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sundizz
Joined: 17 Dec 2009
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 Posted: Thu Feb 04, 2010 3:07 pm Post subject: |
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So read through the post but still a little confused. I am VERY much a normal case from what I can tell. I will be going from March to March and am doing a public school position. I just sent in my taxes for 2009 a few days ago.
-From everything I have read it seems I should mail in the 8802 (Application for United States Residency) and try and get my Form 6166 (Residency Certification).
-Once I receive the Form 6166 then I should be good to go on not paying Korean tax.
-So before I return in March 2011 I will have to file U.S Taxes for the 2010 tax period. For this, I should apply for the Form 2055 (Foreign Income Tax exclusion) before taxes are due (April 15th) to see if I qualify (seems possible from what everyone is saying).
Two questions that I have seen answered but still do not really make sense.
1. Since I will be staying only from Feb 25 to December 29th (not a full year) will this disqualify me from the "physical presence test" or whatever requirements they have? Any suggestions on how to get around this?
2. Has anyone simply just gotten the Form 66 to not do the Korean tax, and then just not filed U.S taxes for that year and had problems with that?
3. If you do apply for the 2055 form and are not granted the exclusion, any idea what form you would use to file taxes, and at approx what rate the income would be taxed at?
Thanks! Hopefully this will help put a lot of this in perspective for other people as well. |
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PatrickBateman
Joined: 08 Jun 2009
Location: American Gardens Building, West 81st Street
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| Posted: Thu Feb 04, 2010 7:58 pm Post subject: |
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Simple question....
Sorry if it has been answered already.
So when I go to file my taxes(turbo tax) will they already know if I pass the physical presence test? The reason I'm asking is that I arrived last year in the middle of May and wasn't sure WHEN I could file. Do I have to wait until 330 days of residency before I file? Will turbotax recognize or understand any of this? Thanks |
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wallythewhale
Joined: 12 Mar 2009
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| Posted: Thu Feb 04, 2010 8:12 pm Post subject: |
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| In short, you'll still have to pay for taxes either in the US or South Korea correct? I think someone should mention that before talking about taxes because it sure does get confusing. |
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Konglishman
Joined: 14 Sep 2007
Location: Nanjing
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| Posted: Thu Feb 04, 2010 10:21 pm Post subject: |
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| sundizz wrote: |
So read through the post but still a little confused. I am VERY much a normal case from what I can tell. I will be going from March to March and am doing a public school position. I just sent in my taxes for 2009 a few days ago.
-From everything I have read it seems I should mail in the 8802 (Application for United States Residency) and try and get my Form 6166 (Residency Certification).
-Once I receive the Form 6166 then I should be good to go on not paying Korean tax.
-So before I return in March 2011 I will have to file U.S Taxes for the 2010 tax period. For this, I should apply for the Form 2055 (Foreign Income Tax exclusion) before taxes are due (April 15th) to see if I qualify (seems possible from what everyone is saying).
Two questions that I have seen answered but still do not really make sense.
1. Since I will be staying only from Feb 25 to December 29th (not a full year) will this disqualify me from the "physical presence test" or whatever requirements they have? Any suggestions on how to get around this?
2. Has anyone simply just gotten the Form 66 to not do the Korean tax, and then just not filed U.S taxes for that year and had problems with that?
3. If you do apply for the 2055 form and are not granted the exclusion, any idea what form you would use to file taxes, and at approx what rate the income would be taxed at?
Thanks! Hopefully this will help put a lot of this in perspective for other people as well. |
1. If you want to qualify under the physical presence test, then you need to be outside the U.S. for 330 days. So, I suggest that you take a month long vacation outside the U.S. after you finish working in South Korea.
2. Unless you are not making any income, you are always required to file a tax return with the IRS. So, why would you want to risk being audited especially since you could still easily qualify for the Foreign Income Exclusion.
3. Form 2555 is the form that you file for foreign income. It is up to the IRS to determine whether or not you qualify for the Foreign Income Exclusion. But of course, Turbotax will tell you if you qualify or not based on the information that you enter in. Anyways, in the unfortunate event that you did not qualify for the Foreign Income Exclusion, you will be taxed as if you made your income in the U.S. I suggest that you take a look at how Federal taxes are calculated.
http://www.moneychimp.com/features/tax_brackets.htm
At any rate, the moral of the story is that you should take a month long vacation somewhere outside the U.S. in order to make sure that you will meet the 330 day requirement. You can even return to the U.S. for a little bit after finishing your work, but make sure that you take that vacation to ensure that you will meet the 330 day requirement.
