Schedule 1 and foreign earned income exclusion - showing negative adjusted income?

But I thought you always put the max exclusion amount on the form? My tax guy last year told me to always claim the full amount even if I didn't make that much. Was he wrong?

You should only exclude the amount you actually earned. Your tax preparer was incorrect if they told you to claim the maximum regardless of your earnings. The Foreign Earned Income Exclusion lets you exclude foreign earnings up to the annual limit ($121,500 for 2024 tax year), but you can't exclude more than you actually earned abroad. When you put in more than your actual foreign earnings, you're essentially telling the IRS you earned negative money from other sources, which triggers the negative AGI. Just adjust your Form 2555 to reflect your actual foreign earnings of $95,000, and the negative AGI issue should resolve itself.

Does it work with all the foreign tax forms? I've got some passive income from overseas investments too, and I'm using the Foreign Tax Credit for those. Will it catch mistakes with that too?

I'm skeptical about tax tools I haven't heard of. How does it compare to something like TurboTax or H&R Block when dealing with international income? Free Fillable Forms is giving me headaches with my Singapore income but I'm not sure about trusting something new.

It handles all the international tax forms including Form 1116 for the Foreign Tax Credit - that's actually where it saved me the most time because it caught a calculation error I made when allocating my foreign taxes between different income categories. Compared to TurboTax, I found it much more helpful specifically for international situations because it focuses on analyzing your forms rather than just filling them out. I was using Free Fillable Forms like you because TurboTax was charging extra for international forms, but kept making mistakes. This tool showed me exactly what was wrong instead of just giving generic guidance.

How does this even work? The IRS phone lines are impossible to get through. Is this legit or just another scam trying to get personal info?

Yeah right. No way they can get you through to the IRS that quickly. I've tried calling about my foreign income situation for WEEKS with no luck. If this actually worked, everyone would be using it.

It's basically a callback service that uses automated dialing to wait on hold with the IRS for you. When they reach an agent, they call you and connect you directly. I was skeptical too but it's just a connection service - they don't ask for any tax info, just your phone number to call you when they get through. It's not free but honestly after wasting three days trying myself, it was worth it to get my question answered quickly. The IRS agent was super helpful explaining how the foreign income exclusion should be entered on the forms and confirmed that seeing a negative AGI means you've entered something incorrectly.

I'm in Germany, do you know if there's a treaty I should be looking at? Honestly I'm now wondering if I should just hire someone because this is getting complicated fast.

Yes, Germany does have a tax treaty with the US! Look up the US-Germany tax treaty online or check IRS Publication 901 for the specifics. The treaty has special provisions for certain types of income. For your situation, you might actually be better off using Foreign Tax Credits instead of the Foreign Earned Income Exclusion, especially if you're paying higher taxes in Germany than you would in the US. With credits, you can often eliminate double taxation while potentially keeping some US tax benefits that you lose with the exclusion. I'd definitely recommend at least consulting with a tax professional who specializes in expat taxes - it can save you much more than it costs.

The issue is on Form 2555. When you complete this form, make sure you're only excluding your actual foreign earned income (the amount you actually made) on Line 42, not the maximum exclusion amount. The form will automatically cap it at the maximum allowed ($121,500 for 2024), but you should input your actual earnings. Then check Schedule 1 Line 8o to make sure that same amount (your actual foreign income, not the maximum) appears there as a negative number. This should resolve the negative AGI issue on your 1040.

Thank you! That fixed it. I was putting the maximum exclusion amount instead of my actual foreign income. Once I changed Form 2555 to show my actual income of $87,300 instead of the maximum $121,500, the negative AGI disappeared. I also realized I needed to complete Part VIII of Form 2555 when using the Free Fillable Forms, which I had completely missed before. It's working correctly now!

This is super helpful! I'm dealing with the same issue right now and was so confused about why my AGI went negative. Just to clarify - when you say "actual foreign earned income," do you mean just my salary, or does that include things like housing allowances and cost of living adjustments that my employer provides while I'm overseas? I want to make sure I'm not missing any income that should be included in the exclusion calculation, but also don't want to over-exclude like what happened to the original poster.