# US Expat in Japan and taxes



## desertmover

well kinda expat...

I moved to Japan but I'm making all my money in America still. I have a job at an American company that lets me work remotely and I'm here in Japan on a spouse visa with my wife. So technically I make all my money in America and then transfer it here.

It looks like I'm going to have to file some taxes in Japan as well as the US, but I'm trying to figure out the best/cheapest way to do it. I don't make a huge amount (under the 80k limit), but I'm thinking:

Filing "0" on my US W-4 (I currently file "2" with my wife)
Convert my address to a foreign address
Pay my taxes in Japan

But I'm not sure the best way to do it. It's not like I can't file taxes in one or the other place, especially if I plan on going back to my home country some day.

So, any ideas?


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## Bevdeforges

If you are residing in Japan, it matters not where your income is coming from. You probably owe taxes in Japan.

Then again, as a US citizen you always have to file a US return, if only to claim the overseas earned income exclusion. But to take the exclusion, you have to have been outside the US for at least a year. (There are a couple ways to do that - but generally if you moved during this past year you'll wind up either filing for an extension or filing at the normal deadline and then doing an amended return after you've qualified for the exclusion.)

Take a look at Publication 54 on the IRS website for details. But basically you're beholden to Japan for taxes.
Cheers,
Bev


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## Joppa

I think for those who aren't permanent residents of Japan (a category quite difficult to obtain for expats), your overseas income is taxed on a remittance basis only - so only any money you bring over to Japan will be taxed, but any income or assets you keep overseas won't be. Japan has double taxation relief agreement with US, so you won't be taxed twice. But you still have to submit tax return in both countries and set off taxes paid against liability in the other country. You probably need the help of an accountant specialising in expat taxation in Japan - see expat publications (such as online Tokyo Metropolis) or Japan Times for contacts. Or ask another US expat, preferably in a similar situation to you.
Also see http://www.nta.go.jp/taxanswer/english/12001.htm


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## larabell

Joppa said:


> I think for those who aren't permanent residents of Japan (a category quite difficult to obtain for expats), your overseas income is taxed on a remittance basis only ...


First, "permanent" for tax purposes is not the same as "permanent" for immigration purposes. According to the instructions supplied with the Japanese tax forms every year, you are considered to live in Japan permanently (for tax purposes) after you've been in the country for five years, regardless of your visa status.

Also, the "remittance basis" only applies to unearned income like interest and stock gains. Income from your daily wage-slavery is considered to have been remitted into Japan when you earn it, whether you actually remitted it into Japan or not.

It's true that you won't be taxed twice on the same money. The way that's usually handled is that you file Japanese a normal Japanese tax return and then claim a credit for the tax paid to Japan on your US tax return. But... you can only claim the credit for tax paid on income that was above the 80k exclusion limit (or whatever the number is these days) since the first 80k wasn't taxed by the US in the first place. So if your income really is less than 80k US dollars, the dual-taxation treaty doesn't even come into play. Then again... you most likely won't owe any US tax unless a substantial part of your income is subject to AMT.

Finally, you probably don't want to enter "0" on your W-4 -- that will maximize the tax deductions from your salary. What you do is write "EXEMPT" in the box where the number would go and the deductions stop completely. Make sure you put that money aside, though, because Japan isn't quite as flexible as the US when it comes to paying your tax and filing your return in a timely manner.

BTW, if you're not living in your home country, you're an "expat" by definition...


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## Joppa

larabell said:


> First, "permanent" for tax purposes is not the same as "permanent" for immigration purposes. According to the instructions supplied with the Japanese tax forms every year, you are considered to live in Japan permanently (for tax purposes) after you've been in the country for five years, regardless of your visa status.
> 
> *Out of ten years.*
> 
> Also, the "remittance basis" only applies to unearned income like interest and stock gains. Income from your daily wage-slavery is considered to have been remitted into Japan when you earn it, whether you actually remitted it into Japan or not.
> 
> *That is true. The rule says that salaries, wages or other compensation for personal services performed in Japan are treated as "INCOME FROM SOURCES IN JAPAN" whether they are paid in Japan or abroad. So your US income, even paid there, is still considered income from sources in Japan because it's earned as a result of work performed while you are in Japan and so fully taxable there. But since you've already been taxed in US, and tax rates in Japan are roughly comparable, you won't be paying much extra tax, if any.*
> 
> BTW, if you're not living in your home country, you're an "expat" by definition...


So true!


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## Bevdeforges

_>>So your US income, even paid there, is still considered income from sources in Japan because it's earned as a result of work performed while you are in Japan and so fully taxable there. But since you've already been taxed in US, and tax rates in Japan are roughly comparable, you won't be paying much extra tax, if any.<<_

Actually, this is where you need to be careful. Just because the OP has had US taxes withheld doesn't mean he has PAID US taxes. 

If the OP is living and working in Japan (i.e. physically in Japan while doing the work for which he is being paid), that income is subject to Japanese taxes - and to the US earned income exclusion, provided the overseas residence or physical presence test has been met. The OP should be able to claim a refund for taxes withheld by the US employer.
Cheers,
Bev


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## Joppa

I did say he ought to consult an accountant in Japan well versed in expat taxation, as it's a minefield and so easy to get wrong for the uninitiated!


