tax Worksheet figures the applicable tax rate by combining the amounts (line 3) and subtracting from that tax calculation (line 4) the tax that would have been due on the foreign earned income (line 5). This does not apply tax directly on the FEI, but the exclusion does bump the tax rate up.

The FEC worksheet is not an IRS form, but is a worksheet only in the TaxAct program used to collect the information and transfer it to the appropriate place on the return. All information entered on the worksheet is transmitted with the return if it is electronically filed. If the return is paper filed, there is no documentation required to be sent with the return. The IRS will contact the taxpayer if they need any additional information on the amount entered on the return for foreign wages or foreign retirement income.

If want to print the FEC worksheet to mail with your return anyway, go to our Printing Your Return and Individual Forms FAQ.

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