Can someone please tell me about paying taxes in the USA and in Taiwan? For example, I know that if I am working in Taiwan (legally), I will have taxes withheld, then go to file, and apply for the refund. Since I am still a US citizen with a mailing address in the USA, do I also have to pay taxes in the USA? I have heard different opinions. One, if you make more than US$ 6,000 in Taiwan, then you have to file taxes for the USA. Two, another person said that if you make less than 70,000 US one year (or you are a teacher ?!?), then you don’t have to pay any USA taxes. Next, are filing taxes different than paying taxes – can you just file and not pay taxes – this is in relation to previous posts of having to show AIT tax returns from the last three years in order to get a green card/ immigrant visa for a spouse. Finally, if earned income in Taiwan is not taxed in the USA, it seems impossible to be able to put money into an IRA (Individual Retirement Account) back in the USA – since contributions to an IRA are based on the amount of earned income for the tax year. Thanks for your help.
You still need to FILE a US tax report. The exemption is around USD72,000, but that’s pro-rated if you spend much time back in the US. This means that if you’re making less than that AND are away from the US for a certain number of days, you won’t have to pay any taxes. You have to fill out a separate form to document the number of days you’ve been out of the states and prove your eligibility. I went 9 years without filing, but filed just before we moved back.
I concur with what Jeff says above. According to my understanding, if you make over US$6,000 per year (equivalent), then you have to file the tax return. You can then deduct the (1/365 x US$70,000+) exemption for each day outside of the USA during the year.
Hence, you may end up owing nothing, but you still have to file or hire H&R Block to file for you.
Also, please note that the USA and Canada tax “worldwide income” of the citizenry.
By contrast, how much ROC income tax do ROC citizens living in the USA pay every year? The answer is zero. This is because the ROC only taxes income for services rendered in the ROC. Foreign source income is not taxed.
Thanks for the replies. One more question, please. If I am not taxed on the income earned in Taiwan, then I will not be able to put money into an IRA (in the USA). Is that correct? I would like to start some kind of savings plan for my older years and IRA’s seem like a great way of doing this. It’s great not to have to pay tax “twice” but it’s a shame to have to miss out on an opportunity like an IRA. Thanks.
I don’t see that anyone is saying that you are not taxed on income earned in Taiwan. This appears to be a point of confusion, and it needs to be straightened up before you move on to any other questions.
Message from AIT
EXCHANGE RATE FOR 2001
The IRS has announced the exchange rate for 2001 tax purposes: 33.8825 New Taiwan Dollars equals USD 1.00.
GETTING THE IRS FORMS YOU NEED
Download IRS forms directly from the IRS website at www.irs.gov, or call IRS in Tokyo at 81-3-3224-5465 to receive information on how to use their Faxback Service to obtain the forms you need.
If you are in the neighborhood, you can also stop by ACS and ask for the forms you need. Be sure to have the forms listed by their number rather than by their title.
PERSONAL TAX HELP
We have received word that an IRS representative will be visiting AIT, Taipei during March, 2002 to provide tax assistance in English. We have not received any specific dates for this visit and will post information as it becomes available. Usually this free service is available by appointment. Again, please watch for an announcement for further details.
You can contribute individually to an IRA or Roth IRA. There is a limit on the personal contribution, however. It’s been $2000/year, but I heard the amount is going to be increased. You can even open an IRA through on-line brokerages such as E*trade. You can get lots of general investment info on-line - so check it out.
ckvw… I was told that U.S. citizens abroad who exercise the optional tax exempt status (anything under US$70,000 in annual income if I remember correctly) are not allowed to contribute to an IRA during the same tax reporting year. Do you know anything about this?
If you have a spouse who has both American and ROC citizenship and they have their own business in Taiwan and they pay ROC taxes, is it true they DO NOT need to pay any kind of tax in the USA if they make under 70,000 a year? and that they DO NOT need to pay into the social security fund?
P.S. Has anyone ever heard of US citizens or ROC/US citizens being investigated by the IRS for not paying USA taxes while in Taiwan?
Regarding the filing of USA taxes, please refer to my posting of 01-18-2002 12:22, above
Every year, the IRS mails me a copy of the latest instruction book for overseas tax filers. I’m looking at it now, and here’s what it says:
A. You have to file taxes (but not pay taxes) if your total salary, income, and tips were at least:
Married filing jointly: $13,400
Married filing separately: $2900
Head of household: $9550
Note 1: If you were married but not living with your spouse as of December 31, 2001, then you must file income taxes as long as your earned at least $2900 (but you can file either “married filing jointly” or “married filing separately”).
Note 2: “Head of household” is only for unmarried people who paid over half of the cost of raising a child or dependent parent.
B. When you file taxes, you have to file both Form 1040 and Form 2555 (“Foreign Earned Income”), as well as your state income tax forms.
C. According to line 35 of Form 2555, the current “Foreign Earned Income Exclusion” is $78,000. This means that you don’t have to pay income tax for all income earned in Taiwan in 2001 up to $78,000.
D. If you don’t pay U.S. income taxes, then it’s impossible to put money into an IRA or Roth-IRA.
Hmm, I know someone (who? who?) who has been contributing to a Roth IRA for a few years now and has been working here in Taiwan for most of that time. She’s never been asked to prove US income. Maybe she should look into it further.
Um, now I am worried. I have not filed taxes in 4 years, thinking that the U.S. government didn’t care how much I earn in Taiwan and have no right to know anyway. Why would the U.S. need to know what money I am making here? It’s not like they are holding Social Security for me!
The announcement has not yet been made. We must wait to go through the
From: David Schnell [mailto:firstname.lastname@example.org]
Sent: Tuesday, February 19, 2002 11:36 AM
Subject: RE: tax;
Thank you for your reply. I will subscribe. I am afraid that the
announcement was made already, so could you please tell me when the tax
person will be in town?
