Korean Job Discussion Forums

[cgkitti]

So I got to Korea in July 2009. Because of lots of stupid rules, I apparently will have to pay taxes on the money I make here. Unless...there is a way around this?

I imagine there has to be someone on here who has had to deal with this. I need to be able to show bona fide residency (meaning I have been here for one full tax year) or physical presence (meaning I've been here for 330 days out of a consecutive 12 months). Neither of which, I can claim yet, so I cannot claim the foreign earned income exclusion. So I get $100 back instead of $1000 on my refund. Umm...no F-ing way.

Now, since I didn't get here exactly on or before Jan. 1, 2009, I can't qualify for bona fide residency yet. I haven't been here for 330 days yet to qualify for physical presence. So, the only two things that make sense to me would be to...

a) File an extension and do my taxes after I have been here for 12 consecutive months. Then I will be able to claim this exclusion and get back the full money I deserve for having worked 7 months in the US.

b) File it, only get the $100 back now and do an amendment to my 2009 tax return after I'm qualified to claim the exclusion and get my $900 after that.

The IRS website has helped a little, but their examples only show so much. They explain what to do if you've been here for maybe 3 years, but not the first 8 months. They don't give suggestions as what to do if you're in my situation.

What have any of you guys done who have come here mid-year and worked the first part of the year in the US?

[murmanjake]

well, personally I have decided to disregard all information i find regarding the fact that Americans should file taxes.

It has worked for about a year and a half.

But who knows?

[cgkitti]

Well, that doesn't help me too much, does it?

I like to cover my butt, considering I'm always sending money to pay off stuff back home. I wouldn't want to be audited or something and have them wonder why $1000 randomly was wired into my US bank account from a foreign country every month.

[tired of LA]

As an American living abroad, you get an automatic two month extension on filing your taxes. So you don't have to file until June 15th, which should qualify you for the physical presence test, if you arrived during the first two weeks of July. If not, file for an additional 3 month extension. But to get this you would have to fill out a form and write a letter explaining your need for the extension.

[Clockout]

[Lolimahro]

You need to file Form 2350 "Application for Extension of Time to File U.S. Income Tax Return" (http://www.irs.gov/pub/irs-pdf/f2350.pdf). You can generally request an extension to file your return up to 30 days past the day you meed either of the qualifying tests to claim the Foreign-Earned Income Exclusion (form 2555).

File Form 2350 by June 15. However, the request could always be denied so you should probably send it in as soon as possible.

Then, file your 1040 (tax return) and 2555 (foreign-earned income exclusion) by the date you requested.

As always, the sooner you get things done, the better - you avoid paying penalties and interest, plus you get your return sooner.

I was confused about all this mess so I just called the IRS myself. They were surprisingly helpful. You can look up which number to use on their website at www.irs.gov

[cgkitti]

Thank you guys for this information. I arrived at the end of July so I will have to file an extension. I'm glad I now know what exactly I should do.

[air76]

Filing your taxes later won't change anything in terms of your bona fide resident test....that test only applies to your tax year. So there is no need to send your tax return in later, it won't change anything.

Now...as long as your contract is a 1-year contract, it shouldn't be a problem to claim your income as tax-exempt. What you do is claim bona fide residency from July 2009-July 2010 on the form (even though this is talking about the future it shows that you will be here for an entire year), and then you calculate a pro-rated percentage for the amount of tax exempt income allowed for each year. So...if you were in Korea for say, 175/365 days, then you would take that same ratio and apply it to the $94,500 that you can legally be tax exempt from for the year. On your 2555 form cross out $94,500 and write this new exemption amount, which of course will still be WAY more than how much you made in Korea. You use the same procedure if you return home 1/2 way through a year as well. The bona fide test is only an issue if you were only working a 6 month contract...but a 1 year contract lets you claim bona fide residency over 2 separate tax years, but your exemption is pro-rated for each year (again, not a worry as you won't be making $50,000US in 5 months work)

So, the 2555 will exempt you from your Korean income, but you will still be liable for your US income from the previous 6 months. However, the beauty is that now with your standard deductions you should pay less taxes on that money than if you'd worked all year in the US...for example, if you'd made only $10,000 from Jan-Jul then you will owe 0$ on your US income.

FYI, you will need to file a standard 1040 and not 1040EZ as the EZ form has no place to deduct your overseas income exemption.