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mikesaidyes
Joined: 26 Apr 2011
Location: Sanbon, South Korea
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 Posted: Tue Jan 24, 2012 12:55 am Post subject: USA Taxes - A Simple Answer |
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So, I've already researched and read many a thread here and looked over documents.
My main question: I keep reading about tax homes, blah blah blah and all the rules. Specifically, http://www.irs.gov/pub/irs-pdf/p54.pdf Page 12 and 13.
Because tax shit is confusing and I like to hear that I have the correct answers from others (don't we all?)..... since I moved here in August 2011, for year 2011 taxes I CANNOT claim the foreign income deduction because I was not here for 330 days in that year.
Correct?
How much did you owe? What's this I keep seeing about a residency certificate? Should I even bother? I have a feeling if I can't even get a basic exemption, I sure as hell won't get this residency certificate.
This is my major sad face  because I already owe taxes in the US for the past 3 years (thanks, restaurant jobs) and I was hoping to use my 2011 income from Jan-Aug to get $$ back and pay down my bill, not pay more from working here!
So, for those of you in a similar boat, how did your taxes turn out? Oh and I work at a hagwon if that makes a difference. |
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nate1983
Joined: 30 Mar 2008
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| Posted: Tue Jan 24, 2012 3:21 am Post subject: Re: USA Taxes - A Simple Answer |
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| mikesaidyes wrote: |
Because tax shit is confusing and I like to hear that I have the correct answers from others (don't we all?)..... since I moved here in August 2011, for year 2011 taxes I CANNOT claim the foreign income deduction because I was not here for 330 days in that year.
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You should be able to file an extension until as late as October, by which time you would (supposedly) have met the qualifications for the Foreign Earned Income Exclusion (careful, it's not a deduction) and be eligible to exclude your Korea-based income. |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Tue Jan 24, 2012 7:59 am Post subject: |
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No, you cannot claim the Foreign Earned Income exemption because you don't meet the requirements.
The residency certificate is a piece of paper that says that you are paying taxes in the US and NOT in Korea. It's to avoid double taxation. It's only good for two years I believe (as per the treaty between the US and Korea) after which you pay taxes in Korea.
So, pay your US taxes as you should. Get the residency certificate so you don't have to pay Korean taxes (which are pitifully low anyway).
You CANNOT push the time with extensions. Getting an extension just means you have more time to pay - the tax year is over on 31-December and if you don't meet the criteria by then, then you don't meet the criteria, plain and simple.
Of course, no one in Korea is going to report your income to Uncle Sam, so if you just didn't pay your taxes on your Korean income, no one will be the wiser. This does entail some risk, however small, that you could get caught in the end, but as it's such a small amount and it's an easy "mistake," you'd simply have to pay the back taxes.
Really, if you were working crap jobs and making crap money, then you shouldn't have trouble with taxes - read over the other forms on there and claim some deductions. If the government is stupid enough to litter the tax code with loopholes, then by god, learn to use them! Good luck! |
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duke of new york
Joined: 23 Jan 2011
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| Posted: Tue Jan 24, 2012 8:30 am Post subject: |
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| nathanrutledge wrote: |
| You CANNOT push the time with extensions. Getting an extension just means you have more time to pay - the tax year is over on 31-December and if you don't meet the criteria by then, then you don't meet the criteria, plain and simple. |
Wait a minute; so if you work for one year in Korea, and it happens to fall within one tax year, you can get the US income tax exemption--but if you work for the exact same amount of time, but it goes from the middle of one year to the middle of the next, you have to pay? That is absolutely ridiculous.
I'm working from Aug.-Aug., and I have been assuming I would be able to file for the exemption. No? |
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nathanrutledge
Joined: 01 May 2008
Location: Marakesh
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| Posted: Tue Jan 24, 2012 8:42 am Post subject: |
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| duke of new york wrote: |
| nathanrutledge wrote: |
| You CANNOT push the time with extensions. Getting an extension just means you have more time to pay - the tax year is over on 31-December and if you don't meet the criteria by then, then you don't meet the criteria, plain and simple. |
Wait a minute; so if you work for one year in Korea, and it happens to fall within one tax year, you can get the US income tax exemption--but if you work for the exact same amount of time, but it goes from the middle of one year to the middle of the next, you have to pay? That is absolutely ridiculous.
