Should I use form 2555

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@robertone139 wrote:

You are correct, I started an S corp in 2023 for my wife and me to keep contributing to SS/MC and do not lose that money. However using the ss.gov retirement calculator we realized that is costing us almost 20,000 dollars per year in SS taxes plus other expenses not to lose 200$/ month for each of us by the time we reach 67.

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I'm not sure I understand. How is structuring the business costing you $20k per year in SS taxes? It ought to be lowering SS paid now because because your W2 wages are lower (only a "reasonable" salary, the reminder being profit). Of course you do have additional expenses (state annual filings, 1065 prep, etc.).

If you are paying out all of the s-corp's earnings after expenses as wages, then there isn't much tax reason to have the s-corp. (Liability protection, handling non-owner employees, etc. are different concerns. Ask your attorney.) Why? Because you're paying the same SS tax plus expenses of running the corporation.

yes, you will be lowering your SS income upon retirement. But you need to figure what you will do with the savings. If you invest it and the market does well as it has for the last 30+ yrs, you would probably do better than SS. See for example figure 5 of  of https://files.stlouisfed.org/files/htdocs/publications/review/05/03/part1/GarrettRhine.pdf

I assume that are are living overseas with an overseas tax home as required for the FEIE being paid by your US s-corp. You should be to go through the TT FEIE interview. It will ask you all of the questions.  Since 2023 is in the books, I'd recommend doing that to see what the result it. It is hard to advise because a lot depends upon your other income and the foreign taxes paid. I'd also recommend doing the foreign tax credit (FTC) Form 1116 for the s-corp profit and for all icnome instead of FEIE. So run through 1) FEIE/1116, 2) no FEIE but all 1116, 3) as a sole prop with all wage and profit income and FEIE,  4) same as 3 without FEIE but with 1116).

Then compare the actual results.

Note the FEIE only works for the first $112k of foreign earned income. If you have more than that you'll need to use the FTC also.

If you have little other income and pay significant foreign tax, no matter what way you do it, you should pay very little US income tax. But if any of those assumptions is off, the results can differ. There are a number of ways that one can win up paying US and foreign tax, but not usually if your only income is foreign income.

This is very complicated stuff unless everything is very simple. Rather than relying on volunteer Internet advice, I'm sorry to say that you would probably be best off seeking advisal from a professional advisor (CPA, enrolled agent, or tax attorney) who deals with foreign tax issues every day (not just a couple times a year).