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nene
Joined: 11 Jun 2005
Location: Samcheok, Gangwon-do
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 Posted: Wed Jul 22, 2009 4:53 am Post subject: How to get (US) Residency Certificate equivilant by fax |
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A few weeks ago (and 10 months into my contract) my public school told me they needed a residency certificate from the US gov't for tax reasons. I was told that if I didn't provide it, I would be eligible for the income tax exemption I had been receiving all year and would have to pay back taxes.
The standard document the IRS provides to demonstrate income and residence is a transcript of one's tax returns. I have heard it works in lieu of a residency certificate (I will update when this goes through and let you know if it does or doesn't). Here's how to get one faxed to you by the IRS:
1. Call the IRS at 800-829-1040 (open 7am-10pm M-F "whatever time zone you're in"... not sure how that works from here)
2. Go through the menus like this: 2 -> 2 -> enter SS# and confirm -> 3 -> 2 -> 2 -> enter year of transcript required. At this point I entered the wrong year (2008, for which I haven't yet filed) and was connected to a rather unfriendly man who confirmed my identity, took my fax number (get a free one at efax.com, download their stupid eFax Messenger software, use it to convert the file to a .tif, and print), and sent me the transcript three minutes later.
I hope this is helpful. I will reply to let you know whether the transcript suffices as a "residency certificate" for my school. |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Wed Jul 22, 2009 5:08 am Post subject: |
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By not paying the Korean tax you make yourself liable for the U.S. taxes on your income, both Federal and State in most cases, Federal in all.
I think the schools are pushing this to save a dime on their end. Teachers that don't understand that by claiming tax residency in their home country are not eligible for foreign income exemptions as a result, are going to get a rude awakening come tax time.
If they have not been withholding your tax for ten months, I imagine they haven't been paying their share as well and have been planning on shoving this down your throat at the last minute knowing you wouldn't or couldn't pay the back tax. They don't care if your tax bill is going to be four or five times the amount in your home country. You are getting the shaft. |
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nene
Joined: 11 Jun 2005
Location: Samcheok, Gangwon-do
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| Posted: Wed Jul 22, 2009 5:15 am Post subject: |
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| T-J wrote: |
| By not paying the Korean tax you make yourself liable for the U.S. taxes on your income, both Federal and State in most cases, Federal in all.... Teachers that don't understand that by claiming tax residency in their home country are not eligible for foreign income exemptions... |
I don't think this is right. I think we're still eligible for the exemption up to $82k or whatever it is. If someone else can clear this up, that would be great. |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Wed Jul 22, 2009 6:13 am Post subject: |
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It's been discussed ad nauseum on this board as it pertains to U.S. citizens.
You have two choices.
Pay tax in Korea, file a 2555 exception from foreign earned income.
or
Pay U.S. taxes by filing a 8802 to obtain a certificate of U.S. residency for tax purposes, which will exempt you from Korean taxes for up to two years.
There are no free lunches. You must pay tax to someone. The choice is yours.
In my opinion it appears that the schools lately are trying to push this on U.S. citizens to escape their tax responsibility that they would be liable for if you elect to pay Korean taxes. |
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wesharris
Joined: 10 Oct 2008
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| Posted: Wed Jul 22, 2009 7:03 am Post subject: |
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With a residency certificate, you still don't have to pay federal taxes. You aren't liable, because you're under the 80k bracket. That's how it works mate. Ask your tax-man-lady-woman-child.
_+_+
Wes |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Wed Jul 22, 2009 7:47 am Post subject: |
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IRS Form 2555 Lines 13a and 13b:
"If you submitted a statement of non residence to the authorities of a foreign country in which you earned income and the authorities hold that you are not subject to their income tax laws by reason of non residency in the foreign country, you are not considered a bona fide resident of that country.
If you submitted such a statement and the authorities have not made an adverse determination of your nonresident status, you are not considered a bona fide resident of that country."
Your turn. |
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lifeinkorea
Joined: 24 Jan 2009
Location: somewhere in China
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| Posted: Wed Jul 22, 2009 2:46 pm Post subject: |
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Where does the school have the money to pay you?
If your contract is until the middle of some month then they only have a little over 1 million won to work with.
I understand there is severance. However, you can be sure to get your 11.5 months if you sign your contracts to NOT end at the end of the month. Schools pay monthly regardless. |
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nene
Joined: 11 Jun 2005
Location: Samcheok, Gangwon-do
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| Posted: Wed Jul 22, 2009 3:49 pm Post subject: |
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| T-J wrote: |
IRS Form 2555 Lines 13a and 13b:
"If you submitted a statement of non residence to the authorities of a foreign country in which you earned income and the authorities hold that you are not subject to their income tax laws by reason of non residency in the foreign country, you are not considered a bona fide resident of that country.
If you submitted such a statement and the authorities have not made an adverse determination of your nonresident status, you are not considered a bona fide resident of that country."
Your turn. |
OK, here's the short version: there are two ways to qualify for the foreign income exclusion: the bona fide resident test and the physical presence test. What T-J quoted does seem to say that you can't pass the bona fide residence test if you submit the documents this thread was originally about. However, you can still pass the physical presence test, which is probably what most of us would use to qualify anyway. To do that, you simply have to be outside the US for 330 days of any 365 day period.
Here are the details: On page 12 of IRS Document 54, "Tax Guide for US Citizens and Residents Abroad" there is a decision chart for determining your eligibility.