I'm working from Aug.-Aug., and I have been assuming I would be able to file for the exemption. No? |
There are TWO ways to claim it - ONE: be in the country for a period of time that includes an entire tax year or TWO: be in the country for 330 days out of the past 12 months.
The OP has not met either of these requirements for the tax year 2011, thus he cannot take the exemption.
NEXT year he CAN take it. He won't be in the country for an entire tax year, BUT he will have been in the country for 330 days of the past 12 months. But now, he can't. |
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duke of new york
Joined: 23 Jan 2011
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| Posted: Tue Jan 24, 2012 8:52 am Post subject: |
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| duke of new york wrote: |
| nathanrutledge wrote: |
| You CANNOT push the time with extensions. Getting an extension just means you have more time to pay - the tax year is over on 31-December and if you don't meet the criteria by then, then you don't meet the criteria, plain and simple. |
Wait a minute; so if you work for one year in Korea, and it happens to fall within one tax year, you can get the US income tax exemption--but if you work for the exact same amount of time, but it goes from the middle of one year to the middle of the next, you have to pay? That is absolutely ridiculous.
I'm working from Aug.-Aug., and I have been assuming I would be able to file for the exemption. No? |
Well, now that I looked at the documents, it's pretty clear. The physical presence test requires 330 days within any 12-month period. It does not all have to fall within a single tax year.
But what nathanrutledge said about being unable to use an extension to meet the criteria is wrong. Refer to page 2 of form I-2555 (http://www.irs.gov/pub/irs-pdf/i2555.pdf):
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When to claim the exclusion(s). The first year you plan to take the foreign earned income exclusion or deduction, you may not yet have met either the physical presence test or the bona fide residence test by the due date of your return (including the automatic 2-month extension, discussed earlier). If this occurs, you can either:
1. Apply for a special extension to a date after you expect to qualify, or
2. File your return timely without claiming the exclusion and then file an amended return after you qualify. |
I would just apply for the extension. Use Form 2350, as instructed in the link. Hope this answers your questions. |
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nate1983
Joined: 30 Mar 2008
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| Posted: Tue Jan 24, 2012 11:35 am Post subject: |
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| nathanrutledge wrote: |
No, you cannot claim the Foreign Earned Income exemption because you don't meet the requirements.
The residency certificate is a piece of paper that says that you are paying taxes in the US and NOT in Korea. It's to avoid double taxation. It's only good for two years I believe (as per the treaty between the US and Korea) after which you pay taxes in Korea.
So, pay your US taxes as you should. Get the residency certificate so you don't have to pay Korean taxes (which are pitifully low anyway).
You CANNOT push the time with extensions. Getting an extension just means you have more time to pay - the tax year is over on 31-December and if you don't meet the criteria by then, then you don't meet the criteria, plain and simple.
Of course, no one in Korea is going to report your income to Uncle Sam, so if you just didn't pay your taxes on your Korean income, no one will be the wiser. This does entail some risk, however small, that you could get caught in the end, but as it's such a small amount and it's an easy "mistake," you'd simply have to pay the back taxes.
Really, if you were working crap jobs and making crap money, then you shouldn't have trouble with taxes - read over the other forms on there and claim some deductions. If the government is stupid enough to litter the tax code with loopholes, then by god, learn to use them! Good luck! |
Did you not read my post just above yours? Try that or the one just above this one.
Seriously man, no information is better than bad information, so if you don't have a clue what you're talking about just keep it to yourself and don't confuse the poor guy. |
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jackson7
Joined: 01 Aug 2006
Location: Kim Jong Il's Future Fireball
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| Posted: Tue Jan 24, 2012 3:57 pm Post subject: |
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You absolutely CAN "push the time limit" with an extension, as I and others have done it. Unless there has been a change for this year (there hasn't been, as I've read and filed tax docs this year), you'll be fine with filing an extension. You can use FAQs from the IRS site, or google the same (from reputable sources, of course) and get your peace of mind. Dave's will undoubtedly provide a mishmash of misinformation that will not necessarily lead you astray, but will simply leave you more confused and in the same place from which you started.
J7 |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Tue Jan 24, 2012 6:50 pm Post subject: |
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| duke of new york wrote: |
| nathanrutledge wrote: |
| You CANNOT push the time with extensions. Getting an extension just means you have more time to pay - the tax year is over on 31-December and if you don't meet the criteria by then, then you don't meet the criteria, plain and simple. |
Wait a minute; so if you work for one year in Korea, and it happens to fall within one tax year, you can get the US income tax exemption--but if you work for the exact same amount of time, but it goes from the middle of one year to the middle of the next, you have to pay? That is absolutely ridiculous.
