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Tax Exemption (US Citizen)
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naturegirl321



Joined: 18 Jul 2006
Location: Home sweet home

PostPosted: Fri Jan 14, 2011 10:45 am    Post subject: Reply with quote

nstick13 wrote:
This seems worthy of a bump.

So, it's possible that one did the 8802 and received the Residency form AND fills out a 2555ez exempting them from foreign income? And that's legal?


ONLY if you can fulfill the Physical Presence Test and be OUT of the US for 330 days. That-s what I-ll be doign.
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nstick13



Joined: 02 Aug 2009

PostPosted: Fri Jan 14, 2011 5:01 pm    Post subject: Reply with quote

retracted.
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northway



Joined: 05 Jul 2010

PostPosted: Fri Jan 14, 2011 9:35 pm    Post subject: Reply with quote

naturegirl321 wrote:
about the amount. Says here right in black and white that it's 91,400 . http://www.irs.gov/pub/irs-pdf/f2555.pdf . From what I've heard on Dave's, not sure if it's true, but people claim to make that much doing at one place, moonlighting at another, and doing privates.


Who in their right mind would declare all that income though?
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jrwhite82



Joined: 22 May 2010

PostPosted: Sat Jan 15, 2011 6:56 pm    Post subject: Reply with quote

Just in case anyone is still waiting on their form 6166.

I just got mine mailed to my parents today. I applied a few weeks ago and received a letter exactly 30 days ago that said I would receive my form 6166 within 30 days. So it took exactly 30 days from receiving my confirmation letter to get my form 6166.
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naturegirl321



Joined: 18 Jul 2006
Location: Home sweet home

PostPosted: Sat Jan 15, 2011 8:15 pm    Post subject: Reply with quote

northway wrote:
naturegirl321 wrote:
about the amount. Says here right in black and white that it's 91,400 . http://www.irs.gov/pub/irs-pdf/f2555.pdf . From what I've heard on Dave's, not sure if it's true, but people claim to make that much doing at one place, moonlighting at another, and doing privates.


Who in their right mind would declare all that income though?


Well, LEGALLY, you have to.
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isitts



Joined: 25 Dec 2008
Location: Korea

PostPosted: Sun Jan 16, 2011 5:35 am    Post subject: Reply with quote

nstick13 wrote:
This seems worthy of a bump.

So, it's possible that one did the 8802 and received the Residency form AND fills out a 2555ez exempting them from foreign income? And that's legal?


Oh, god. this thread again.

Not the EZ, just the regular 2555.

This thread shouldn't be bumped. It should be stickied. And some sort of award should be given to naturegirl for the information she provided.

Yes, it's legal. when you submit the 8802, you've already submitted the 2555 so the IRS knows you've claimed exemption from foreign earned income. So you aren't hiding anything. The loophole is that the US is still your tax home, but you were physically present in a foreign country for, what was it? 330 days.

Incidentally (and this is something of an update), I never got my residency cert. IRS said they were reviewing my 8802 and would get back to me in 30 days. That was about 100 days ago. So once again, I don't think I'll be getting it. But it's most likey because I hadn't established a permanent address in the US the past...er 6 years.

But no matter, my school is still planning on giving me the exemption even without the certificate. Not sure it'll fly (and I have money set aside to pay the last year and a half in taxes here in Korea if it doesn't), but we'll see. Not sure I'd bank on this option. I don't know how many schools do this.
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Boating3



Joined: 05 Dec 2010

PostPosted: Sun Jan 16, 2011 6:11 am    Post subject: Reply with quote

isitts wrote:
The loophole is that the US is still your tax home, but you were physically present in a foreign country for, what was it? 330 days.


No, no. Korea is your tax home---assuming Korea is your main place of employment. At least that's my simplified understanding of the definition given in this document......

http://www.irs.gov/pub/irs-pdf/p54.pdf

That document should clear up a lot...mainly pages 11-22. Tax home, bona fide resident, physically present test, 'statement to foreign authories' (form 8802/6616), forms 2555/2555ez etc. all defined and easily mapped out.
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naturegirl321



Joined: 18 Jul 2006
Location: Home sweet home

PostPosted: Sun Jan 16, 2011 6:30 am    Post subject: Reply with quote

Boating3 wrote:
isitts wrote:
The loophole is that the US is still your tax home, but you were physically present in a foreign country for, what was it? 330 days.


