Job Discussion Forums

[run-jp]

I just read a single message on another ESL BB that Bush's new tax plan entails messing with our tax exemption for income earned abroad
(up to $ 70,000). anyone else hear this vicious rumour?
If so, its time for a "surgical strike" on Dubya... or at least writing some letters.

[xiaoyu]

hey haven't heard anything like that.... but do know that due to irs tax laws it is impossible for them to tax you if your income is already taxed by the host country or if there are certain treaties with the host country.... you can probablyfind more information by visiting the irs website.

believe that if in china the us can no longer tax your income because of a recent tax levied by the chinese gov't on foreign experts.... if it is not currently in effect it should be soon. of course you can always disappear and not mention where you were or what money you earned!

[isabel]

Yes, I saw a report in either the Herald Tribune or the Korea Herald, but now I can't find the article. I hope that you are right about the double taxation thing, as I won't be making much if I have to pay my fair share for Bush's perma-war.

[veiledsentiments]

I just heard today on CNBC that in the version coming out of the committee in the Senate, the Foreign Income Exclusion is killed and all foreign income will be fully taxable.

That said, it still has to go through the whole senate, and then be reconciled to the house version. They didn't mention if it was also removed in that version.

The double taxation situation will only work for those countries that have a tax agreement with the US. I never had to deal with this question, as I never worked in a country that had taxation.

I suggest that it is time for everyone to get in touch with their congressperson - tell all your friends and family back home to do the same.

[mwalcoff]

Below is a link to a story about the proposed elimination of the foreign income tax exclusion:

http://www.washingtonpost.com/wp-dyn/articles/A32536-2003May8.html

Please write your senators to let them know you oppose this provision.

Here is what I wrote to my senators:

Dear Sen. DeWine:

I am writing to urge you to oppose the elimination of the foreign earned-income exclusion, which is part of the tax bill passed by the Finance Committee yesterday.

I am planning to go overseas to teach English. English as a Second Language teachers help improve the image of the United States in Third World countries. ESL teachers often work long hours for low pay with little in the way of benefits or job security. ESL teachers forego Social Security credits and other benefits of living at home. They pay taxes to foreign governments but usually are ineligible for their social-welfare benefits. They put themselves through this to help others and learn about their cultures.

It is mind-boggling that Congress would consider increasing taxes on such poorly paid workers to offset tax cuts for wealthy investors.

If you must alter the tax exclusion, you could consider lowering the income limit rather than scrapping it entirely. However, I believe any such tax increase is immoral and unjustified.

Thank you for taking the time to read about my concerns.



Matt

[Joe C.]

Unfortunately, you are supposed to declare all income earned abroad and pay taxes on that income. Yes, some have already paid income tax to the Chinese government on this income, but the way it works is that you declare the income to the IRS and then the tax you paid to the Chinese government is a tax deduction.

But the interesting thing is why you would even declare this income to the US government? It's not like the Chinese government gives you a W-2 form, right? At this point in time, there is no way the Chinese government is going to share tax data with the US government.

On the other hand, even if you do declare it, the declaration of $6,000 in income is more laughable than taxable from an IRS point of view. You'd probably have no tax liability at all. Who working at a university in China "officially" earns more than $6 k per year?

Some have mentioned a tax treaty before. This applies only to income earned in China from a government sponsored college or university. It does not apply to a private university or any of the run-of-the-mill ESL schools around.

[bnix]

Thanks to the posters for informing the rest of us.If this bill actually gets through the whole Senate,the House and is made into law...well,guys,we willhave major problems.Don't know about the rest of you.If they mess with that tax exclusion(one of the few real incentives to work overseas)...well,I am hanging it up and going back to the US to get a "regular" job.If they are going to tax me...what the hell...might as well go home.

IF they pass it,not only could they tax the salary...but probably the fringies like free housing,paid plane fare(for those people who got it)...any fringies.Plus if you wind up paying fed income tax...chances are almost certain you would also wind up paying STATE income tax...most states have a state income tax...only two or three don't.GOOD LORD!!


YESwirite your congressmanand tell him or her to oppose this thing!On the positive side,there are also other expats besides TESOL teachers who would be affected....so maybe they are mounting some sort of campaign against this bill.In the meantime...do all you can! Write those letters!

[Joe C.]

Can't figure out how this will have any influence on the vast majority of ESL teachers. Housing in lieu of cash is almost a non-item. Air fare is also a non-item since it is only reimbursed. Unless you have an official salary of over, approximately, $12,000 a year, the proposed tax bill has nothing to do with you. And even then, whatever tax you have paid to the foreign government comes off of whatever you might owe the IRS.

The vast majority of foreign companys that employ expats have provisions in their salary packages to cover tax liabilities of their employees.

[veiledsentiments]

Actually Joe, that is not quite right. Benefits are taxable. If your employer provides housing or an allowance and/or pays for your ticket, the value of those items are taxable income to you. In many countries that could add up to another $15,000+ added to your income.

I also do not expect that the majority of employers of teachers take care of their teachers taxes. Perhaps in corporate jobs, but teachers tend to be on their own.

