Korean Job Discussion Forums

[You]

I was wondering how US taxes/Korean taxes worked if an American stayed and worked in Korea for more than two years.

How much do you get taxed per year after the two free years are up?

[AmericanExile]

2 free years?

Money earned abroad is not taxed up to $87,000 something every year. Even though you don't have to pay tax on it you do have to file.

[T-J]

I think the OP is referring to the two year exemption that some countries get from paying Korean taxes.

First, this is my disclaimer, I'm not a tax expert. Don't rely on Dave's or any message board for legal, financial, or medical advice.

Now that that is out of the way, some countries are exempt from paying Korean taxes for two years. However the U.S. IRS form for overseas income exemption asks if you have an exemption from local taxes and if you do, then you are not eligible for the U.S. exemption.

Simply put, you owe somebody something. There is no free lunch. Pay the Korean tax or pay the U.S. tax, your choice.

[You]

Thanks for the replies. I think I'm confused, in my contract it says:

The Korean income tax (approx. 3% which is exempted for foreigners, except for Canadians, for the first two employment years in Korea)

So I would not pay Korean tax for two years.

Then American Exile pointed out that you still file with the US IRS, but don't pay tax if you make under 87kish a year.

So with that information, I'm assuming that I won't be paying tax on my money earned until my two years are up teaching in Korea, at which time I'll be paying a 3% tax.

I'll have to check out the form T-J referred to and see whats up I guess. Also, I think I will also ask my recruiter once we get further into the hiring process.

[T-J]

Quote from,

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.

Again I might be mis-reading this section or taking it out of context. I read it as saying you can get an exemption from one or the other, but not both.

[mmstyle]

I called the IRS after last year for help. Per the people I spoke to at the IRS, TJ is correct. If you are looking to do this all above board, you must pay taxes to someone.

Bear in mind that taxes here are much lower. Also, you don't have to do anything about filing them (at least, my last school did it for 2 years), and all of your filing info is in Korean. I, for one, don't feel like trying to use all Korean documentation to file back home. If you have very simple taxes back home, like I do, then you'll be able to make over 80k (87K was exempt in 2008) and not pay taxes back home as long as you paid them here.

I think there is some weird stipulation about having an out-of-country tax residence, though. The way I read it, once you stop claiming it, you have to ask for permission or something like that. I'm not sure about it, though, as I didn't ask. Anyone have any experience with that part?

[Forward Observer]

How does that work if your spouse goes back to the states and you stay in Korea for a couple of years? My guess would be that we'd have to file separately...

[sketchforsummer]

[quote="T-J"]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. [/quote]

So let's say you [i]haven't[/i] submitted Form 8808 (or whatever it's called); in that case would the IRS consider you a resident of the foreign country? I don't suppose they check the Korean Tax Service to see if your employer's deducting what they ought.

[Geckoman]

Here's an earlier thread about filing your taxes while abroad:

ATT AMERICANS!: FILE YOUR FEDERAL INCOME TAXES BY JUNE 15TH!
http://forums.eslcafe.com/korea/viewtopic.php?t=154390