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Questions About Teachers Paying Russian & American Taxes
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Ro_Laren



Joined: 29 Dec 2013
Posts: 5

PostPosted: Tue Dec 31, 2013 3:05 am    Post subject: Questions About Teachers Paying Russian & American Taxes Reply with quote

Sorry guys: this is going be a long post! I have been entertaining the idea of teaching English in Russia as I’ve visited and/or lived there a number of times already, but have never worked there. However, the whole idea of dealing with taxes is quite confusing. I like to plan ahead and have therefore have looked a lot up on the internet. But, the more I research and try to figure expat taxes out, the more questions I have!

If I understand what I’ve read about the US-Russia tax treaty, Americans won’t be double taxed IF they are out of the U.S. for a minimum of 330 days out of the fiscal year (January to December). However, seeing as most teaching contracts begin in August and typically only last 9 months, that means that most American English teachers don’t meet the double taxation exemption requirements and will therefore be double taxed. If so, I’m guessing that is about 25% or more (13% Russian flat tax plus at least 15% American tax). But even that 25% estimate leads me to more questions. Aren’t foreigners living in Russia charged 30% tax for the first 6 months living in Russia?? If I recall correctly, the 17% difference is supposed to be refunded to you if you work (or just live?) there after 6 months. Is this correct? If so, how is it refunded? Do you have to go somewhere to pick up the refund, is it mailed to you, or something else?? Regardless, that is a large chunk of your paycheck. If you take away 30% of your paycheck for the first 6 months AND set aside a minimum of 15% for the American taxes, then that means you will only have 55% of your 30,000 ruble a month salary (or whatever the amount) to live on! Wow!!! On the other hand, I thought I read somewhere that some schools will pay the 17% difference for the first 6 months. Is this typical of language schools in Russia? I think I read this somewhere on-line from someone that was offered a job at English First. If a school agreed to do this then would they typically “pay” the 17% difference by adding 17% to your pay or are they able to directly pay your taxes??

Also, I read that if your school provides you with accommodation then this is also taxable. Is that true? Do you have to pay taxes on this to Russia or to the U.S. or to both?

Do schools typically deduct your Russian taxes out of each paycheck?? Or are you hit with a big tax bill before your leave / whenever the big tax deadline occurs? IIRC, Russians pay their taxes in April too, right? Is it April 30th or something? Regardless, isn’t it true that you have to pay your taxes in full at least a month before leaving Russia? Do schools typically process this / prepare any of the necessary forms?

Lastly, who typically prepares & file your Russian yearly tax forms? Paying taxes in America can be confusing enough to many… I can’t imagine trying to figure out Russian tax forms. Of course, I also read that American expats have confusing tax forms to file for their U.S. taxes: you can’t file the 1040 or 1040EZ. Do we also still have to pay Social Security and Medicare taxes when teaching abroad?
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Sashadroogie



Joined: 17 Apr 2007
Posts: 8612
Location: Moskva, The Workers' Paradise

PostPosted: Tue Dec 31, 2013 7:06 am    Post subject: Reply with quote

Hee hee!

Sorry, I didn't get past the part of your post where you asked about Russian taxes. Please rest assured that you will not have to deal with any tax nonsense from the Russian side. Everything is deducted in advance by your employer - that is if he is declaring your full salary in the first place, which he more than likely will not be. Most salaries here are 'black', or at least a deeper shade of 'grey'. In any case, you do not need to fill in any forms.

As to the iniquitous practices of the US tax office, cannot help you. I would advocate just renouncing your citizenship and staying in the Workers' Paradise.

Welcome to Russia!
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smithrn1983



Joined: 23 Jul 2010
Posts: 319
Location: Moscow

PostPosted: Tue Dec 31, 2013 10:41 am    Post subject: Reply with quote

There are two ways to show that you do not owe taxes in the US (for the first $92000 or so of income. You're a teacher, so it's highly unlikely you'll go over this number). The first, as you mentioned, is to show that you were physically out of the US for 330 of any 365 days. The second is to show bona fide residence in a foreign country. The first is easier to prove, though I used the second method during my last stay in Russia.

As I remember, as far as the first method is concerned, it's 330/365 days and does not need to be an actual calendar year. I think there is a way of indicating this on your US tax forms. You basically defer one year's taxes to the next year, and then claim that you were outside the US for 330 days and owe nothing.