I'm working from Aug.-Aug., and I have been assuming I would be able to file for the exemption. No? |
If you are working from Aug~Aug, you can claim the exemption.
Pretend it's July 1st ~ June 30th for simplicity.
You arrived July 1st 2011. Filing 2011 taxes you will meet the 330 day requirement based off your future departure date. 330 days does not have to occur in one tax year.
The maximum amount for foreign earned income is about 91k. You were only out of the country for half the year. When filing out the return you calculate what percentage of the year you spent overseas, in this case 50% and multiply that times the full 91k. Your adjusted tax exemption limit is about 45k. Anything earned up to that amount is tax exempt.
If you leave this June then next year's 2012 filing you will also be able to claim up to 45k foreign income exemption.
Hope this helps.
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duke of new york
Joined: 23 Jan 2011
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| Posted: Tue Jan 24, 2012 8:50 pm Post subject: |
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| T-J wrote: |
If you are working from Aug~Aug, you can claim the exemption.
Pretend it's July 1st ~ June 30th for simplicity.
You arrived July 1st 2011. Filing 2011 taxes you will meet the 330 day requirement based off your future departure date. 330 days does not have to occur in one tax year.
The maximum amount for foreign earned income is about 91k. You were only out of the country for half the year. When filing out the return you calculate what percentage of the year you spent overseas, in this case 50% and multiply that times the full 91k. Your adjusted tax exemption limit is about 45k. Anything earned up to that amount is tax exempt.
If you leave this June then next year's 2012 filing you will also be able to claim up to 45k foreign income exemption.
Hope this helps.
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I'm not saying you're wrong, but I didn't see anything in the IRS information about that. It appears to me that the exclusion only applies to people who stay for 330 days. I don't think you can just claim a fraction of the exclusion for meeting a fraction of the requirements. Is this something you have experience with?
I think the best option for most people is to just file for the special extension. Remember, it's not really "pushing the time limit," as it's an extension specifically designed for people filing for this exclusion in this exact situation. So there's no reason why they wouldn't give you the extension you need to get to 330 days/12 months. Just refer to the OP's IRS tax guide, I-2555, and Form 2350. All the necessary information is there. |
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T-J
Joined: 10 Oct 2008
Location: Seoul EunpyungGu Yeonsinnae
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| Posted: Tue Jan 24, 2012 9:10 pm Post subject: |
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| duke of new york wrote: |
| T-J wrote: |
If you are working from Aug~Aug, you can claim the exemption.
Pretend it's July 1st ~ June 30th for simplicity.
You arrived July 1st 2011. Filing 2011 taxes you will meet the 330 day requirement based off your future departure date. 330 days does not have to occur in one tax year.
The maximum amount for foreign earned income is about 91k. You were only out of the country for half the year. When filing out the return you calculate what percentage of the year you spent overseas, in this case 50% and multiply that times the full 91k. Your adjusted tax exemption limit is about 45k. Anything earned up to that amount is tax exempt.
If you leave this June then next year's 2012 filing you will also be able to claim up to 45k foreign income exemption.
Hope this helps.
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I'm not saying you're wrong, but I didn't see anything in the IRS information about that. It appears to me that the exclusion only applies to people who stay for 330 days. I don't think you can just claim a fraction of the exclusion for meeting a fraction of the requirements. Is this something you have experience with?
I think the best option for most people is to just file for the special extension. Remember, it's not really "pushing the time limit," as it's an extension specifically designed for people filing for this exclusion in this exact situation. So there's no reason why they wouldn't give you the extension you need to get to 330 days/12 months. Just refer to the OP's IRS tax guide, I-2555, and Form 2350. All the necessary information is there. |
You are staying for 330 days, and yes I have done this.
See part seven of the form.
Also for those that claim the two year exemption from Korean taxes, you should refer to Part II line 13a and b.
http://www.irs.gov/pub/irs-pdf/f2555.pdf
**edit** This must have changed since I did it, or I had hit the 330 by the time I filed and didn't notice.
I came on March 1st and so only had 300 days in the tax year, but filed in April after I'd been here for a year.
See the second page of the directions you provided. You have to file for an extension and file after you meet the 330 day requirement. You will still prorate your maximum exemption amount as I stated before.
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