Taxes For US Teachers Abroad
It’s tax season in the US, and if you have a US employer they should be sending you your W-2 forms by the end of the month. If you’re from the US and working overseas, and you need serious tax information, mosey on over to the real deal at the IRS website. What follows here are some assorted comments and thoughts I’ve collected. Keep in mind that this is an EFL blog and not an authoritative source of information on taxes. (Translation: if you get audited…don’t say I didn’t warn you!)
One of my first concerns was: my foreign employer sure is not sending me any W-2’s! What do I do? I found some form of an answer on the FAQ’s with the fine heading “Aliens and US Citizens living overseas”. Briefly, you fill out a form reporting your foreign earned income, but generally as long as it is under $85,000 or so in a year, it is excluded from taxation.
There is one complication. You either have to be A) “a U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year” or “a U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.” My understanding of the second point is: if your contract runs July 2006 – July 2007, that’s fine. There is a step later which proportions the income that is excluded from taxation (if the one-year period starts in July, it is only up to 43,000 that is excluded, and so on).
There is also the question of: Do you have to file? The short answer I’m fond of is: even if there is a reason why it might be okay not to file, it’s not a bad idea to file anyway.
The longer answer is: even in the US, if you make under a certain amount ($10,000?), you are in fact not obligated to file. Usually it makes sense to do so because you can get some or all of what you paid refunded. One difference with income earned overseas in EFL is that it’s very unlikely that you have paid US taxes, so it’s even more unlikely that you will get anything back. However, it still makes sense to file.
First of all, it’s better to make a mistake in the direction of doing something you didn’t need to do than vice versa. Also, though, you may need tax information in the future for a reason you haven’t thought of now. One possibility is for the financial side of further school. Many graduate schools require students to fill out the FAFSA to be considered for financial awards from the school. Even if you only want bank loans – you have to have filled out a FAFSA. And yes, the FAFSA requires tax information.
Finally, it’s my hunch that there is just a tad of suspicion attached to “over there” meaning “outside the US” nowadays. All you do on the 2555 is write down what you earned, so there’s not any strenuous verification process… but in my opinion it still just looks better that you’ve done it.
I can already hear our heavily taxed (ahem, let’s not get too carried away, it is the US) counterparts crying, “Why shouldn’t EFL teachers have to pay taxes?” Generally EFL teachers do pay taxes, but those taxes go to the countries they live and work in. In my cases, the salary quote I got was the take home amount, and the tax was framed more as an employer obligation than an individual burden.