Korean Job Discussion Forums

[Threequalseven]

I filed my U.S. tax return for 2012 last night. However, I was wrongfully under the impression that I didn't need to file my income since working in Korea. I started working here in late September, which means I've earned three paychecks abroad.

To qualify for the tax exemption, you need to be here for 330 days and you need to complete at Form 2555. I did a ton of searching on this forum, but nobody seems to answer this question: What do I do about the income I made in Korea in 2012? I haven't been here for 330 days yet, but it still shouldn't be taxed, right?

Since every American who works here is legally required to file all their income, this shouldn't be too obscure. How does this work? Do I file my income and just let it get taxed the first year? Is there an honor system where I say I'm going to be here for a year and the IRS just believes me? Should I not even worry about filing this income until 2013? There are countless posts on this forum about what people should do after two years here, but nobody has mentioned how the first year works. It's as if everybody started working here in January.

[Drew345]

The 330 days in 12 months window is a "sliding" window; it doesn't have to be a calendar year for the 12 months. So you are right that you can connect the last 3 months last year with the first 9 months this year to make it exempt. Here it is from the IRS website:
http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion---Physical-Presence-Test
quote -- --
How To Figure The 12-month Period
There are four rules you should know when figuring the 12-month period:
Your 12-month period can begin with any day of the month. It ends the day before the same calendar day, 12 months later
Your 12-month period must be made up of consecutive months. Any 12-month period can be used if the 330 days in a foreign country fall within that period
You do not have to begin your 12-month period with your first full day in a foreign country or to end it with the day you leave. You can choose the 12-month period that gives you the greatest exclusion
In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another
end quote -- --

You do bring up an interesting point though about the first year. How to file it when you are going to be here more than a year but not yet been here a year. I can't think of any other way than you did. Deduct it and go back and amend it if you end up not being here a year. Good question.

[Threequalseven]

Thanks for the input. I know the 330 days doesn't have to be all within one calendar year. I just figured the only way to fit it all in the first tax return would be if you started working in January (which, of course, very few people actually do).

At this point, I'm just curious what others have done in their first year. Did you include your income in Korea on your 1040? If so, I assume that you'd have had to pay tax on it... unless there's a workaround that I don't know about. I wonder how many ESL teachers never file a thing and never give a thought toward any of this.

[Threequalseven]

After a night's worth of research and a call to the IRS, I figured out exactly what you're supposed to do as a U.S. citizen. (This should probably be a sticky.) In IRS Publication 54, page 4, it states the following:

[mayorhaggar]

Thanks for posting that, especially with the links to the forms we need. I'm going to bookmark this for when I do my taxes next year. (I'm about to start teaching with EPIK)

[YTMND]

I thought there was an upper limit we could make before filing, like 90,000 USD.

http://forums.eslcafe.com/korea/viewtopic.php?t=199757

[jackson7]

Americans living abroad receive an automatic 2-month extension, so if you need more time to fill your 330 days, you can file for it pretty easily.

There is an upper limit of income EARNED ABROAD that is tax exempt, but if you have any investments, etc., you'll still want to file to be sure you avoid any penalties on non-paid tax.

Other benefits to filing include possible rebates that may be coming your way (I received a few hundred bucks from Obama's stimulus plan a few years ago, even though I paid no tax that year), and continuing a credit record. I have filed every year since I've been here, which has maintained income history for me in the States. This has made it MUCH easier for me when I approach banks there inquiring after loans for investments or properties.

With services like Turbo Tax and the like, it's really silly NOT to file, even if you are sure you won't be paying any tax. I've used Turbo Tax for the past seven years, and it takes less than 15 minutes to do everything, file, and feel good about getting this yearly "chore" out of the way.


J7

[Swampfox10mm]

[Threequalseven]

[isitts]

[pumpkinstuffing]

Question - TurboTax allows you to file an online extension form 4868, which is the application for automatic extension of time to file. Is that sufficient if I need the extension to qualify for the physical presence test or do I need to mail the IRS Form 2350?

[isitts]