How do I file taxes when I earned income in 2 countries?
October 16, 2010 3:24 AM Subscribe
I'm sure this has been asked many times before on AskMeFi, but I wasn't able to find a query like mine: I'm late paying my taxes. No problem? I'm living abroad. More inside.
From August 2009 until present my wife and I have lived in South Korea. Before that we lived in New York. In 2010, we didn't file taxes, but we did get an extension. That deadline is now looming.
Basically we sat on our hands because we were both entirely clueless about how to file when it involved our foreign income. To compound matters, we've been paying taxes in Korea and not in America. We got some bad info about our ability to get an exemption and so it seemed reasonable to pay taxes here.
So, I guess my question, in it's most basic form is: How do I file our taxes for a year where we made money in the United States for 4 months, then in South Korea for 8 months, paying taxes in Korea?
For what it's worth, the US portion of our taxes should be fine. All of our W2s are in line.
From August 2009 until present my wife and I have lived in South Korea. Before that we lived in New York. In 2010, we didn't file taxes, but we did get an extension. That deadline is now looming.
Basically we sat on our hands because we were both entirely clueless about how to file when it involved our foreign income. To compound matters, we've been paying taxes in Korea and not in America. We got some bad info about our ability to get an exemption and so it seemed reasonable to pay taxes here.
So, I guess my question, in it's most basic form is: How do I file our taxes for a year where we made money in the United States for 4 months, then in South Korea for 8 months, paying taxes in Korea?
For what it's worth, the US portion of our taxes should be fine. All of our W2s are in line.
Long term American ex-pat here (well over one third of my adult life spent living and working abroad) and I've blown these deadlines many more times than I care to admit, being a banker and all. I take much better care of my mothers money than I do my own tax affairs, I'm sorry to admit.
So first of all, don't panic!; the IRS isn't gonna kick in your door or cart you off to jail. That's the good news. Bad news is you're gonna incur penalties.
More good news: since you've been paying foreign taxes on your income earned abroad, you more than likely won't have to pay US taxes. Also you may be eligible for the Foreign Earned Income Exclusion, which will shield the first $91,400 from US taxes.
A couple of ways to play this: first, get a professional. Not sure who is available in Korea (I'm in England), but you should be able to get either a local or stateside pro to run you up a set of returns (there is interaction between US and foreign taxes so whomever is filing the US side needs to see what was paid on the other side) for maybe three to five thousand. Shop around, get three quotes and see who you feel most comfortable with.
I'm a little vague on the exact amount as the second option is to do them yourself. I do my returns on my own, both sides. The UK side is fairly easy, even though my tax situation is anything but mundane, having assets parked in several countries.
The IRS web site has everything you'll need in terms of forms, covering (solely for example, your specific circumstances may require different forms) 1040, 1040SD Capital gains and losses (if you invest), the all important F116 Foreign Tax Credit, the equally important F2555 Foreign Earned Income, and the necessary F6251 Alternative Minimum Tax.
As I mentioned, you may or may not have to file additional forms.
In either case you'll need your foreign income tax returns at hand as the IRS will corroborate any numbers entered on US side from the foreign tax returns.
All in all, doing it yourself sounds like a PIA but once you get in the (dulling) mindset you can probably complete your return in a weekend, less if you use one of the popular software packages. I don't use the software so I'll let someone more knowledgable on the subject chime in here.
Hope this helps!
posted by Mutant at 5:26 AM on October 16, 2010 [1 favorite]
So first of all, don't panic!; the IRS isn't gonna kick in your door or cart you off to jail. That's the good news. Bad news is you're gonna incur penalties.
More good news: since you've been paying foreign taxes on your income earned abroad, you more than likely won't have to pay US taxes. Also you may be eligible for the Foreign Earned Income Exclusion, which will shield the first $91,400 from US taxes.
A couple of ways to play this: first, get a professional. Not sure who is available in Korea (I'm in England), but you should be able to get either a local or stateside pro to run you up a set of returns (there is interaction between US and foreign taxes so whomever is filing the US side needs to see what was paid on the other side) for maybe three to five thousand. Shop around, get three quotes and see who you feel most comfortable with.
I'm a little vague on the exact amount as the second option is to do them yourself. I do my returns on my own, both sides. The UK side is fairly easy, even though my tax situation is anything but mundane, having assets parked in several countries.
The IRS web site has everything you'll need in terms of forms, covering (solely for example, your specific circumstances may require different forms) 1040, 1040SD Capital gains and losses (if you invest), the all important F116 Foreign Tax Credit, the equally important F2555 Foreign Earned Income, and the necessary F6251 Alternative Minimum Tax.
As I mentioned, you may or may not have to file additional forms.
In either case you'll need your foreign income tax returns at hand as the IRS will corroborate any numbers entered on US side from the foreign tax returns.
All in all, doing it yourself sounds like a PIA but once you get in the (dulling) mindset you can probably complete your return in a weekend, less if you use one of the popular software packages. I don't use the software so I'll let someone more knowledgable on the subject chime in here.
Hope this helps!
posted by Mutant at 5:26 AM on October 16, 2010 [1 favorite]
Response by poster: Very helpful. Thanks a ton. I don't really have any extra scratch laying around, nearly ever dime we makes goes to those bloodsuckers at the student loan banks. Learn by doing, right?
posted by GilloD at 5:33 PM on October 16, 2010
posted by GilloD at 5:33 PM on October 16, 2010
Response by poster: Just as a follow-up: I got TurboTax and it walked me through it. However, TurboTax did not seem to have the EZ version of the Foreign Exemption form, which is what we needed. At this point in time we passed neither the Physical Presence test (330 days in country), nor the Bona Fide test. So TT told us we couldn't get the exemption.
But the EZ version of the form has a field where you take your income, divide by the # of days ina a tax year you spent there and then use that as your deduction. The standard form didn't have that and TT never offered it to us.
So, a little homework helped, too.
posted by GilloD at 5:29 PM on October 17, 2010
But the EZ version of the form has a field where you take your income, divide by the # of days ina a tax year you spent there and then use that as your deduction. The standard form didn't have that and TT never offered it to us.
So, a little homework helped, too.
posted by GilloD at 5:29 PM on October 17, 2010
« Older What's an appropriate greeting for the Diwali... | What is the minty looking, lemony smelling leaf? Newer »
This thread is closed to new comments.
It doesn't quite cover all of it, but still. Weird, man.
posted by GilloD at 3:32 AM on October 16, 2010