Last edited by Konglishman on Thu Feb 04, 2010 10:49 pm; edited 1 time in total |
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Konglishman
Joined: 14 Sep 2007
Location: Nanjing
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| Posted: Thu Feb 04, 2010 10:31 pm Post subject: |
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| PatrickBateman wrote: |
Simple question....
Sorry if it has been answered already.
So when I go to file my taxes(turbo tax) will they already know if I pass the physical presence test? The reason I'm asking is that I arrived last year in the middle of May and wasn't sure WHEN I could file. Do I have to wait until 330 days of residency before I file? Will turbotax recognize or understand any of this? Thanks |
Yes, Turbotax should tell you if you pass the physical presence test. Turbotax will ask you what range of dates you have been outside the U.S. and when you made any trips to the U.S. if any. So, I do not think that you can get away with saying you qualify before you actually do.
Since only 330 days outside the U.S. are required, you could probably still qualify if you filed shortly before April 15. Of course, you actually have until June 15 to file since you live overseas. |
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Konglishman
Joined: 14 Sep 2007
Location: Nanjing
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| Posted: Thu Feb 04, 2010 10:48 pm Post subject: |
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| wallythewhale wrote: |
| In short, you'll still have to pay for taxes either in the US or South Korea correct? I think someone should mention that before talking about taxes because it sure does get confusing. |
Wrong. It is not an either/or choice. That was one of the main points of my original post.
Being exempted from Korean taxes is not a disqualification against the Foreign Income Exclusion. This is because nearly every tax treaty has a clause which says that the tax treaty benefits do not have any effect on how U.S. taxation is determined.
But of course, the Korean tax exemption is only good for two years.
I suppose that your confusion stems from T-J's post which quoted an email from the IRS. Unfortunately, not everyone at the IRS know what they are talking about. This is why I have posted relevant quotes and links from the IRS website to explain this topic. And just to avoid any confusion, at the time of T-J's post, I was not 100% done updating the original post which is why I was initially confused by T-J's post.
Once again, if you do not believe, then call the IRS yourself. By the way, you will have better luck if you call in the morning (East Coast time). And make sure that you have on hand, the relevant quotes from the IRS website. |
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Geckoman
Joined: 07 Jun 2007
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PatrickBateman
Joined: 08 Jun 2009
Location: American Gardens Building, West 81st Street
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| Posted: Fri Feb 05, 2010 5:02 am Post subject: |
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| Konglishman wrote: |
| PatrickBateman wrote: |
Simple question....
Sorry if it has been answered already.
So when I go to file my taxes(turbo tax) will they already know if I pass the physical presence test? The reason I'm asking is that I arrived last year in the middle of May and wasn't sure WHEN I could file. Do I have to wait until 330 days of residency before I file? Will turbotax recognize or understand any of this? Thanks |
Yes, Turbotax should tell you if you pass the physical presence test. Turbotax will ask you what range of dates you have been outside the U.S. and when you made any trips to the U.S. if any. So, I do not think that you can get away with saying you qualify before you actually do.
Since only 330 days outside the U.S. are required, you could probably still qualify if you filed shortly before April 15. Of course, you actually have until June 15 to file since you live overseas. |
Much appreciated, thanks! |
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sundizz
Joined: 17 Dec 2009
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| Posted: Fri Feb 05, 2010 11:50 am Post subject: |
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| Konglishman wrote: |
| sundizz wrote: |
So read through the post but still a little confused. I am VERY much a normal case from what I can tell. I will be going from March to March and am doing a public school position. I just sent in my taxes for 2009 a few days ago.
-From everything I have read it seems I should mail in the 8802 (Application for United States Residency) and try and get my Form 6166 (Residency Certification).
-Once I receive the Form 6166 then I should be good to go on not paying Korean tax.
-So before I return in March 2011 I will have to file U.S Taxes for the 2010 tax period. For this, I should apply for the Form 2055 (Foreign Income Tax exclusion) before taxes are due (April 15th) to see if I qualify (seems possible from what everyone is saying).
Two questions that I have seen answered but still do not really make sense.
1. Since I will be staying only from Feb 25 to December 29th (not a full year) will this disqualify me from the "physical presence test" or whatever requirements they have? Any suggestions on how to get around this?
2. Has anyone simply just gotten the Form 66 to not do the Korean tax, and then just not filed U.S taxes for that year and had problems with that?
3. If you do apply for the 2055 form and are not granted the exclusion, any idea what form you would use to file taxes, and at approx what rate the income would be taxed at?
Thanks! Hopefully this will help put a lot of this in perspective for other people as well. |
1. If you want to qualify under the physical presence test, then you need to be outside the U.S. for 330 days. So, I suggest that you take a month long vacation outside the U.S. after you finish working in South Korea.
