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tax Q: Foreign Earned Income Exclusion, form 2555ez

 
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stumptowny



Joined: 29 May 2011
Posts: 219

PostPosted: Thu Jan 17, 2013 4:53 am    Post subject: tax Q: Foreign Earned Income Exclusion, form 2555ez Reply with quote

starting into my taxes.. joy! this question applies to Americans..

I meet both tests: the Bona Fide Residence Test and the Physical presence test.

My question: on the form itself, must i complete both sections? I only need to meet the requirement for either test, not both, to qualify. But I am not sure if completing both sections is required? I prefer to complete just one and move on.
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Glenski



Joined: 15 Jan 2003
Posts: 12844
Location: Hokkaido, JAPAN

PostPosted: Thu Jan 17, 2013 8:45 am    Post subject: Reply with quote

I believe the form states rather clearly that you need to do one or the other. I know I've filled out only one for the past decade and a half.
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stumptowny



Joined: 29 May 2011
Posts: 219

PostPosted: Thu Jan 17, 2013 11:22 pm    Post subject: Reply with quote

Glenski wrote:
I believe the form states rather clearly that you need to do one or the other. I know I've filled out only one for the past decade and a half.


no, the form does not state whether you are to fill in both regardless of which you meet. and it does not state that rather clearly. my question is, do you need to fill in both anyway?

which have you chosen each year? I am leaning toward the physical presence test.. any other tips glenski? I can go to my local city office, tax dept to get my yearly tax info correct? thanks
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Glenski



Joined: 15 Jan 2003
Posts: 12844
Location: Hokkaido, JAPAN

PostPosted: Fri Jan 18, 2013 3:19 am    Post subject: Reply with quote

The form itself (part 1) says you can skip the physical presence part IF YOU WERE A BONA FIDE RESIDENT. In essence, then, this is what I meant.

Fill in part 1, and then go to part 2 if you answer NO about bona fide resident status. If you answered YES, then skip the physical presence test.

I've always met the bona fide resident status.
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stumptowny



Joined: 29 May 2011
Posts: 219

PostPosted: Sat Jan 19, 2013 12:12 pm    Post subject: Reply with quote

Glenski wrote:
The form itself (part 1) says you can skip the physical presence part IF YOU WERE A BONA FIDE RESIDENT. In essence, then, this is what I meant.

Fill in part 1, and then go to part 2 if you answer NO about bona fide resident status. If you answered YES, then skip the physical presence test.

I've always met the bona fide resident status.


thanks glenski!
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stumptowny



Joined: 29 May 2011
Posts: 219

PostPosted: Mon Jan 21, 2013 5:27 am    Post subject: Reply with quote

for glenski or anyone willing to share:

I am trying to figure my tax bracket back home for the purposes of taxes levied on short/long term capital gains. I am excluded from all income taxes with the earned income exclusion (EIE), however I still need an applicable tax rate to apply to my brokerage account back home because my short and long term gains will be taxed regardless of the EIE.

have read that you take the tax rate you pay in your country of domicile (%10 in japan) and the rate you would normally fall into in your home country (%15 based on foreign income earned) then minus the japan rate from the american rate. so you are not double taxed. so my taxable rate that applies to short/long term capital gains is 5%?? this can't be, of course, because the lowest tax rate is 10%. So would I default to that rate?

thanks for your feedback...
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lcanupp1964



Joined: 12 Dec 2009
Posts: 266
Location: Jeddah, KSA

PostPosted: Sat Feb 09, 2013 7:40 am    Post subject: Reply with quote

Hi all!

An old JET program guy (American) has a question:

I am 100% certain that I am under the max (money earned overseas) and am over the amount of days I need to live overseas earning said money. I am single with no kids.

Question: Is there any penalty for me NOT filling out a tax form? I know that all American are required to do so, but if I am certain that I donít owe any money. So why should I fill out a tax form? Cool Are there any downsides (besides needing past tax forms to submit for bank loans, etc...) for not filling out a tax form?
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stumptowny



Joined: 29 May 2011
Posts: 219

PostPosted: Sun Feb 24, 2013 12:16 pm    Post subject: Reply with quote

lcanupp1964 wrote:
Hi all!

An old JET program guy (American) has a question:

I am 100% certain that I am under the max (money earned overseas) and am over the amount of days I need to live overseas earning said money. I am single with no kids.

Question: Is there any penalty for me NOT filling out a tax form? I know that all American are required to do so, but if I am certain that I donít owe any money. So why should I fill out a tax form? Cool Are there any downsides (besides needing past tax forms to submit for bank loans, etc...) for not filling out a tax form?


