Can the foreign earned income exclusion be a negative amount?
If gross income (sch C line 7) after subtracting cost of goods sold (sch C line 5) from gross receipts (sch C line 1), is a negative number, or if expenses exceed gross income, so that the net business profit (sch C, line 31) from self employment abroad is a loss, some software will not allow either Form 2555 line 42 (foreign earned income exclusion) nor line 45 (to be copied to Schedule 1 line 8d) to be a negative number and will instead enter a zero.
This is when either entering a negative number for income for personal services (2555, line 20), or when the business expense entered as a deduction (2555, line 44) exceeds line 20.
The problem is that a net loss on Schedule C offset other income on 1040. However, once electing to exclude foreign earned income in a past year, all subsequent foreign earned income must be excluded. If form 2555 line 45 is zero, then none of the loss has been excluded.