No, no. Korea is your tax home---assuming Korea is your main place of employment. At least that's my simplified understanding of the definition given in this document......

http://www.irs.gov/pub/irs-pdf/p54.pdf

That document should clear up a lot...mainly pages 11-22. Tax home, bona fide resident, physically present test, 'statement to foreign authories' (form 8802/6616), forms 2555/2555ez etc. all defined and easily mapped out.

Not necessarily true. If you file the 6166 and get the 8802 then the US is your tax home and the only way that you can fulfill the 2555 is through the LONG form (can-t do the 2555EZ if you file the 6166) AND have at least 330 is foreign countries or country.

If you don-t file the 6166 then KOrea is your tax home and you pay Korean taxes. For me, I filed the 6166 and get out of KOREAN taxes for 2 years AND because I-m physically present in other ocuntries for 330 days, then I also get out of US taxes. (BUt just my KOrean income, my self employment income is still taxes at 15.3%) Rolling Eyes
And there-s nothing simple about the IRS Smile

isitts wrote:
nstick13 wrote:
This seems worthy of a bump.
So, it's possible that one did the 8802 and received the Residency form AND fills out a 2555ez exempting them from foreign income? And that's legal?

Oh, god. this thread again. Not the EZ, just the regular 2555.

This thread shouldn't be bumped. It should be stickied. And some sort of award should be given to naturegirl for the information she provided.

Yes, it's legal. when you submit the 8802, you've already submitted the 2555 so the IRS knows you've claimed exemption from foreign earned income. So you aren't hiding anything. The loophole is that the US is still your tax home, but you were physically present in a foreign country for, what was it? 330 days.

Incidentally (and this is something of an update), I never got my residency cert. IRS said they were reviewing my 8802 and would get back to me in 30 days. That was about 100 days ago. So once again, I don't think I'll be getting it. But it's most likey because I hadn't established a permanent address in the US the past...er 6 years.

But no matter, my school is still planning on giving me the exemption even without the certificate. Not sure it'll fly (and I have money set aside to pay the last year and a half in taxes here in Korea if it doesn't), but we'll see. Not sure I'd bank on this option. I don't know how many schools do this.

Yes, I should get a reward. Smile Maybe I should be an accountant.

isttis: you CAN get the 8802, I hadn-t had a US address is nearly 8 when I filed, however, for that one year before I filed the 8802, I had self employment and ended up paying about $58 to the US. They also rejected me the first time around, but then gave it to me. Though if you get out of Korean taxes even if you don-t sign some Korean document, I wonder if you-d have to do the 2555 through the physical presence test.
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isitts



Joined: 25 Dec 2008
Location: Korea

PostPosted: Sun Jan 16, 2011 9:00 pm    Post subject: Reply with quote

naturegirl321 wrote:

isttis: you CAN get the 8802, I hadn-t had a US address is nearly 8 when I filed, however, for that one year before I filed the 8802, I had self employment and ended up paying about $58 to the US. They also rejected me the first time around, but then gave it to me. Though if you get out of Korean taxes even if you don-t sign some Korean document, I wonder if you-d have to do the 2555 through the physical presence test.


I don't really want to argue for it. I'm not sure how I would justify both the 8802 and the 2555 by talking directly to the IRS. If submitting the files doesn't do it, then I'll pay taxes here. Doesn't matter. It's only like 3.3%.

You've had US based income. And you stayed in Peru. I have not had a regular job or residence (because my parents moved while I was in Japan) in the US (or anywhere) for the past, really, almost 7 years. So filing an 8802 is a little stange when I haven't held a regular job in the US since graduation and my residence (even in the US) kept changing.

I also had filed Japan and Taiwan as my tax homes when I was living there.

