Second-Fifth Year Tax Guide
This page describes the process for filing taxes for second-fifth year US Citizens only. JETs from other countries should check their embassy/tax bureau's website for details.
This guide summarizes the US tax information that specifically relates to second-fifth year JETs.This guide is only useful if you have already correctly filed your taxes during your first year on JET. If you had issues filing/forgot to file last year, you need to start your filing process as if you were a first year.
You can access all the information online at www.irs.gov -- under "forms and publications", search for "Publication 54 (Tax Guide for US Citizens and Resident Aliens Abroad)".
The Internal Revenue Service (IRS) office for US citizens living abroad is located in Austin TX. Send all tax forms (except 8822) to:
Internal Revenue Service Center
Austin, TX 73301-0215
Additionally, the IRS website (www.irs.gov) has a lot of information available to answer many questions. Go to 'Individuals' and then 'International Taxpayers' and you will find a section of FAQ. Also, you can ask general questions about tax law at www.irs.gov/help/page/0 and you can call the IRS automated Information Line at 1-800-829-1040 for specific questions.
- You will likely have income tax obligations to individual states in addition to the Federal taxes discussed here. Questions about state taxes should be directed to the appropriate agencies in your state. A "Google" search for your state is a good place to begin.
- 1040 Income Tax Return (pdf). File this by June 18.
- Foreign Earned Income Statement (see below). File with Form 1040.
- 2555-EZ Foreign Income Exclusion (pdf). File with Form 1040.
- 8965 Health Coverage Exemption (pdf). File with Form 1040.
- Publication 970 (pdf). File this if you've paid deductible interest on student loans in the last year.
Foreign Earned Income Statement
Photocopy the small form that your school or BOE gave you showing how much money you made in your last year of work. It`s called the Gensen Choushuu Hyou(源泉徴収票) in Japanese. If you have not received it yet, ask the accountant in your school or BOE office. This will act like a W-2 for the income you earned in Japan. Indicate your name and your gross income on the photocopy and write “Foreign Earned Income Statement” across the top. It should look like this:
Foreign Earned Income Statement
- Net salary from January to December
- Amount remaining after deducting tax exemptions from 3
- Amount deducted based on Social Insurance and Life Insurance payments
- Amount of income tax paid
- Amount of social insurance paid
This form is used to exempt you from paying US income taxes on the money you earn in Japan.
Part 1 – You may qualify for the Bona Fide Residence Test, but the qualifications for this test are somewhat vague and difficult to understand. You will qualify for the Physical Presence Test and Tax Home Test like you did last year, so we recommend you use this qualification and not bother with the Bona Fide Residence Test.
When filling out line 2b - The 12-month period on which the physical presence test is based must include 365 or 366 days, part of which must be in 2013. The dates may begin or end in a calendar year other than 2013.
Part 2 - Fill in your address and employment information; you can write N/A for Employer's US address. Your employer is "other"-- put something like "foreign board of education." Follow the instructions until you get to the part that asks what your tax homes were during the tax year. In this blank, enter your address in Japan and the date (month and year) you began living there. If you moved during the past year, make sure to list your former address as well.
Part 3 - Under Days Present in the US, fill in any time you spent in the US during the 365-day period you specified under the “Physical Presence Test” in Part 1. If you did not return to the U.S during the past year, refer to the example below on the left. If you did return to the U.S. during the past year, refer to the example below on the right. Enter each trip home in the subsequent rows.
Part 4 - Figure your Foreign Earned Income Exclusion. Use the 12-month period from Part I to calculate the number of days in your qualifying period that fall within the past year, and enter the number on line 14.
In Line 17, convert the amount listed on your Foreign Earned Income Statement to USD and enter that figure. The IRS likes everything you do to be outlined explicitly, so draw an asterisk and write, "see foreign earned income statement" at the bottom of the page. Then write a statement along the lines of: “I used the 2013 average Yen/USD exchange rate as reported by the Federal Reserve Bank to calculate the amount reported on line 17. (In 2013 the rate was $1 = 97.60 Yen. website) Finally, sign your name to the note.
Form 8965 Health Coverage Exemption
Form 1040 Income Tax Return
This is the form where you report how much total money you earned in 2013. You will figure out if you get a refund or if you still owe more to Uncle Sam. You cannot file form 1040 EZ, so you are not eligible to E-File. There are a lot of specific questions on the Form 1040 that will be different for each person. What we are explaining here is focused on the specific parts related to living and working overseas. For the rest of the complicated stuff, it’s best to start at the top and work your way through line by line. Consult a certified tax preparer and/or the official IRS instructions (online) to be sure you don't miss something. If you still have confusion, you can call or email the IRS on their site.
Label - Exemptions Enter your name and address information, social security #, and filing status. Claim yourself as an exemption in line 6.
Income - On line 7, add your income from Japan (Form 2555-EZ, Line 17) and any U.S. income (most second year-plus JETs won't have any). The “Taxable Interest” in 8a includes all interest earned from savings accounts. For many people, everything else is zeroes until you get to line 21. List your Japan-earned income (Form 2555-EZ, Line 18)in parentheses on Line 21, and write “2555-EZ” next to it. Add lines 7 through 20 and then subtract the Japan-earned income amount (this is entered in parenthesis). Enter the total on line 22 (Enter 0 if it is a negative number). This total is the amount of taxable income you earned during 2013.
Adjusted Gross Income - If you paid student loan interest, enter in Line 33 the amount of the “Student Loan Interest Deduction” from the worksheet in publication 970 (available online at www.irs.gov). Many student loan institutions provide this information directly to the students. If you make payments online, check there first to see if the student loan interest is already figured out for you. Finish following the instructions for the rest of that section and turn to the next page. Everything else will be zeros for many JETs.
Page 2 - Everything should be straightforward (tedious, but straightforward) on the second page. By the time you get here, you've dealt with most of the foreign earned stuff and weeded it out. Just work through the lines one by one. You will need to look at the 1040 instructions in order to calculate line 44.
Line 44 - If Line 43 is more than zero, then you will have to calculate your tax for Line 44. If Line 43 is zero, then Line 44 will also be zero. In order to calculate your Tax you will have to make some calculations using the Foreign Earned Income Tax Worksheet—Line 44 below (from page 38 of the 1040 instructions). For Lines 4 and 5 you will have to consult the 2010 Tax Table beginning on page 77 of the instructions.
Sign and date in the box and you should be good to go.
In the box titled “your occupation” enter “English Teacher” (ALT) or “Coordinator for International Relations” (CIR).
Before October 15 and after you have been in Japan for 330 days, sign and date the forms and mail it all to the IRS office in Austin. Your return will include at least Forms 1040, 2555-EZ, and the Foreign Earned Income Statement.
- Individual cases and circumstances will vary.
Additional procedures will be necessary if:
- You are married and/or have dependants of your own
- Someone else will claim you as a dependant for the 2011 tax year
- You had over $10,000 in foreign bank accounts at any time during 2011
- You earn income from stocks, bonds, real estate or other investments
- Any number of other circumstances
- It is your personal responsibility to file taxes on time.
- This guide is in no way affiliated with the IRS or the US Government. The IRS – not this document - is the final authority on tax-related matters.
- The Federal Reserve Bank average annual exchange rate figure of $1 = ￥97.60 for the 2013 Tax Year can be found at http://www.federalreserve.gov/releases/g5a/current/.
- Please photocopy your forms before you submit them, so you can refer to them next year.
- Please call or email the PAs if you have any questions.
- Credit goes to http://kumamotopa.pbwiki.com/ for the information for this page
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