I,
I remember reading somebody's question with regards to filing taxes in the states and you recommended...form 2555ez. Anyway, I was just wondering if we can file for that since we've only been here for about 6 months. What I mean is that if we haven't met all the requirement....does it mean that we don't have to declare the money we made here so far? Sorry for all the questions but you're the only one that seems to know the answer.
Filing US Taxes in Korea
Thanks for the question and the first thing I recommend is contacting an accountant in the US to find out for sure.
That being said, the instructions on the Foreign Earned Income Exclusion (form 2555ez) say that you must be either a Bona Fide Resident, ie officially reside in, or pass a Physical Presence Test of being in a country for at least 330 days in a consecutive 12 month period. The country in question must have a tax treaty with the US, of which South Korea does.
In the 2555ez instructions it states:
"No specific rule determines if you are a bona fide resident of a foreign country because the determination involves your intention about the length and nature of your stay. Evidence of you intention may be your words and acts....If you go to a foreign country for a definite, temporary purpose and return to the United States after you accomplish it, you are not a bona fide resident of the foreign country. If accomplishing the purpose requires an extended, indefinite stay, and you make your home in the foreign country, you may be a bona fide resident."
As we all arrived in Korea in August and have neither been physically present here for 330 days (Physical Presence Test) or resided here for a year, it would seem that we do not qualify for this form. However, my contract is for a year and I may apply for the FEIE based on this intention of foreign residency, which is based on my 1-year contract and South Korean foreign resident card. It could be that I am told I do not qualify, in which case I will have to pay more taxes and possibly a penalty.
A safer bet may be to simply not declare your earnings here in Korea and file your taxes using your permanent residence back home, only including income that you made before coming to Korea.
I hope this helps but if you are concerned about what to do I would have someone back home contact an accountant and get a professional answer.
Qualifications
I just called the IRS this morning. In order to qualify you must be present for 330 days and are a bona fide resident. To be a bona fide resident, you must be here for an "extended, indefinite stay" and "if you make your home in the foreign country."
In other words, if you came here via the EPIK program in August, then you don't qualify for Form 2555.
If you had an income in the year 2006 before coming to Korea, then you need to claim those earnings instead (not including your income in Korea).
Paying US while working in South Korea
So basically this means that for people who came to Korea in August 2006, who were here less than 330 days in 2006, we dont report our August - December 2006 earnings made in Korea when filing our 2006 taxes, right?
Tax filing
That's what I heard from the IRS rep. Your earnings from August to December 2006 don't need to be reported yet. You need to be here 330 days in order to qualify for Form 2555.