Our situations are not the same. I have no income ties to the US. I'm not surprised that I didn't get the certificate.
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naturegirl321



Joined: 18 Jul 2006
Location: Home sweet home

PostPosted: Mon Jan 17, 2011 10:02 am    Post subject: Reply with quote

isitts wrote:
I don't really want to argue for it. I'm not sure how I would justify both the 8802 and the 2555 by talking directly to the IRS. If submitting the files doesn't do it, then I'll pay taxes here. Doesn't matter. It's only like 3.3%.

You've had US based income. And you stayed in Peru. I have not had a regular job or residence (because my parents moved while I was in Japan) in the US (or anywhere) for the past, really, almost 7 years. So filing an 8802 is a little stange when I haven't held a regular job in the US since graduation and my residence (even in the US) kept changing.

I also had filed Japan and Taiwan as my tax homes when I was living there.

Our situations are not the same. I have no income ties to the US. I'm not surprised that I didn't get the certificate.

Haven-t had US based income since 2001. I haven-t ever worked FT in the US, just had jobs at college, between 1999 and 2001. I left when I was 19. I had to pay US taxes on internet based income. So like you I never really had US based income either, but in hindsight, paying US taxes that one year saved me Smile

I suppose you're right, our situations are different. Stinks that you can't get no taxes, but I suppose you-re right, it-s only 3.3% and I think you can get some of that back as well during tax season.
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naturegirl321



Joined: 18 Jul 2006
Location: Home sweet home

PostPosted: Mon Jan 17, 2011 8:18 pm    Post subject: Reply with quote

Just an FYI, even if you live abroad and file the 2555 or 1116, you qualify for the Sch M, "making work pay" and could get up to $400.

"Schedule M: making work pay" is worth up to $400 and the only requirements are to be a US citizen (or resident alien) and not be a dependent on anyone else's taxes.
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working title



Joined: 20 Apr 2010

PostPosted: Wed Jan 26, 2011 8:38 pm    Post subject: Reply with quote

(BUt just my KOrean income, my self employment income is still taxes at 15.3%) Rolling Eyes

naturegirl321, are you saying that you are not taxed (Payroll Tax a.k.a. Social Security, Medicare etc) on your income in Korea?

I've been hearing from different sources that regardless of your status, ALL U.S. citizens must pay a 15.3% of their Korean income to cover payroll taxes.

So in other words, we're really not exempt, we still have to pay into social security.
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working title



Joined: 20 Apr 2010

PostPosted: Wed Jan 26, 2011 11:43 pm    Post subject: Reply with quote

I've done some research regarding my question above.

Since 2001, the U.S. and Korea have had a Social Security Tax Treaty that helps those who are double-taxed in the Korea. For example, we all (most of us) pay into the National Pension Scheme, we are then exempt from paying any social security taxes on our Korean income.

Link is here:

http://www.ssa.gov/international/Agreement_Pamphlets/korea.html

Taking a look further, let's take a look at Part 2 Article 4

"1. Except as otherwise provided in this Article, a person employed within the territory of either Contracting State shall, with respect to that employment, be subject to the laws of only that Contracting State."

Details of Article 4

"Part II is intended to eliminate dual Social Security coverage, the situation that occurs when a worker is covered under the laws of both countries with respect to the same services. In so doing, the existing coverage provisions of the laws of both countries are preserved to the greatest extent possible. The provisions in this Part are intended to eliminate dual coverage by continuing the worker's Social Security coverage and taxation under the system of the country to whose economy he or she has the more direct connection and exempting the worker from coverage and taxation under the other country's system.

Article 4.1 establishes a general rule for eliminating dual Social Security coverage and contributions for persons employed in either the United States or Korea. Article 4.2 contains an exception to this general rule which applies in the case of employees sent by an employer in one country to work temporarily in the other country. Article 4.4 provides for the elimination of dual coverage in the case of self-employed persons. Article 4.6 precludes dual coverage that might otherwise occur for employees in international shipping and air transportation. Article 4.7 establishes rules applicable to persons employed in U.S. or Korean Government service. "

Article 4.7 Is for people who are hired by the U.S. for non-diplomatic purposes to work for either the national or local Korean governments.