I just noticed this reply of yours. I started to work through my taxes last week and have reached the point where I realized, I will owe nothing. Not sure I will submit mine either, like you. no point really.

I really don't see any downsides. my thoughts are these:

there is a separate IRS division handling overseas filers. I think they are in Texas (that is the address shown to submit returns for filers living abroad). I am not sure what their threshold is for an audit? I suspect if we owe nothing, they will not seek you out. That is most of us living abroad. None of us make enough to merit tax evasion. and there is no tax evasion if we owe nothing anyway.

whether not filing is tax evasion, I don't know?

The US and Japan can share tax information openly. But I have yet to do a tax return since I left home. They really have no way of even knowing I am out of the country. we don't use our SSN for jobs here. The only way they would know is if the IRS worked with immigration to see who left and has working visas abroad. our government is just too ineffective and inefficient to think they are actively doing this. not enough lost revenue to recoup for the resources they'd use.

The possible problems I see is when we do our next tax forms. We are required to submit our AGI from the previous year. no problem, as the amount will be very low and, as always, exempt with the foreign income exclusion.

there is a "Failure to File Penalty" but this is only if you owe money and the interest you pay for being late is based on the amount you owe. well, none of us owe money. we are just not filing.

The following IS a concern. from http://www.ehow.com/about_5261567_do-do-not-owe-taxes.html

"Do People Have to File If They Do Not Owe Taxes? Special Case - The Foreign Earned Income Exclusion.

If you have never taken the foreign earned income exclusion before, and if you fail to file a tax return within one year after that tax return is due, including any extensions, the IRS has the right to refuse to allow you to claim the Foreign Earned Income Exclusion. This will result in you owing full federal taxes, despite the fact that you might have owed nothing if you had filed on time or less than one year late."

To me this sounds like legalize posturing. but if they did it, it would mean we would get double taxed, from japan and the US. this appears to be the only penalty.

if they ever contact you, I would play stupid.. I really don't see why they would penalize someone for not knowing. then again, might as well file them and send them in to be safe.. if you have many years of no filing, that could be an issue.. even if you owe nothing..
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Glenski



Joined: 15 Jan 2003
Posts: 12844
Location: Hokkaido, JAPAN

PostPosted: Sun Feb 24, 2013 2:43 pm    Post subject: Reply with quote

Don't play stupid.
Don't be stupid, either.

What is the harm in filing for your taxes? You act as if you have something to hide. If you are like the vast majority (99.9%) of foreign teachers in Japan, you don't make more than the exemption limit.

But legally you must still file. Just because you don't owe money, why is that any reason for not filing? If you were back home and didn't owe, would you refuse to file, too?

Mark the forms, be exempt, and continue to have a record of filing with the IRS.

Penalties if you don't?
1. What was already posted.
2. For another, if you decide to get married here and bring your J wife/husband back to the States, you will probably encounter serious problems for not having filed, which may result in rejection of your spouse's application.
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spiral78



Joined: 05 Apr 2004
Posts: 9127
Location: On a Short Leash

PostPosted: Sun Feb 24, 2013 7:06 pm    Post subject: Reply with quote

Not in Japan, but have lived and worked abroad for 15+ years now. Glenski's right - you have a legal obligation to file, even if you owe nothing. If you don't file, you are liable for all sorts of legal hassles down the road.
It's EZ, as they so cleverly title it. File. Cool
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kah5217



Joined: 29 Sep 2012
Posts: 255
Location: Ibaraki

PostPosted: Sun Feb 24, 2013 10:15 pm    Post subject: Reply with quote

Think of filing your taxes as dues for your your citizenship. It doesn't cost you anything, and you get the support of the embassy if something bad happens while abroad.
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stumptowny



Joined: 29 May 2011
Posts: 219

PostPosted: Mon Feb 25, 2013 1:46 am    Post subject: Reply with quote

if you have any problems for not filing, playing stupid IS the best option. and most plausible. your other option is to tell them, "I knew I should have filed, I just didn't want to!" I am sure there are many people who really have no clue about this stuff or who assume that because they pay japanese taxes, they don't need to do anything else...

with upcoming sequestration cuts in a week or so, it is becoming more unlikely uncle sam will have the resources to track you down for not filing. not that they would anyway, as there is little money lost because none of us owe. anyway, the irs is saying it would have to reduce staffing and reviews of tax returns, which is how the gov ferrets out tax fraud. whether irs resources return (for when or if you have other problems that require your completion of taxes) is unknown..

does anyone know of anyone who lost there foreign income exclusion rights for any reason? would be hard pressed to find someone I'm betting..

the choice is yours..
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