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Tax Exemption (US Citizen)
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working title



Joined: 20 Apr 2010

PostPosted: Tue Feb 01, 2011 8:32 pm    Post subject: Reply with quote

Naturegirl,

I went to check with my tax attorney today regarding your question above.

First off he said that because we work in Korea for a Korean company (in this case government funded schools), based on the existing Social Security Tax Treaty between the U.S. and Korea, we are exempt.

Now I also asked him the following question: Do you have to pay a "payroll tax" if you claim the Foreign Income Exclusion and non-resident statutes? He said yes, you must pay. In any other country without a similar treaty to the one specified above, you must pay a payroll tax of 15.3% (as a self-employed person, 7.15% for you and the other 7.15% your employer would have to contribute.)

In other words, you can escape U.S. income taxes, but unless there's a treaty (41 countries with treaties), you've got to pay payroll taxes.

This is what I got. You guys are free to follow up on this information if you like. If you have any questions, let me know.
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PatrickBateman



Joined: 08 Jun 2009
Location: American Gardens Building, West 81st Street

PostPosted: Mon Feb 07, 2011 8:49 pm    Post subject: Reply with quote

If anybody else is doing it on TurboTax, I need some help.

It keeps saying I'm not exempt, but I've been over here for two years.

Any help is appreciated!

PM me or email me at patrickbatemn@hotmail.com

Thank you.
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Clockout



Joined: 23 Feb 2009

PostPosted: Wed Feb 09, 2011 5:27 am    Post subject: Reply with quote

I have been in Korea for almost 2 year (2 months left.) I have never filed for the residency certificate. Is it worth doing now?

What is the process like for getting back the taxes I have paid for the past 2 years?
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Sun Feb 13, 2011 5:11 am    Post subject: Reply with quote

PatrickBateman wrote:
If anybody else is doing it on TurboTax, I need some help.
It keeps saying I'm not exempt, but I've been over here for two years.
Any help is appreciated!
PM me or email me at patrickbatemn@hotmail.com
Thank you.


Maybe try starting another post about this? There must be others having this problem, heres' my guesses.

I don't know your exact details. BUT, if you haven't been on US soil, Guam, Puerto Rico, etc included, then you should be able to file the PPT or the bona fide resident.

IF You are doing the two year KOrean tax exemption, then you have to do the PPT, physical presence test

IF NOT, then you can do the bona fide resident

As to paying US taxes, depends, I know you don't want to hear that Smile
BUt if you have property, stocks, bonds, mutual funds, self employment, etc, then you owe US taxes, or MAy owe US taxes.

Just curious, did Turbo tax say WHY you can't file the 2555? Are you using the version that doesn't support the 2555? I think the cheapest version doesn't accept the 2555

I would say that it's easiest to file the bona fide res of the 2555, you can do the 2555EZ that way, BUT you CANNOT
be getting out of Koraen taxes
have (or declare Smile ) self emp income over $400 a YEAR
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Sun Feb 13, 2011 5:12 am    Post subject: Reply with quote

Clockout wrote:
I have been in Korea for almost 2 year (2 months left.) I have never filed for the residency certificate. Is it worth doing now?

What is the process like for getting back the taxes I have paid for the past 2 years?


Yep, if they'll accept it. Extra money is always good, isn't it? The thing is that you might not get it in time if you're leaving Korea soon.

I started working at the beg of March, got my tax cert accepted in May and my school returned my taxes in May's paycheck.
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Sun Feb 13, 2011 5:16 am    Post subject: Reply with quote

working title wrote:
Now I also asked him the following question: Do you have to pay a "payroll tax" if you claim the Foreign Income Exclusion and non-resident statutes? He said yes, you must pay. In any other country without a similar treaty to the one specified above, you must pay a payroll tax of 15.3% (as a self-employed person, 7.15% for you and the other 7.15% your employer would have to contribute.)

In other words, you can escape U.S. income taxes, but unless there's a treaty (41 countries with treaties), you've got to pay payroll taxes.

This is what I got. You guys are free to follow up on this information if you like. If you have any questions, let me know.

Thanks for getting back to me. Though I'm confused. Are you saying that Americans in Korea have to pay the "payroll tax" or those without the agreement?