2. Unless you are not making any income, you are always required to file a tax return with the IRS. So, why would you want to risk being audited especially since you could still easily qualify for the Foreign Income Exclusion.
3. Form 2555 is the form that you file for foreign income. It is up to the IRS to determine whether or not you qualify for the Foreign Income Exclusion. But of course, Turbotax will tell you if you qualify or not based on the information that you enter in. Anyways, in the unfortunate event that you did not qualify for the Foreign Income Exclusion, you will be taxed as if you made your income in the U.S. I suggest that you take a look at how Federal taxes are calculated.
http://www.moneychimp.com/features/tax_brackets.htm
At any rate, the moral of the story is that you should take a month long vacation somewhere outside the U.S. in order to make sure that you will meet the 330 day requirement. You can even return to the U.S. for a little bit after finishing your work, but make sure that you take that vacation to ensure that you will meet the 330 day requirement. |
Thanks....that cleared it up quite a bit. I actually miswrote the days, I will be there from Feb 20th 2010 to Feb 20thish 2011 (so a full year). My question was more in terms of when taxes are calculated (Feb 25th-Dec 31st) that is not a full year at that point. Any ideas on how that works with the physical presence test etc? Thanks. |
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Konglishman
Joined: 14 Sep 2007
Location: Nanjing
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| Posted: Fri Feb 05, 2010 2:58 pm Post subject: |
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| sundizz wrote: |
| Konglishman wrote: |
| sundizz wrote: |
So read through the post but still a little confused. I am VERY much a normal case from what I can tell. I will be going from March to March and am doing a public school position. I just sent in my taxes for 2009 a few days ago.
-From everything I have read it seems I should mail in the 8802 (Application for United States Residency) and try and get my Form 6166 (Residency Certification).
-Once I receive the Form 6166 then I should be good to go on not paying Korean tax.
-So before I return in March 2011 I will have to file U.S Taxes for the 2010 tax period. For this, I should apply for the Form 2055 (Foreign Income Tax exclusion) before taxes are due (April 15th) to see if I qualify (seems possible from what everyone is saying).
Two questions that I have seen answered but still do not really make sense.
1. Since I will be staying only from Feb 25 to December 29th (not a full year) will this disqualify me from the "physical presence test" or whatever requirements they have? Any suggestions on how to get around this?
2. Has anyone simply just gotten the Form 66 to not do the Korean tax, and then just not filed U.S taxes for that year and had problems with that?
3. If you do apply for the 2055 form and are not granted the exclusion, any idea what form you would use to file taxes, and at approx what rate the income would be taxed at?
Thanks! Hopefully this will help put a lot of this in perspective for other people as well. |
1. If you want to qualify under the physical presence test, then you need to be outside the U.S. for 330 days. So, I suggest that you take a month long vacation outside the U.S. after you finish working in South Korea.
2. Unless you are not making any income, you are always required to file a tax return with the IRS. So, why would you want to risk being audited especially since you could still easily qualify for the Foreign Income Exclusion.
3. Form 2555 is the form that you file for foreign income. It is up to the IRS to determine whether or not you qualify for the Foreign Income Exclusion. But of course, Turbotax will tell you if you qualify or not based on the information that you enter in. Anyways, in the unfortunate event that you did not qualify for the Foreign Income Exclusion, you will be taxed as if you made your income in the U.S. I suggest that you take a look at how Federal taxes are calculated.
http://www.moneychimp.com/features/tax_brackets.htm
At any rate, the moral of the story is that you should take a month long vacation somewhere outside the U.S. in order to make sure that you will meet the 330 day requirement. You can even return to the U.S. for a little bit after finishing your work, but make sure that you take that vacation to ensure that you will meet the 330 day requirement. |
Thanks....that cleared it up quite a bit. I actually miswrote the days, I will be there from Feb 20th 2010 to Feb 20thish 2011 (so a full year). My question was more in terms of when taxes are calculated (Feb 25th-Dec 31st) that is not a full year at that point. Any ideas on how that works with the physical presence test etc? Thanks. |
Oh, I see. Then, you are perfectly fine. I will explain why.
Next year, when you file your tax return for 2010, you only include the foreign income for the 2010 tax year. However, for the physical presence test, the 330 days are allowed to roll over into the next year of 2011 if that is what it takes. Just make sure that you have waited until you have satisfied the physical presence test when you file your tax return.