"Article 4.7(b) provides that if a U.S. or Korean national is employed by his or her Government in the other country but is not exempt from host country coverage by virtue of the Vienna Conventions (for example, because the person is not employed in a diplomatic or consular mission), the person will be subject only to the laws of his or her own country. This provision applies not only to Government employees, but also to persons working for a Government instrumentality." --

"His or Her Government"- we work for the Korean government, not the U.S. govt' (for those of us in the public schools)

So everyone needs to get this form, have your schools get it and have it handy in case you do get audited by the IRS. You do not (need to verify this) to submit this with your tax return, only if the IRS later asks for it.

To establish your exemption from coverage under the U.S. Social Security system, your employer in Korea must request a certificate of coverage (form KOR-USA 4) from Korea at this address:

National Pension Service
International Relations Team
7-16 Shincheon-dong
Songpa-gu
Seoul 138-725
SOUTH KOREA


Very Happy
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naturegirl321



Joined: 18 Jul 2006
Location: Home sweet home

PostPosted: Thu Jan 27, 2011 6:35 am    Post subject: Reply with quote

working title wrote:
naturegirl321, are you saying that you are not taxed (Payroll Tax a.k.a. Social Security, Medicare etc) on your income in Korea?

I've been hearing from different sources that regardless of your status, ALL U.S. citizens must pay a 15.3% of their Korean income to cover payroll taxes.

So in other words, we're really not exempt, we still have to pay into social security.

In Korea I pay pension and medical (my personal medical I believe, not Medicare). Show me where it says that US citizens have to pay 15.3% on ALL their income. It's ONLY for self employment. Check the IRS Smile You are exempt. Or at least I am due to the 2555 physical presence test. I do NOT qualify under the bona fide residence since I don't pay Korean taxes.

The 2555 and 1116 can get Americans out of taxes. I didn't make this stuff up, the IRS did.
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wotsit2004



Joined: 17 Sep 2010

PostPosted: Sun Jan 30, 2011 12:32 pm    Post subject: Reply with quote

im really confused about the tax exemption that can be claimed by public school teachers. im from the uk, and like many other countries, the uk has a double taxation agreement with korea. i thought this meant that i would not have to pay tax to both countries, but i would have to pay tax to one of the countries. so i thought that if i submit a uk residence certificate, i am liable to paying uk taxes. (american citizens do not have to pay tax when working abroad as long as they earn less than $90000 or so, but i dont think theres a rule like that for british citizens. this means that when american citizens submit a US residence certificate, they may be liable to US taxes, but just dont pay any because theyre not earning more than ~$90000. so it could be different for americans.)

when i checked the UK-korea double taxation agreement online, it said:

Subject to paragraph (2) of this Article, an individual who visits one of the Contracting States for a period not exceeding two years for the purpose of teaching or engaging in research at a university, college, school or other similar educational institution which is recognised as non-profit seeking by the Government of that Contracting State, and who immediately before that visit was a resident of the other Contracting State, shall be taxable only in that other State on any remuneration for such teaching or research for a period not exceeding two years from the date he first visits that State for such purpose.

this looks like i have to pay uk taxes if im exempt from korean taxes. (and uk tax is much higher than korean tax.)

HOWEVER.. when i called the korean national tax service, they told me i would be exempt from paying uk and korean tax, and that if a korean comes to the uk to work in education, theyll also be exempt from both uk and korean tax.if i declare myself a non-resident of the uk, i dont think i will be liable to uk taxes if im out of the country for a full tax year. the korean national tax service advisor told me that the residence certificate just proves that i have been a resident of the uk - not that i still am a resident; and that it whats important; and thats why im not liable to uk tax.

so this seems to be contradictory to what i read in the double taxation agreement. i dont want to be exempt from korean tax if it means i will have to pay uk tax, so im not sure whether or not i should hand in a uk residence certificate to become exempt from korean tax.

can anyone help explain this to me?
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