I've never heard of that. Having worked abroad in other countries, I've always earned less than the amount, now $91,500 and due to that since I paid taxes in that country, I didn't owe the US.

Though I suppose you mean that
IF there's no agreement
and IF you don't pay the country you're working in's taxes
THEN
you have to pay US taxes, right?

Or are you saying that you would have to pay BOTH US and the foreign country's taxes? (Because as far as I know, that's not true, that's the reaons behind the 2555 and 1116).

What about Saudi, where there are no taxes, would you still have to pay US taxes if you worked there?
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working title



Joined: 20 Apr 2010

PostPosted: Tue Feb 15, 2011 11:51 pm    Post subject: Reply with quote

Naturegirl,

Currently Americans in SK do not have to pay into the U.S. Social Security system (payroll tax) because of the treaty with South Korea regarding pension funds.

The payroll tax is separate than that of the income exclusion of $91,000. I asked my tax attorney and he said that the "tax free status" of $91,000 does not include payroll taxes. It looks like no matter where you go, if your host country doesn't have a tax treaty with the U.S., then you're going to end up paying a payroll tax as a self employed person (which is 7.15% x 2 = 15.3%)

So we're OK earning money in Korea as U.S. citizens because of the treaty. I can't say the same for English teachers who are working in China or Taiwan (which do not have treaties with the U.S.)

As for your previous time spent working in other countries, I do not know if you owe taxes or not, as this would be something you would have to ask a tax attorney.

Also, this may be a question that should be put up on the International Forum.
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Wed Feb 16, 2011 1:22 am    Post subject: Reply with quote

working title wrote:
Naturegirl,

Currently Americans in SK do not have to pay into the U.S. Social Security system (payroll tax) because of the treaty with South Korea regarding pension funds.

The payroll tax is separate than that of the income exclusion of $91,000. I asked my tax attorney and he said that the "tax free status" of $91,000 does not include payroll taxes. It looks like no matter where you go, if your host country doesn't have a tax treaty with the U.S., then you're going to end up paying a payroll tax as a self employed person (which is 7.15% x 2 = 15.3%)

So we're OK earning money in Korea as U.S. citizens because of the treaty. I can't say the same for English teachers who are working in China or Taiwan (which do not have treaties with the U.S.)

As for your previous time spent working in other countries, I do not know if you owe taxes or not, as this would be something you would have to ask a tax attorney.

Also, this may be a question that should be put up on the International Forum.


Hey, thanks so much for answering. Yea, no taxes! Though I owe self employ of about $150 Sad

Do you have a link abou tthe $91,500 not including payroll tax? This is the first time I've ever heard about it. Can't find it in the PUb 54 or 2555 info.

EDIT: I've searched high and low and I can't find ANYTHING about Americans paying payroll taxes. Payroll is for those that have US earned income over earn over $91,500. I'm not saying you're wrong, (but hopefully your accountant is) but I'd like to see where in the IRS pubs it says we have to pay payroll. Sometime tax accountants don't really know about our tax situations .Case in point. TWO tax accountants didn't think I had to file since I didn't live in the US.

I hope you don't take this the wrong way, I DO appreciate the info, but, well, need to see it in black and white first. Sorry.
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drcrazy



Joined: 19 Feb 2003
Location: Pusan. Yes, that's right. Pusan NOT Busan. I ain't never been to no place called Busan

PostPosted: Thu Feb 17, 2011 11:43 am    Post subject: Reply with quote

naturegirl321 wrote:
working title wrote:
Naturegirl,

Currently Americans in SK do not have to pay into the U.S. Social Security system (payroll tax) because of the treaty with South Korea regarding pension funds.

The payroll tax is separate than that of the income exclusion of $91,000. I asked my tax attorney and he said that the "tax free status" of $91,000 does not include payroll taxes. It looks like no matter where you go, if your host country doesn't have a tax treaty with the U.S., then you're going to end up paying a payroll tax as a self employed person (which is 7.15% x 2 = 15.3%)

So we're OK earning money in Korea as U.S. citizens because of the treaty. I can't say the same for English teachers who are working in China or Taiwan (which do not have treaties with the U.S.)

As for your previous time spent working in other countries, I do not know if you owe taxes or not, as this would be something you would have to ask a tax attorney.

Also, this may be a question that should be put up on the International Forum.


