Korean Job Discussion Forums

[elliemk]

Well, one of the new job listings says this: Two-year local and U.S. tax exemption for American citizens

I thought US citizens were exempt from US taxes the whole time they're overseas.

Comments?

Thanks

[Woland]

As a US citizen, you are obliged to file a return every year. By virue of living abroad, you get an automatic two montrh extension on filing, until June 15th. You may request a further extension until August 15th.

If you are out of the country for any 330 days of any 365 day period which at least partially includes the tax year you are filing for, you are eligible for a deduction of $80,000, pro-rated to the percentage of days out of 365 that you were out of the country in that 365 day period.

This year, for my 2006 tax return, my accountant filed that I was out of the US for 343 days in the period April 4, 2005 to April 3, 2006. She calculated 343 as 94% of 365, and my deduction as 94% of $80,000 - $75,200. Given an income considerably lower than that, my tax bill was once more zero. In fact, I'm getting a return of $30 because the federal government is giving all taxpayers a rebate of that amount from the federal telecommunications excise tax. I love my accountant. Worth every penny of the $140 I pay her for this.

You get this deduction every year you meet the requirement. It does not run out.

I am not a tax expert and my comments here cannot be taken as legal advice. Talk to your accountant.

[elliemk]

[Sine qua non]

I think what that refers to in the OP is a two year exemption from paying Korean taxes.

You still have to file a US return, but you also file a Form 2555 (or 2555-EZ) which is the foreign earned income exclusion. You fill out this form (in addition to the 1040, of course), and all of your wages from teaching here up to $82,400 are exempt from American taxes. This American exemption is going to continue indefinitely in the future, unless Congress decides to cancel it. It is not just a two year exemption.

During your first two years teaching here, you do not pay Korean taxes. However, from the third year on the Korean government begins taking taxes from your pay (something around 4% of your wages). You can file a tax return with the Korean authorities to request the return of this tax.

As the previous poster also mention, an American living overseas atomatically recieves a two month extension to file your taxes. Thus, while living overseas, your new tax deadline is now June 15th, annually. And, if you opt to file for the automatic extension request, you get two additional months to file your taxes (pushing back the due date to August 15th, if you file the request for an automatic extension).

However, be sure to review Publication 54 (available from www.irs.gov) to make sure that you officially qualify as an overseas resident for tax purposes. There are two tests, of which you must satisfy at least one: the Bona Fide Residence Test and the Physical Presence Test. Your first year working overseas can put you into a situation that you may not qualify as an overseas resident, depending on when you arrive here.

After two years working, you are additionally expected to file a tax return with the Korean tax authorities (i.e., you need to file two tax returns per year: one in the US and one in Korea). Check with cubanlord, I think, about this. This poster seems more informed about the Korean tax situation for international workers here.

[mehamrick]

[betty74]

Are hogwon employees exempt also?

[mehamrick]

[betty74]

I thought it was only public school positions. Where do I get the paperwork?

[mehamrick]

[Tony_Balony]

US citizens owe the SSA about $1600 each year in SS taxes.

[Sine qua non]

Do you know if a person can file a late Korean tax return? I haven't filed for this year because I was too busy (how's that for a lame excuse), but I've got some free time now and want to file if it would do any good.

[markfwarren]

So if I understand correctly what you last posted Mehamrick, I can go ahead and pay taxes, and then next year when I file a return, I can get the money back?
-Mark

[mehamrick]