My brother worked in Afghanistan in 2014, but did not work for 330 days... does this mean that he should NOT even fill out the Form 2555?=======>No: to claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, he must have foreign earned income, his tax home must be in the foreign country, Afghanistan, and he must be a U.S. citizen who is a bona fide resident of Afghanistan for an uninterrupted period that includes an entire tax year, or a U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. The maximum amount of the Foreign Earned Income Exclusion under Internal Revenue Code was $99,200 for 2014.please follow the IRS inst here: https://www.irs.gov/individuals/inte...n-or-deduction
OR does he fill out the 2555 and let the form automatically prorate the income exclusions for the 180 days he was over there?====>>As said, no; he may claim foreign tax credit instead of foreign earned income exclusion; since he
paid / accrued foreign taxes to Afghanostan and is subject to U.S. tax on the same income, your bro may be able to take either a credit or an itemized deduction for those taxes.He needs to File form 1116 to claim the foreign tax credit. He can take it as a deduction, to reduce his U.S. taxable income by deducting foreign taxes on Sch A of Form 1040 or by taking as a credit ro reduce his U.S. tax liability. In most cases, it is to his advantage to take foreign income taxes as a tax credit. On form 1040 line 48
I am a little confused about this , because i hear people saying that the 330 rule is to get the full income exemption... not necessarily to be allowed to fill out the form.
==========> Not to get the full income exemption however it depends; As mentioned above, you need to file either Form 2555 or From 2555EZ; If you are a U.S. citizen or a resident alien of the US and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is adjusted annually for inflation ( $99,200 for 2014). In addition, you can exclude or deduct certain foreign housing amounts.