Allocate Schedule C income and expenses to foreign sources
Allocate Schedule C gross income and expenses between U.S. and foreign sources by entering an allocation rate on the Business Income Organizer for Form 2555.
Use this procedure when the taxpayer has a sole proprietor business with income earned in both U.S. and foreign sources.
The allocation rate you enter determines how Schedule C gross income and expenses are split between U.S. and foreign source.
- In the Organizer, go to .
- Select an existing business name, or create a new one.
- SelectBusiness Information, then go to theSch C Miscellaneous Infotab.
- Go to theSection 911 Incomesection.
- Select an allocation method.The allocation method determines how income and expenses are proportioned between U.S. and foreign sources.
- Complete any additional fields as required by the selected allocation method.
Depending on how the taxpayer reports foreign earned income, complete one or both of the following:
- If you don’t use Schedule C to enter foreign earned income related to the taxpayer's sole proprietor business, enter the foreign-source Schedule C income on theForeign Earned IncomeOrganizer.
- To designate Schedule C income and expenses as foreign-source for foreign tax credit purposes, open theForeign Tax CreditOrganizer and enter the decimal underOverrides for Total Incomein the Schedule C row.
