Korean Job Discussion Forums

[afsjesse]

So I know US citizens are exempted from foreign income tax up to 85k. But what about state tax? How do we go about filing those? Anyone have any experience in this?

[afsjesse]

I spent all of 2008 in Korea so would I even need to file with the state since I didn't earn my wages there? I'm from Michigan FYI.

[peacemaker]

If I remember correctly, the way it works is that your state taxes use your adjusted gross income to calculate your tax liability (at least in Minnesota). Since your income in Korea would be subtracted from from your gross income when calculating your federal adjusted gross income, the foreign income exclusion would already be taken into account on your state taxes.

Hopefully that made some kind of sense.

[dennis66]

Correctly, the first $85,000 of foreign sourced earned income may be EXCLUDED from taxable income; it is not exempt from income. That means you have to file your federal return, Form 1040 and exclude the income on Form 2555. This is an exection because in some countries it is more advantageous to claim a foreign tax credit; you have to choose, you can't do both.

Each state is different. If you are a resident of State A you must look at the state rules to see if they also allow you to exclude foreign sourced income, some do, some don't, some states don't have income tax, like Florida and Texas. If you have a driver's license, a bank account, own real estate, have a car titled and tagged in the state, voted in the state, then the state will deem you a resident. Remember the IRS and the states exchange information each year.

If you are American and are working for a public school in Korea you are EXEMPT from Korean taxes for the first two years you are here. This is per Article 23 of the US/Korean tax treaty. Hope this helps.

[sarbonn]

I'm just curious. How would the state OR the federal government know you earned anything while in Korea? I'm not advocating not reporting, but just curious how this really works out.

[Jammer113]

[dimnd]

My state told me from the State Tax Commission that the amount is from my AGI like another poster stated. Therefore, I do not have to file taxes and thus will not be filing state taxes. My state tax form asks if I have been out of the state for any portion of the year, and I think that is probably the same in all states across the board. Hence, if you file U.S. tax form for making under the 85K, then you do not have anything to file with the state; subsequently, the state only taxes you on income made in that state.

Went through this for a couple of years, both in Utah, Nevada (they have no state tax .neither does another state). Utah did not require anything to be filed. A form to them stating you were not in that state can be submitted online..but you can email them and they will tell you the same information. Not required.