Hey, thanks so much for answering. Yea, no taxes! Though I owe self employ of about $150 Sad

Do you have a link abou tthe $91,500 not including payroll tax? This is the first time I've ever heard about it. Can't find it in the PUb 54 or 2555 info.

EDIT: I've searched high and low and I can't find ANYTHING about Americans paying payroll taxes. Payroll is for those that have US earned income over earn over $91,500. I'm not saying you're wrong, (but hopefully your accountant is) but I'd like to see where in the IRS pubs it says we have to pay payroll. Sometime tax accountants don't really know about our tax situations .Case in point. TWO tax accountants didn't think I had to file since I didn't live in the US.

I hope you don't take this the wrong way, I DO appreciate the info, but, well, need to see it in black and white first. Sorry.


You seem to know much about taxes. What about that thread on off topic about Reporting Foreign Bank Accounts if we ever have over 10,000$ at a time? My tax person in USA who does my stuff never said anytrhing about this.
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Thu Feb 17, 2011 5:54 pm    Post subject: Reply with quote

drcrazy wrote:
You seem to know much about taxes. What about that thread on off topic about Reporting Foreign Bank Accounts if we ever have over 10,000$ at a time? My tax person in USA who does my stuff never said anytrhing about this.


I know. Accountants don't seem to know what they're talking about Smile But who can blame them, the law change all the time and most of them don't do expat taxes and if they do they're for major earning expats, at least 6 figures. However, the benefits are that if you ever get in trouble, your accountant has signed the tax forms, so THEY should get the blame. Unless you lied, but this is just negligence on their part.

It's called the FBAR.
A United States person must file an FBAR report if that person has financial interest in, signature authority or other authority over any financial account (s) in a foreign country and the aggregate (total (and why can't IRS people use simple language?!) value of these account(s) exceeds $10,000 at any time during the calendar year.

The account value is the largest amount of currency and/or monetary instruments that appear on any quarterly or more frequently issued account statement (since we don't get them in Korea, just look at your bank book, find the max for each of your bank accounts.) for the applicable year. If a periodic account statement is not issued, the maximum account value is the largest amount of currency and/or monetary instruments in the account at any time during the year. If the aggregate value of accounts exceeds $10,000 at any time during the calendar year an FBAR must be filed.
http://www.irs.gov/businesses/small/article/0,,id=148849,00.html
http://www.irs.gov/businesses/small/article/0,,id=159757,00.html
http://www.irs.gov/businesses/small/article/0,,id=210244,00.html
http://www.irs.gov/businesses/small/article/0,,id=210249,00.html

So let's say in March you had the max amount in BOTH your bank accounts. This was the MOST you've held in each individual (not total) bank accounts for the ENTIRE tax year

So here's John's statement
Bank A was 9K
Bank B was 5K
You MUST file

this is Mary's for May.
Bank A 6K
Bank B 3K
You DO NOT need to file

So, if at ANY time, the TOTAL amount is over 10K (I'mnot sure if you have to file if you have EXACTLY 10K), then you have to file. YOU ARE NOT Taxes on this, you just have to tell the IRS the Exact banking details of where you have your money. Fun.
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Slowmotion



Joined: 15 Aug 2009

PostPosted: Fri Feb 18, 2011 9:12 pm    Post subject: Reply with quote

Is the 2 years tax free working at a public school deal still going on? I've been in Korea for 3 years (one year studying, 2 years working).

The first year, apparently I wasn't taxed. Now my last contract I got taxed and even had to pay money because "i didn't use my checkcard enough."

If it's still going on, is it too late to get a residency certificate and try to get my taxed money back?

The problem is I haven't filed for taxes in the states in over 3 years. I have to do that first before even applying for a residency certificate right?
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Fri Feb 18, 2011 9:56 pm    Post subject: Reply with quote

Slowmotion wrote:
Is the 2 years tax free working at a public school deal still going on? I've been in Korea for 3 years (one year studying, 2 years working).

The first year, apparently I wasn't taxed. Now my last contract I got taxed and even had to pay money because "i didn't use my checkcard enough."

If it's still going on, is it too late to get a residency certificate and try to get my taxed money back?

The problem is I haven't filed for taxes in the states in over 3 years. I have to do that first before even applying for a residency certificate right?

