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Snowkr
Joined: 03 Jun 2005
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 Posted: Sat Jan 21, 2006 7:34 pm Post subject: tax time for Americans working in Korea |
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This question is for teachers who will be filing a 2005 tax return in the U.S. on earnings Korea.
Is it pretty straightforward with the 1040 form? Do you pay U.S. soc. security even though you pay income tax here in Korea?
For tax purposes would you say $1 U.S. = 1,000 won?
I've been through this already in Australia and China but I've never had so many things to report as I do here... health insurance, pension, medical expenses etc...
Any advice from experienced U.S. teachers here would be great! |
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Richard Krainium
Joined: 12 Jan 2006
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| Posted: Sun Jan 22, 2006 2:33 pm Post subject: |
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$80,000 is exempt.
There are two tests you must meet to qualify for the foreign-earned-income exclusion:
1. You have a tax home in a foreign country and
2. You meet either the IRS' bona fide residence or physical presence requirements.
Basically, your tax home is your regular or principal place of business, employment or post of duty. The IRS wants to be sure that you actually moved abroad, rather than simply traveled there periodically to earn money. And you're not totally off the tax hook. If the foreign country has income tax laws, you cannot claim to be exempt from them.
The second test requires you to establish a genuine home in the country for a full tax year or, failing that, spend at least 330 days abroad earning your income.
You still must file, too. |
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lastat06513
Joined: 18 Mar 2003
Location: Sensus amo Caesar , etiamnunc victus amo uni plebian
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| Posted: Sun Jan 22, 2006 4:10 pm Post subject: |
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The last time I did my US income tax was in 2002 and that was for tax years 2000 and 2001.
Yeah, there is an exemption of up to 70,000 to 80,000 dollars.
But what most people don't know is that there is a grace period of up to 3 years for each tax year you are overseas (meaning, you have until 2006 to pay for tax year 2003).
It is good to know these things  |
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pdxsteve
Joined: 29 Sep 2004
Location: Bundang
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| Posted: Sun Jan 22, 2006 7:06 pm Post subject: |
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| lastat06513 wrote: |
The last time I did my US income tax was in 2002 and that was for tax years 2000 and 2001.
Yeah, there is an exemption of up to 70,000 to 80,000 dollars.
But what most people don't know is that there is a grace period of up to 3 years for each tax year you are overseas (meaning, you have until 2006 to pay for tax year 2003).
It is good to know these things |
This is totally false and seriously bad advice. US citizens living overseas can get an automatic two-month extension to file only. There is no 3-year grace period.
See: http://www.irs.gov/publications/p17/ch01.html#d0e4497 |
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Zyzyfer
Joined: 29 Jan 2003
Location: who, what, where, when, why, how?
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| Posted: Sun Jan 22, 2006 7:36 pm Post subject: |
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| Mine's so messy that I'm just going to H&R Block or something. |
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bluelake
Joined: 01 Dec 2005
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| Posted: Sun Jan 22, 2006 7:47 pm Post subject: |
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| It's easy to file. I downloaded the 1040 and 2555EZ and was done in ten minutes. |
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stumptown
Joined: 11 Apr 2005
Location: Paju: Wife beating capital of Korea
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| Posted: Wed Jan 25, 2006 12:58 am Post subject: |
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| I figured...why bother, they can't prove I made anything anyway. How do they know I wasn't doing volunteer work? It's none of their business if I'm making money in a foreign country. |
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napoleon8
Joined: 18 May 2003
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| Posted: Mon Feb 13, 2006 6:02 am Post subject: |
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| stumptown wrote: |
| I figured...why bother, they can't prove I made anything anyway. |
I used to believe this, but I'm not so sure anymore since I found out that the U.S. and the ROK have a tax treaty that allows each country to check the tax records of the other country on its own citizens, and vice versa. My understanding is that the treaty requires one country to assist when the other country conducts an investigation. What the exact details of this agreement are I don't know. The treaty is available at the IRS web site. I downloaded it, didn't find out very much. Anyway, this is my current understanding of the situation.
