No US Tax Owed plus Making Work Pay, Did I Make A Mistake?

[nelsona]

there is NO WAY that foreign taxable income can be greater than taxable income, espacially in your case, since you had US source wages. Even then, you can only exclude foreign taxable wages, so it cannot excced taxable wages.

The reason it has changed is exactly becuase congress felt iot was unfair to give 2555 users a free pass on anything but their feie income.

You are just palin doing it wrong.

Figure it out or go see a tax pro.

[nelsona]

I've been advising US citizens living in canada for 4 years now that 1116 is better.

For part-time US residents, because you have US income, 2555 is usually better, but certainly not as good as pre-2006. 1116 does noy work well when income is split between US and Cdn sources.

[jjhowey]

nelsona,

I agree that foreign _taxable_ income will never be greater, but...

I've just spent the last couple of hours re-reading 1040 instructions and 2555 instructions..... NO WHERE in the instructions does it mention foreign _taxable_ income, it just says foreign income from line 45+50 from 2555 or Line 18 from 2555-EZ.

I am following the instructions line for line and you are arguing a calculation that makes sense, but I am not see how it is achievable under the instructions the 2009 tax package gives.

(Unfortunately Pub 54 is missing the crucial page in the illustrated example where they show Line 44 onwards on 1040 with 2555 example).

[nelsona]

C'mon. The first page tells you that you cannot exclude more that your foreign earned income, and that your foreign earned income are included on line 7 wages.

So, that means your taxable foreign earned income.

Why would you be using a chart is a workbook if you are using software. If you have correctly identified your wages included in line seven as foreign, there is nothing else for you to do, but print out the correct 2555.