[bnix]

Veiled Sentiments is right.The housing can be taxable.I was not talking about"housing in lieu of cash",either.I was talking about free housing in addition to a salary.It could be taxable,except in certain situations,such as if you live on a military base(this happens mostly in the Middle East)and you also teach on the base.Because in that instance the housing is provided really as a convenience to the employer and not to the employee,in that instance it is not taxable.That is not just my opinion.That comes from my very knowledgeable CPA,who does my taxes every year.Of course,she gets her info from the appropriate section in the US tax code.

I do not pretend to be a tax expert.However,I did return from Saudi one time before the contract was up(back to the US) and had to pay taxes on the salary,my original(free) flight to Saudi.I did not pay taxes on the trip back to the US(I had to pay for it myself since I left before the contract was up).Also,since I had been living on the military base while teaching,I did not have to pay for the housing benefit.Also,since I had been employed by a governmental entityof Saudi(and not a private concern),I did not have to pony up Social Security contributions.I know...there are people out there who will say:Why pay?Because...they might not catch it right away...and the IRS might never catch it...but if they do....you would have to pay the backtax,plus penalties...and do some fancy explaining.personally,I prefer to deal truthfully with the IRS.I have enough to worry about...without worrying about them

Overseas tax law is very complex...and perplexing.There are many CPA's who are not even comfortable with it...If in doubt,better look for a GOOD accountant...forget about Hand R Block and guys like that.


As for that $15000 salary figure the guy from Malaysia mentioned.Well,in the Middle East and also in places in Asia like Korea and Taiwan... virtually every TESOL teacher makes more than $15000,so that figure is not at all uncommon.True,they don't pay that much in Latin America(most places),eastern Europe,or maybe Malaysia(although I really do not know about Malaysia).

Let's all hope that bill to kill the tax exclusion does not become law...and write your congressman or congresswoman asking them to oppose it.If it makes it into law...we are going to have big problems.

[bnix]

Ok.Before someone has a "cat-fit"...the salary Joe C.from Malaysia mentioned was $12000,not $15000.Again,there are numbers of TESOL teachers who make more than this.Also,Veiled Sentiments had another very good point.The majority of employers(at least for TESOL teachers) have no provisions for covering tax liabilities.The mind boggles!Why would they want to get involved in the hassle and expense of dealing with their employees' US tax responsibilities?Ha.Some of the "schools""...well,they barely pay the SALARIES(and some don't).I do not think they are going to get involved witthe the tax thing Very good point,Veiled S.

Joe.C.,if you are talking about some multinationals,maybe with engineers or technical people as employees,well,yes they might have provisions to cover tax liabilities.But teachers?...I doubt it very seriously.

[Joe C.]

Yes, I did mean practically every type of expat except ESL teachers.

Actually, the purpose of the "old" tax law that allowed certain tax benefits to expats was to encourage entrance into a weak labor pool. It was difficult, if not impossible, to get workers to go overseas into what some considered (or maybe actually were) high risk and / or hardship posts. For example, if you could net, say, $50 k working for an oil company fixing pipes domestically, why would you go to work in Lagos on an oil platform to net the same $50 k?

I don't think the end result of the new tax bill passing will mean you have to pay more taxes. There will be no double taxation. Any foreign income taxes you pay are fully deductible from any taxes you will owe to the IRS. The end result will be, IMO, that fewer people will see any economic advantage (i.e. windfall) from going overseas.

[veiledsentiments]

Must disagree Joe C. There is a particular group of EFL and other professionals - a not insignificant number - who will be extremely affected by this new law. They will go from paying -0- in taxes to paying thousands of dollars. For instance instead of the -0- that I paid my last year overseas, I would have to pay $12,000 in federal taxes.

It will certainly end a windfall for this group.

And, if it passes, there will be a lot fewer Americans teaching in the Middle East. (yes - I know - some of you wouldn't miss us) I certainly wouldn't go back unless they raised the salaries to cover the difference. A rather unlikely occurrance.

I have mentioned this elsewhere. But - for those of you who are writing to your congressperson, you might want to mention that American corporations avoid income taxes by setting up PO boxes in places like Bermuda while none of their actual business is done there. Now they want to tax people who are actually living and working overseas. Am I the only one who sees a lack of logic here??

[arioch36]

Throw stones at me, but if you make enough so that you "oh No" have to pay taxes, well you know, most people do pay taxes. Maybe the gravy ride is over.
Very very very few teachers wil be effected, as I see (I could be totally wrong) but there are Americans making a killing overseas (which I have no problem with) who have avoided paying what they should...and probably still will.

Unfortunately, those with the most money (such as those rich corporations) are the best at not paying what they should. I agree they should pay what they should...and so should the individuals you make a lot. Because some banks cheat doesn't mean it is right for individuals to cheat.

Stay taxless, be poor in China

[Joe C.]

Must disagree Joe C. There is a particular group of EFL and other professionals - a not insignificant number - who will be extremely affected by this new law. They will go from paying -0- in taxes to paying thousands of dollars. For instance instead of the -0- that I paid my last year overseas, I would have to pay $12,000 in federal taxes.

Assuming a 20% tax bracket, you need to have made $60 k to have had to pay $12 k in federal taxes. When you say going from 0 that means you paid no taxes in your host country?

Don't you feel a tad bit deadbeatish taking in $60 k and contributing nothing?