The tax treaty is mentioned in IRS Publication 54, "Tax Guide for U.S. Citizens and Resident Aliens Abroad". |
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J.B. Clamence
Joined: 15 Jan 2003
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| Posted: Mon Feb 13, 2006 8:59 am Post subject: |
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| stumptown wrote: |
| It's none of their business if I'm making money in a foreign country. |
As long as you claim citizenship in a country, any money you make regardless of where it comes from is indeed their business. That's just the way it is. The only way to make it not their business is to renounce your citizenship (not recommended). |
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seoulsista
Joined: 31 Aug 2005
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| Posted: Mon Feb 13, 2006 6:23 pm Post subject: |
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| Do you have to file a 1040 and a 2555? |
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napoleon8
Joined: 18 May 2003
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| Posted: Mon Feb 13, 2006 7:20 pm Post subject: |
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| stumptown wrote: |
| It's none of their business if I'm making money in a foreign country. |
In principle I agree. But, FYI, there have cases in which the U.S. government has refused to renew passports of American citizens who had not filed a tax return in several years. You may recall writing down your SSN on your passport application. Well, if the IRS doesn't get a tax return from you in several years, your passport number can be red flagged. And you will not get another passport until you settle with the IRS. This brings me to a second point. If you don't file taxes now, and end up filing them years from now, for any reason such as to get a passport renewal or a U.S. visa for a foreign spouse, the IRS can revoke the earned income exclusion which you currently have, which means at that time you would have to pay back taxes on all foreign income you report. Keep in mind that if your school is paying taxes to the Korean government, the U.S. government possibly would be able to prove all your Korean income.
Another point: there is no statute of limitations on a return if the return is never filed. If you do file, the statute of limitations is 3 years, so if you file now you probably will never hear from the IRS again about that return.
After researching this issue, I decided it is best in the long run not to fcuk with the IRS. They have too much power, and in the long run you will lose. English teachers don't make more than $80,000, so just file.
FYI, the U.S.-ROK tax treaty numbers are TIAS 9506, 1979-2 C.B. 435, and 1979-2 C.B. 458. |
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napoleon8
Joined: 18 May 2003
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| Posted: Mon Feb 13, 2006 7:33 pm Post subject: |
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| J.B. Clamence wrote: |
As long as you claim citizenship in a country, any money you make regardless of where it comes from is indeed their business. |
Not necessarily. Only 2 countries in the world, the U.S. and some other country, are the only countries in the world who base taxation on citizenship rather than residency.
| J.B. Clamence wrote: |
| The only way to make it not their business is to renounce your citizenship. |
Not necessarily. If the U.S. government can prove you are only renouncing your citizenship for tax purposes, they can require you to pay taxes to the IRS for 10 more years. Consequences for refusing to pay back taxes and taxes for those 10 years could include inability to be physically present in U.S. territory for the rest of your life. |
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riley
Joined: 08 Feb 2003
Location: where creditors can find me
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| Posted: Mon Feb 13, 2006 8:33 pm Post subject: |
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| Napolean 8, are you saying that if you file within 3 years, you could be okay? |
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J.B. Clamence
Joined: 15 Jan 2003
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| Posted: Mon Feb 13, 2006 9:33 pm Post subject: |
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| seoulsista wrote: |
| Do you have to file a 1040 and a 2555? |
Yes, if you want to claim the exemption, you must file both. Assuming your situation is not complicated, the 2555EZ version may be more suitable than the stardard 2555. |
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napoleon8
Joined: 18 May 2003
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| Posted: Tue Feb 14, 2006 5:19 pm Post subject: |
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| riley wrote: |
| Napolean 8, are you saying that if you file within 3 years, you could be okay? |
No, that's not what I'm saying. You should file by June 15, with the 2-month extension. The 3 year statute of limitations I mentioned means the IRS has 3 years by law to do any research or disputes on your return. After 3 years by law they cannot dispute your return. This is true of any return, foreign or domestic. When you submit your return showing foreign income, the IRS will not have any info in front of them disputing any figures you submit. I doubt they would try to verify your income unless they felt they had some compelling reason to do so. This is especially true for a return showing an income below the $80,000 limit. If you do nothing out of the ordinary, simply e-file your returns on time, I don't think the IRS would do anything other than stick your return in your file somewhere. And 3 years would go by and the statute of limitations would expire. At that time if the IRS wanted to audit your return, by law they could not. |
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