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Pablo
Joined: 15 Dec 2011
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 Posted: Fri Feb 24, 2012 5:53 am Post subject: Tax Paradox Confusion |
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Hello,
I'm confused, and hope someone can straighten me out. I'm American, and Korean taxes are being deducted from my paycheck. I looked into getting a "Certification of U.S. Tax Residency" from the U.S. to exempt myself from (and get a refund on) Korean taxes at the start. What I'm confused about is this... Claiming the Foreign Earned Income Exclusion to avoid paying U.S. tax seems to require that my residence be outside the U.S. But this "Certification of U.S. Tax Residency" seems to certify that I am a resident of the U.S.
So if I apply for certificate, will the IRS in the U.S. refuse to give me the foreign earned income exclusion since I'm then a certified resident of the U.S.?
If I have to make a choice, of course I'd opt for paying the lower Korean taxes rather than paying U.S. taxes, but from posts on the forum, it sounds like people are paying neither at the beginning of their work here.
What am I missing? Thanks for any explanation and/or reassurance. |
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ttompatz
Joined: 05 Sep 2005
Location: Kwangju, South Korea
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| Posted: Fri Feb 24, 2012 3:24 pm Post subject: |
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Unless you work at a university or a public school you do not get the 2 year tax exemption on Korean taxes.
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Pablo
Joined: 15 Dec 2011
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| Posted: Sat Feb 25, 2012 3:32 am Post subject: |
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| Really? Why the discrepancy? |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Sat Feb 25, 2012 6:01 am Post subject: |
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If you are an American, you have to pay taxes in the US on your worldwide income. If you are in Korea, you have to pay taxes on your Korean earned income.
However, the two countries have a treaty. If you get the 6166 form from the IRS and turn it into the Korean government, then it exempts you from paying Korean taxes.
When you pay your US taxes, you have no W-2 form so you have to file a 2555. On it you can claim the Foreign Earned Income Exemption for up to 92,900 (for 2011 - it changes each year. 2010 was 91,500) and be exempt from paying taxes on your Korean income.
After the two years are up, however, you must pay taxes in Korea.
As to why this rule is this way for who can take it, don't ask. It's the government - you probably won't find an answer, and if you do, it won't make any sense, so just don't bother. |
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Pablo
Joined: 15 Dec 2011
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| Posted: Sat Feb 25, 2012 6:05 am Post subject: |
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| Thanks, Nathan. Do I have to be at a public school / university, or can I do the same thing at a hagwon? |
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ttompatz
Joined: 05 Sep 2005
Location: Kwangju, South Korea
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| Posted: Sat Feb 25, 2012 3:42 pm Post subject: |
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| Pablo wrote: |
| Thanks, Nathan. Do I have to be at a public school / university, or can I do the same thing at a hagwon? |
Hagwans / hagwan workers do NOT get the 2-year tax exempt status in Korea - you are not a government worker - you pay Korean taxes according to the tax tables:
( http://www.nts.go.kr/eng/help/help_56.asp?top_code=H001&sub_code=HS05&ssub_code=HSE4 )
Therefore, at a hagwan, you do not need to submit the 8088 or receive the 6166. You need the 1040 and 2555.
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Sat Feb 25, 2012 11:00 pm Post subject: |
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Tax Home Test.
Was your tax home in a foreign country or countries throughout your period of bona fide residence or physical presence, whichever applies? . . . . . . . . . . Yes / No
� If you answered �Yes,� you can take the exclusion. Complete Part II below and then go to page 2.
� If you answered �No,� you cannot take the exclusion. Do not file this form.
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http://www.irs.gov/pub/irs-pdf/f2555ez.pdf |
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Pablo
Joined: 15 Dec 2011
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| Posted: Sun Feb 26, 2012 1:11 am Post subject: |
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| Yeah, yeah, thanks. I've been doing that since 1987. (And yes, I still listen to Kim Wilde "You Keep Me Hanging On".) The only remaining question is: Is there really an official double-standard between public and private school employees? I'm sure Mr. Patz is, or at least could be, a very nice man. But I don't want to potentially pay taxes needlessly on one person's statement. |
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ttompatz
Joined: 05 Sep 2005
Location: Kwangju, South Korea
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| Posted: Sun Feb 26, 2012 1:18 am Post subject: |
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| Pablo wrote: |
| Yeah, yeah, thanks. I've been doing that since 1987. (And yes, I still listen to Kim Wilde "You Keep Me Hanging On".) The only remaining question is: Is there really an official double-standard between public and private school employees? I'm sure Mr. Patz is, or at least could be, a very nice man. But I don't want to potentially pay taxes needlessly on one person's statement. |
Don't take my word for it. Ask the foreign tax advocate at the NTS.
Work for a school or university and get the 2 year tax break.
Work elsewhere and you pay the tax.
Yes, there is a double standard since hagwans are NOT "schools" or bodies of lifelong learning - they are businesses for profit.
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Pablo
Joined: 15 Dec 2011
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| Posted: Sun Feb 26, 2012 1:33 am Post subject: |
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| I worked at a pubic university for 8 years. A lot more learning happens at my oinkoink, thank you. Have a nice day. |
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ttompatz
Joined: 05 Sep 2005
Location: Kwangju, South Korea
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| Posted: Sun Feb 26, 2012 4:11 am Post subject: |
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| Pablo wrote: |
| I worked at a pubic university for 8 years. A lot more learning happens at my oinkoink, thank you. Have a nice day. |
That may be true but they are still not "schools".
and if you worked at a public uni for 8 years you are long past the 2 year tax exemption anyway.
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crescent
Joined: 15 Jan 2003
Location: yes.
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| Posted: Sun Feb 26, 2012 4:21 am Post subject: |
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| Pablo wrote: |
| Yeah, yeah, thanks. I've been doing that since 1987. (And yes, I still listen to Kim Wilde "You Keep Me Hanging On".) The only remaining question is: Is there really an official double-standard between public and private school employees? I'm sure Mr. Patz is, or at least could be, a very nice man. But I don't want to potentially pay taxes needlessly on one person's statement. |
ttompatz is a consistently accurate, dependable source for relaying facts regarding issues such as these.
Now say thank you. |
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