The first question to get through is "Is your tax home in a foreign country?" If not, you are ineligible. "Your tax home is the general area of your main place of business, employment, or post of duty...." There is nothing about submitting documents of residence to foreign governments in the section on determining tax home. Clearly our main place of employment is Korea, so we answer yes to this question, which after answering that one is a US citizen, takes us to...
"Were you a bona fide residence of a a foreign country...?" This is where TJ's citation is relevant. Submitting a residency certificate or a transcript of a tax return does seem to be what is described in Form 2555, Line 13a. So we answer no the bona fide residence test, which takes us to....
"Were you physically present in a foreign country ... for at least 330 full days in any period of 12 consecutive months?" There is nothing in physical presence test about submitting documents to foreign governments. It is exactly what the name suggests -- if you were physically outside of the US for a full year, as just about all of us are if we complete our contracts, we pass this test and qualify for the foreign earned income exclusion regardless of whether we pay income tax to the Korean government.
T-J, next time you hijack someone's thread to tell them they need to worry about something, make sure you know what you're talking about. |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Wed Jul 22, 2009 5:20 pm Post subject: |
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| nene wrote: |
T-J, next time you hijack someone's thread to tell them they need to worry about something, make sure you know what you're talking about.
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First, I don't think this is a thread hijack as I am addressing the topic originally presented.
Second, turn your attention to page one of the instructions for Form 2555.
Who Qualifies
You qualify for the tax benefits available to taxpayers who have foreign earned income if both of the following apply.
* You meet the tax home test.
* You meet either the bona fide residence test or the physical presence test.
Tax home test.
To meet this test, you tax home must be in a foreign country, or countries throughout your period of bona fide residence or physical presence, whichever applies. |
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warmachinenkorea
Joined: 12 Oct 2008
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| Posted: Wed Jul 22, 2009 5:30 pm Post subject: |
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Just filled my taxes by e-file from Korea last week
Qualified for 330 days.
Haven't been paying Korean taxes.
Payed taxes on US income from 2008
Reported Sept-Dec 2008 Korean income.
Was under the 82k bracket do not have to pay tax on Korean income only
US income
Talked to the IRS many times about this.
You are supposed to report foreign income but if you are a bonified resident, or pass the physical presence test then yes you get a free lunch for two years. |
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nene
Joined: 11 Jun 2005
Location: Samcheok, Gangwon-do
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| Posted: Wed Jul 22, 2009 8:08 pm Post subject: |
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| T-J wrote: |
Who Qualifies
You qualify for the tax benefits available to taxpayers who have foreign earned income if both of the following apply.
* You meet the tax home test.
* You meet either the bona fide residence test or the physical presence test.
Tax home test.
To meet this test, you tax home must be in a foreign country, or countries throughout your period of bona fide residence or physical presence, whichever applies. |
Yes, this is what I said. We meet both the tax home test and the physical presence test even if we submit a residency certificate and don't pay Korean income tax.
warmachine -- good to hear. Thanks for posting that. |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Thu Jul 23, 2009 4:36 am Post subject: |
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Just got off the phone with the IRS 215-516-2000 for those that want to confirm the information. According to the nice lady there, if you have a 6166 you can not file a 2555. Furthermore if you filed a 2555 the prior year they will deny your 8802 application and not issue a 6166.
The tax treaty, again according to the IRS is to prevent people from being double taxed, not to avoid any tax.
Don't take my word for it. Call the number above and ask yourself. |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Thu Jul 23, 2009 5:05 pm Post subject: |
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| game..... |
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TheUrbanMyth
Joined: 28 Jan 2003
Location: Retired
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| Posted: Thu Jul 23, 2009 7:43 pm Post subject: |
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| T-J wrote: |
By not paying the Korean tax you make yourself liable for the U.S. taxes on your income, both Federal and State in most cases, Federal in all.
I think the schools are pushing this to save a dime on their end. Teachers that don't understand that by claiming tax residency in their home country are not eligible for foreign income exemptions as a result, are going to get a rude awakening come tax time.
If they have not been withholding your tax for ten months, I imagine they haven't been paying their share as well and have been planning on shoving this down your throat at the last minute knowing you wouldn't or couldn't pay the back tax. They don't care if your tax bill is going to be four or five times the amount in your home country. You are getting the shaft. |
Since when do schools pay a share of our TAXES? . The OP is not paying Korean tax. Now the school wants some proof that the OP is entitled not to pay Korean tax. How exactly are they trying to save money here? |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Thu Jul 23, 2009 7:50 pm Post subject: |
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| TheUrbanMyth wrote: |
| T-J wrote: |
By not paying the Korean tax you make yourself liable for the U.S. taxes on your income, both Federal and State in most cases, Federal in all.
I think the schools are pushing this to save a dime on their end. Teachers that don't understand that by claiming tax residency in their home country are not eligible for foreign income exemptions as a result, are going to get a rude awakening come tax time.
If they have not been withholding your tax for ten months, I imagine they haven't been paying their share as well and have been planning on shoving this down your throat at the last minute knowing you wouldn't or couldn't pay the back tax. They don't care if your tax bill is going to be four or five times the amount in your home country. You are getting the shaft. |
Since when do schools pay a share of our TAXES? |
It's not a share of your tax. I'm going out on a little bit of a limb as I don't know exactly what the schools (government owned) have to pay. Businesses such as hagwons pay a tax as a percentage of the payroll they pay, which is why some prefer to deal in cash, to cook the books a bit. I'm not sure if the foreigners claiming U.S. tax residency effects that for sure or not, it does sound like a plausible explanation for the sudden surge of schools pushing for this certificate.
I would advise against obtaining the 6166 for reasons that I've already stated. |
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