Yep, still going on. YOu'd have to file US taxes FIRST and show that you have US TAX residency (which means that the US was your TAX home)

If KOREA was your tax home, then you might not get it. You could try though. If you have investments, self employment, etc in the US that would help your case. File the forms and see what happens. You have to include the tax forms as well. So file for 2010 and file the 8802. If you're accepted, you'll get form 6166,

Since you've used one year, you still have one left.
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Slowmotion



Joined: 15 Aug 2009

PostPosted: Fri Feb 18, 2011 10:06 pm    Post subject: Reply with quote

naturegirl321 wrote:
Slowmotion wrote:
Is the 2 years tax free working at a public school deal still going on? I've been in Korea for 3 years (one year studying, 2 years working).

The first year, apparently I wasn't taxed. Now my last contract I got taxed and even had to pay money because "i didn't use my checkcard enough."

If it's still going on, is it too late to get a residency certificate and try to get my taxed money back?

The problem is I haven't filed for taxes in the states in over 3 years. I have to do that first before even applying for a residency certificate right?

Yep, still going on. YOu'd have to file US taxes FIRST and show that you have US TAX residency (which means that the US was your TAX home)

If KOREA was your tax home, then you might not get it. You could try though. If you have investments, self employment, etc in the US that would help your case. File the forms and see what happens. You have to include the tax forms as well. So file for 2010 and file the 8802. If you're accepted, you'll get form 6166,

Since you've used one year, you still have one left.

Thanks for your reply. I'm a bit confused on what you mean by "tax home."

I've bee in Korea since 2008 and didn't pay any taxes anywhere except this year. I haven't filed for any taxes for America since I've been in Korea. Does that help?
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naturegirl321



Joined: 18 Jul 2006
Location: Suwon

PostPosted: Fri Feb 18, 2011 10:33 pm    Post subject: Reply with quote

Slowmotion wrote:
Thanks for your reply. I'm a bit confused on what you mean by "tax home."

I've bee in Korea since 2008 and didn't pay any taxes anywhere except this year. I haven't filed for any taxes for America since I've been in Korea. Does that help?


A tax home is where you pay taxes, such as income, or VAT, etc.

Well, legally speaking, I think you're in deep doo-doo Smile

You have to file taxes. and you're supposed to pay SOMEWHERE yes, there are exceptions
1. like countries that don't have taxes, such as the KSA
2. Don't file if making peanuts and you're not
3. File, but don't pay becuase of the PPT (physical presence test)*** yea! this is the loophole you need!

You have a couple of choices
1. Backfile for 2008-2010. You said you got out of taxes in Korae for a year, you CAn still get out of US and Korea taxes iF you fulfil the PPT, that means that you're outside the US and its territories for 330 days in a tax year. It can be a calendar year, or, pick the dates and make a tax year, ex, from June to June.

2. Just file 2010 taxes

BUt here's the thing. Since you didn't file for either Korea or the US, your tax home is proabbly Korea, since you live here and pay taxes on goods. Does that make sense?

SO. . .
what you might do it file all the backtaxes. And try to get the 8802 for the last year you were in the US, since that year the US was your tax home. I htink it would be 2007 in your case. Then hand that over to your boss and see if it gets you out of taxes.

OR. .
you could try to get the 6166 for 2010. the worst they could do is tell you know. Let's face it. We really have no idea what we're talking about when it comes to taxes. the IRS does. So if you file the 8802 and they give you the 6166 based on the info that you truthfully give them, then you're golden Smile

In my case, I hadn't worked in the US since 2002. I still got a 6166 for year 2009. Here's how I did it. I had self employment. I DIDN?T pay self employment taxes in the country I was living in, I paid them to the US. By doing this , I was able to declare the US as my tax home for that one year and get out of Koraen taxes due to that. And then get out of US taxes since I did the PPT. So, I don't pay ANY taxes on my Korean income, but I DO pay taxes to the US on my self employment income, which is very dinky.
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Slowmotion



Joined: 15 Aug 2009

PostPosted: Fri Feb 18, 2011 10:55 pm    Post subject: Reply with quote

Since I'm all the way in Korea, how do I go about backfiling?

I heard people file for taxes in their home countries even though they've been working here. Am I going to need documents for work to show I didn't make over $85,000 or whatever?
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