The information is obviously out of date. Please subscribe to our
email group for the latest information as it becomes available.
I found this on your Web site, but I can not find any info about when
the IRS rep will be here in Taiwan this year… Please advise.
“A representative from the United States Internal Revenue Service
will visit Taiwan from March 30 to April 7, 1999, to provide
information and assistance to U.S. taxpayers in preparing their own
1998 U.S. tax returns or prior year tax returns. Also, a Volunteer
Income Tax Assistant will be available at Taipei American School
starting this week.”
Voice of the People, Bridge to the World
I’ve heard that the main reason to file your income from Taiwan in the US (even though you’re not paying US tax on it) is just for a record of income. Perhaps you would need that kind of evidence to apply for a loan?
I know of no banks in Taiwan that would require such information in connection with the application for an NT$ loan.
Richard I think he was talking about maintaining credit in the U.S. in the event that one wants to take out a loan or apply for a credit card (in the U.S.), etc.
A friend of mine (U.S. citizen) married a local Taiwanese man, changed her last name to his, lived and worked in Taiwan for many years and didn’t have an active bank account or credit card from the U.S. They got divorced, and upon applying for a simple credit card back in the U.S. years later, was denied because she had no “line of credit”.
Don’t hold me to this but I think filing U.S. taxes (even if you are exempt as a U.S. citizen living abroad and making less than 78K) is just one more way to reflect responsible credit?
As far as I’m aware, credit reporting agencies do not have access to income tax returns. Mortgage lenders may ask for income tax returns if you have limited credit, but credit card agencies generally do not. Your friends lack of credit was simply that: no recent history of credit. My friend faced the same problem when coming bak to the States. He had a car loan and credit card in Taiwan, but US credit reporting agencies don’t look for foreign credit. Therfore, he effectively had no history of credit, and that’s almost as bad as having no credit. My advice is to keep a US-based credit card while you’re here.
From the American Institute in Taiwan (AIT)
Sent: Wednesday, February 20, 2002 9:36 AM
Subject: Tax Consultant Dates Announced
INTERNAL REVENUE SERVICE REPRESENTATIVE TO VISIT TAIWAN
A representative from the U.S. Internal Revenue Service (IRS) will visit Taiwan from March 12 to March 15 to provide information and assistance to taxpayers in preparing their 2001 federal tax returns or prior year returns.
In Taipei, the representative will be at the American Institute in Taiwan from Tuesday, March 12 through Thursday, March 14 (8:00 to 12:00 and 1:00 to 3:30). The service is free and is by appointments of 15 minutes each. Please call the American Citizen Services Office (02-2709-2000, ext. 2117) to arrange an appointment.
In Kaohsiung, the representative will be at the American Institute in Taiwan on Friday, March 15 (8:00 to 12:00). As in Taipei, the service is free and is by appointment. Please call the American Citizen Services Office (07-238-7744, ext. 15 or 30) to arrange an appointment.
Anyone seeking information or guidance in preparing U.S. tax returns is encouraged to make an appointment and visit the American Citizen Services Office, AIT Taipei at the following addresses: No. 7, Lane 134, Hsin Yi Road, Sec. 3, (tel.: 2784-2306); or the American Citizen Services Office, AIT Kaohsiung, 5F, No. 2, Chung Cheng 3rd Road, (tel.: 07 238-7744, ext. 15 or 30) during the above times.
AIT has copies of the most frequently used U.S. tax forms. You may pick them up at AIT’s Taipei office Monday through Friday, 8:00 to noon and from 1:30 to 3:30 or AIT’s Kaohsiung office Monday through Thursday, 8:30 to 11:30.
(Please note: Both offices are closed U.S. and Taiwan holidays. The Taipei office is also closed to the public the first business day of each month.)
For even faster service, you can obtain tax forms and general information directly by fax. Call IRS, Tokyo, at 81-3-3224-5465 from a telephone connected to your fax machine. You will receive instructions on how to use the system.
Many forms are available directly from the IRS website at www.irs.gov.
Also, a Volunteer Income Tax Assistant will be available at Taipei American School (Admissions Office, 800 Chung Shan N. Road, Sec. 6, Tien Mu) to aid in the preparation of income tax returns on the following dates:
March 02 (Saturday - 9:00 am to 12:00 noon)
March 09 (Saturday - 9:00 am to 12:00 noon)
March 16 (Saturday - 9:00 am to 12:00 noon)
March 30 (Saturday - 9:00 am to 12:00 noon)
Please note that there will be no service on Saturday, March 23.
April 06 (Saturday - 9:00 am to 12:00 noon)
April 13 (Saturday - 1:00 pm to 5:00 pm)
The 2001 U.S. Treasury reporting rate of exchange for Taiwan is NT$33.8825 = US $1.00
Information for overseas U.S. taxpayers can also be obtained by calling an IRS hot line in the U.S. at 202-874-1460 or 800-TAX-FORM (800-829-3676). The IRS Internet web site is: http://www.irs.gov. IRS tax forms and publications can be downloaded from the IRS web site. Additionally, the Regional IRS Office in Tokyo can be contacted by phone at: 813-3224-5466.
You beat me to it!
lol… I take it you are on the AIT mailing list? If you’d be willing to post up relevant announcements from them going forward I’d be happy to take a step back. One less thing to do!
(I’ve written to the general AIT email suggesting that they use the ORIENTED Forums to get the word out about important announcements for U.S. citizens living here but never heard back from them and then got too busy to follow up. If anyone knows the right person in that building to contact for this, do let me know, or by all means contact them on our behalf!)