The short answer is that you do not pay US taxes while you're teaching overseas.
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spiral78



Joined: 05 Apr 2004
Posts: 9130
Location: On a Short Leash

PostPosted: Tue Dec 31, 2013 8:39 pm    Post subject: Reply with quote

Ditto smithrn.

You have to file, but will not have to pay US taxes on your Russian salary (unless you earn some astronomical figure - and if you do that, let us know how!).

Google the US IRS website for tax forms for expats. It's similar to the EZ. Takes me normally about 15 minutes to fill out.

The only other consideration is if you open a bank account in Russia which has more than equivalent of 10,000 USD in it, which you would then have to report (but not pay anything on) to the IRS also.
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Ro_Laren



Joined: 29 Dec 2013
Posts: 5

PostPosted: Wed Jan 01, 2014 4:47 am    Post subject: Reply with quote

So if your employer deducts your taxes from your paycheck, does that mean that our offered salary is post- or pre-tax? If it’s pre-tax (as in any regular job in the U.S.), should we assume that exactly 30% (or 13%) will be deducted from our paycheck? I’m just curious… I’d want to know that my school is paying me the correct amount!

Smithrn1983, I read something about the $92,000 salary figure, but I forget what I read. I’m guessing that it was just that the tax rules of those making more than that amount are different than those of someone like an English teacher who would make significantly less. Regarding the facts that you mentioned, I thought that we couldn’t apply for Russian residency until we live at least a year in Russia. If you don’t have official Russian residency, how can you claim Russian residency? If it is true that the330/365 days and does not need to be an actual calendar year, then that is good news. But, for that to help any potential teacher then they need to have at least an 11 month contract or they’ll still be double taxed. = (

Spiral78, I thought I read on-line that U.S. expat tax forms are really hard and confusing. Perhaps the stuff I read was talking about the tax forms for the uber-rich.

Does anyone know if we have to pay U.S. taxes on our accommodation if it is provided to us by our school?
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ecocks



Joined: 06 Nov 2007
Posts: 780
Location: Gdansk, Poland

PostPosted: Wed Jan 01, 2014 10:42 am    Post subject: Reply with quote

They answered your question.

You should file, not difficult and really not even that tedious but unless you make more than $97,600 you will not owe taxes. You may choose to pay into SS/Medi if you wish.

Do you expect to make more than $97,600?

You need to go to the IRS website and look at the info.
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spiral78



Joined: 05 Apr 2004
Posts: 9130
Location: On a Short Leash

PostPosted: Wed Jan 01, 2014 12:27 pm    Post subject: Reply with quote

No, you do not pay taxes on your accommodation either. Check out the IRS website for expat filing. Mountain out of a molehill, this thread is.
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Sashadroogie



Joined: 17 Apr 2007
Posts: 8612
Location: Moskva, The Workers' Paradise

PostPosted: Wed Jan 01, 2014 12:56 pm    Post subject: Reply with quote

Tax, tax, tax. We don't bother with that silliness here, hic!
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teacher X



Joined: 13 Feb 2013
Posts: 135
Location: Super Sovietsky Apartment Box 918

PostPosted: Wed Jan 01, 2014 9:19 pm    Post subject: Reply with quote

Ahahaha, I have the opposite problem. I've been trying to get in contact with the Department of Work and Pensions to try and pay some national insurance contributions. After three messages they finally responded stating that they currently have a backlog and cannot help me. I guess they don't want me to give them any money. How strange.
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smithrn1983



Joined: 23 Jul 2010
Posts: 319
Location: Moscow

PostPosted: Wed Jan 01, 2014 11:19 pm    Post subject: Reply with quote

Ro_Laren wrote:
But, for that to help any potential teacher then they need to have at least an 11 month contract or they’ll still be double taxed. = (


It doesn't matter how long your contract is. All that matters is where you physically are, and that you can prove it. So, keep track of those passport stamps and old plane tickets.
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Ro_Laren



Joined: 29 Dec 2013
Posts: 5

PostPosted: Thu Jan 02, 2014 12:35 am    Post subject: Reply with quote

smithrn1983 wrote:
Ro_Laren wrote:
But, for that to help any potential teacher then they need to have at least an 11 month contract or they’ll still be double taxed. = (


It doesn't matter how long your contract is. All that matters is where you physically are, and that you can prove it. So, keep track of those passport stamps and old plane tickets.