When you satisfy the physical presence test due to a roll over in the next year, the maximum Foreign Income Exclusion is actually prorated according to the number of days that you were outside of the US in the given tax year. In your case, you will be outside of the U.S. from dates of Feb. 20th to Dec. 31st for the 2010 tax year. That adds up to 315 days. After Jan. 15, 2011, you will have satisfied the physical presence test.
When (315/330) x $91,400 is rounded to the nearest dollar, $87,245 is the result. So, as long as your foreign income in 2010 is less than $87,245, you will not owe any taxes on your foreign income.
If you look at Publication 54 from the tail end of page 19 to the beginning of page 20, you will find the same explanation that I just gave you. Also, note that in the example given on page 20, the maximum Foreign Income Exclusion was lower in the 2008 tax year than it is now.
http://www.irs.gov/pub/irs-pdf/p54.pdf
Since I only very briefly mentioned in passing that the maximum Foreign Income Exclusion is prorated in these types of situations, I may go ahead and add a little bit more explanation to that part of the original post. |
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OiGirl
Joined: 23 Jan 2003
Location: Hoke-y-gun
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| Posted: Fri Feb 05, 2010 7:41 pm Post subject: |
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Question:
If we are a married couple, both with income only in Korea, reported on Form 2555, is it best to file jointly or separately? I just got married last year. |
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Konglishman
Joined: 14 Sep 2007
Location: Nanjing
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| Posted: Fri Feb 05, 2010 10:16 pm Post subject: |
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| OiGirl wrote: |
Question:
If we are a married couple, both with income only in Korea, reported on Form 2555, is it best to file jointly or separately? I just got married last year. |
That is an excellent question, OiGirl. In fact, you seem to have tripped me up. Perhaps, I will give the IRS a call on Monday to find out.
By the way, based on something I vaguely recall reading, I suspect that it will make some sort of difference depending on whether your spouse is an American or not. |
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Toffenheim
Joined: 21 Jan 2009
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| Posted: Sat Feb 06, 2010 12:03 am Post subject: |
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I'm a little confused about this. I'm an E-2 visa holder working at a hagwon.
-I worked in the US from 1/1/2009 - 2/15/2009
-I moved to Korea and started working 4/1/2009 and will finish 4/1/2010
-I went back to the US for 1 week over Christmas to visit family
-I don't plan to live or work in Korea afterwards
My questions:
1. I'm looking at page 2 of the 2555-ez form where it says you must put down the dates you were in the US during 2009. I was there for the first 4 months of 2009, working at my previous job. So what do I put for date arrived and date left? I never "arrived", I was already living there. Also, there is that 1 week during Christmas that probably belongs there but that's easier to figure out.
2. My goal is to not pay U.S. taxes on my income in Korea. My school is incredibly unorganized and incompetent and didn't pay/deduct for my pension/health insurance for many months although I did pay the 3.3% tax every month. I have a feeling trying to avoid both U.S. AND Korean taxes would be a big mess, I'd rather just focus on the U.S. part.
Given that information, what forms do I need to file and when? I'm planning on doing the 1040 (for the 2 months I worked in the US) before April but whether I need to do the 2555, 8802, or 6166 and how all those forms interact is not entirely clear to me. |
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OiGirl
Joined: 23 Jan 2003
Location: Hoke-y-gun
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| Posted: Sat Feb 06, 2010 9:40 pm Post subject: |
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| Konglishman wrote: |
| OiGirl wrote: |
Question:
If we are a married couple, both with income only in Korea, reported on Form 2555, is it best to file jointly or separately? I just got married last year. |
That is an excellent question, OiGirl. In fact, you seem to have tripped me up. Perhaps, I will give the IRS a call on Monday to find out.
By the way, based on something I vaguely recall reading, I suspect that it will make some sort of difference depending on whether your spouse is an American or not. |
My spouse is a Permanent Resident in the US now. |
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arice05
Joined: 29 Aug 2009
Location: Dongducheon
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| Posted: Sun Feb 07, 2010 10:31 pm Post subject: |
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I am so confused! Can someone please help me? I've read all the posts but I'm feeling a bit overwhelmed...
OK. I filed form 8802 and I got a letter from the IRS saying they accepted it.
Do I also file form 2555, and do I do so at the same time that I file the 1040? I know I need to do the long version of form 1040.
I arrived here at the very end of Oct. 2009. My contract started the first week of Nov. 2009 and is a one year contract.
However, I am going home (USA) Feb. 19-28. Does that mean that I will have to pay taxes for the foreign income, because I won't be out of the USA for 330 days? Do these days have to consecutive? I don't think they do, actually.
Furthermore, I have an F-4 Visa, but I am definitely an American citizen.
Thank you in advance for your help. Sorry I am incompetent at taxes  |
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