What I meant is that if I only have a 9 month contract then I will only be out of the U.S. for 9 months out of 365 days. I'm guessing some would say that you should then take a 2 month trip abroad (so that you are abroad 330 out of 365 days), but that is cost prohibitive. = )
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Sashadroogie



Joined: 17 Apr 2007
Posts: 8612
Location: Moskva, The Workers' Paradise

PostPosted: Thu Jan 02, 2014 7:36 am    Post subject: Reply with quote

Many come to the Glorious Motherland for just a nine-month stint. A stint that runs into decades. Be warned...

So long as your visa is for about twelve months, your employer won't really be too fussy how long you stay. An extra couple of months won't make any difference. BTW, make sure your contract, such as it will be, explicitly states the terms and conditions of holidays. Many nine-month contracts really mean nine months of work, and any time taken off for holidays and sick leave etc. are added on to your work period, thus pushing your final day of work further into the future. BKC used to do this regularly, and catch newbies unawares. Made a mess of return flights and the like.

Eleven months? No worries matey! But you really need to get out of this mindset which needs everything explained beforehand and done by the book. There will be little or no clarity re anything when you get here.

Welcome to Russia!
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Sashadroogie



Joined: 17 Apr 2007
Posts: 8612
Location: Moskva, The Workers' Paradise

PostPosted: Thu Jan 02, 2014 9:23 am    Post subject: Reply with quote

As an extra aside, the Russian tax rate of 13% only applies to those who have been working in Russia for more than six or so months. I forget the exact number of months - somebody else will clarify that. In any case, this means that your income tax rate is somewhere in the region of 33% for the duration. All the concern of your employer, of course, what with taxes being deducted before you collect your pay-packet. Which is why it is more than likely your real earnings will not be declared at all to the Russian tax authorities.

Any documentation you manage to get from your employer, which will be minimal, will probably state you are earning about 15 - 25 k rubles GROSS monthly. Somewhere between 500 to 800 USD per month, of which a third is theoretically taken by the Russian state.

On paper, you will be far, far below the radar of the US tax authorities, no matter how far their mixed metaphor tentacles stretch...
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smithrn1983



Joined: 23 Jul 2010
Posts: 319
Location: Moscow

PostPosted: Thu Jan 02, 2014 9:55 pm    Post subject: Reply with quote

Sashadroogie wrote:
Many come to the Glorious Motherland for just a nine-month stint. A stint that runs into decades. Be warned...


I won't say decades, but many, many people I know in Russia came for a single nine month contract but wound up staying for years. I recently left, and now I'm thinking about going back. Mother Russia will not let go.
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Ro_Laren



Joined: 29 Dec 2013
Posts: 5

PostPosted: Thu Jan 02, 2014 11:44 pm    Post subject: Reply with quote

I know what you mean about staying longer than you planned in Russia. The last time I was in Russia I came for a 10 month study program, but ended up staying 16 months, lol. And of course, I know that things aren’t often done by the book or end up going as you planned in Russia. I just want to have a general idea of things. I ran into some confusing tax stuff on-line, which is why I came to this forum for clarification. Sorry for the initial long post, but since I’m an English teacher newbie I’ll probably post more threads. = ) I have a number of questions, but think it is best to keep them in separate threads (especially since it would be more helpful for anyone else looking for answers on similar topics).

As far as getting always getting taxed at 30%, I wouldn’t be surprised if a school always wanted to take that amount out whether they legally have to our not. Expat.ru (http://expat.ru/s_taxes.php) said:

Quote:
The tax rate for residents is 13%, but it is 30% for tax non-residents. Given that the definition of a tax resident is a matter for technical debate, great care is needed to ensure that the 13% rate will apply, particularly, for expatriates in the year of their arrival or departure. Whether a person arrives in the second half or the year or leaves in the first half of the year, achieving the necessary presence in Russia to be a tax resident can be logistically impossible. Many expatriates are also surprised to find that, even where they qualify for the 13% rate for a particular year, they do not receive the benefit of this immediately through payroll, at least in the early part of their assignment, but, instead, have to wait until they have been physically present in Russia for over 183 days. They then receive the refund of the "over-withheld" 17%, but the cash flow disadvantage can be an unpleasant surprise.


Perhaps some schools might have their teachers pay 30% tax at first and then pocket the 17% refund when it comes in…
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