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## desertmover

Hi, bringing this back after realizing how close the deadline is.

I have a few more questions. I'm pretty sure I have to file here now. This is what I'm looking at and some of the questions I have:

1) I need to file in Japan. But do I only list the income I transferred (remitted) here since the day I became a _non-resident_? In other words, if I got my visa in September of last year, only the money I transferred from September to December 31st, or is it September to now?

2) I should be filing for the foreign earned income credit for the wages paid by my American employer. But I make under the $85k USD limit, so should I get all the withheld taxes back?

3) I am looking at the Japanese tax forms and there are sections for expenses. As I work from home, can I write off half of what I paid in rent and internet access and all the other things associated with work? Again, is it only for the months that I had my visa until December 31st, or until now?


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## Bevdeforges

desertmover said:


> 1) I need to file in Japan. But do I only list the income I transferred (remitted) here since the day I became a _non-resident_? In other words, if I got my visa in September of last year, only the money I transferred from September to December 31st, or is it September to now?
> 
> 2) I should be filing for the foreign earned income credit for the wages paid by my American employer. But I make under the $85k USD limit, so should I get all the withheld taxes back?
> 
> 3) I am looking at the Japanese tax forms and there are sections for expenses. As I work from home, can I write off half of what I paid in rent and internet access and all the other things associated with work? Again, is it only for the months that I had my visa until December 31st, or until now?


I can't help you with the Japanese taxes, but for US taxes, you MUST declare your worldwide income for the entire calendar year 2009. If you only moved to Japan during 2009, chances are you will have to file for an extension until the date you qualify for the overseas earned income exclusion under either the physical presence test (12 consecutive months) or the bona fide resident test (one full calendar year - January to December). Download a copy of form 2350 from the IRS website to apply for the extension.

In response to question #2, this first year overseas, you have to apportion the earned income exclusion maximum - i.e. if you moved to Japan half-way through the year, you're only entitled to a maximum of half the allowance (which is closer to $92,000 these days) against your income earned since your arrival.

Download a copy of pub 54 for more details and some sample forms all filled out. From overseas, your US filing date is June 15th, but to be safe, be sure and file a change of address form with the IRS (form 8822).
Cheers,
Bev


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## larabell

desertmover said:


> Hi, bringing this back after realizing how close the deadline is.


If by "here" you mean Japan, the deadline is the end of this week.



desertmover said:


> 1) I need to file in Japan. But do I only list the income I transferred (remitted) here since the day I became a _non-resident_? In other words, if I got my visa in September of last year, only the money I transferred from September to December 31st, or is it September to now?


As has already been mentioned, if you performed services in Japan, you need to claim that as income on your Japan tax return. This, of course, assumes that you were here long enough to have to file at all.

The part about money remitted into Japan only applies to foreign income. If, for example, you sold stocks which were held in a brokerage account outside of Japan. It does *not* apply to wages earned while performing services in Japan. That is considered Japanese income whether the money showed up in Japan or not.

BTW, if I were you, I'd be asking an expert these questions -- not a forum. I really doubt anyone here is qualified to give advice on either US or Japanese taxes so take these as suggestions only.

I don't understand what you're talking about with the dates and why you would have become a "non-resident" (unless you moved away from Japan, that's not at all clear).



desertmover said:


> 2) I should be filing for the foreign earned income credit for the wages paid by my American employer. But I make under the $85k USD limit, so should I get all the withheld taxes back?


I've never heard of a "foreign earned income credit". Perhaps you mean the "foreign tax credit". Or perhaps you mean something else??

If you make less than the $85k exclusion, you cannot claim foreign income credit on your US tax return. The foreign tax credit only applies to income on which you would otherwise be taxed twice -- and since the first $85k is not taxed in the US, you don't get to claim credit against US taxes for what you paid in Japan.

Now... there is also a foreign tax credit against Japanese taxes for tax you might have paid in the US. However, it's very complex and geared mainly to help Japanese citizens who have foreign investments that are taxed outside of Japan. I doubt that's what you're referring to.



desertmover said:


> 3) I am looking at the Japanese tax forms and there are sections for expenses. As I work from home, can I write off half of what I paid in rent and internet access and all the other things associated with work? Again, is it only for the months that I had my visa until December 31st, or until now?


I have the typical Japanese forms and instructions. I don't see any place where it mentions anything about work-related expenses. What form are you looking at and what line? There is something called a "blue form" that I believe contains more blanks that would be pertinent to individuals running a business but if you intend to file a blue form, shouldn't you have someone who knows what they're doing filling it out for you?

On the individual form (Form A or B), I don't think there's any place for those kinds of expenses and, even if there were, I'd expect the computation to be a lot more complex than "half".


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## desertmover

larabell said:


> If by "here" you mean Japan, the deadline is the end of this week.
> 
> As has already been mentioned, if you performed services in Japan, you need to claim that as income on your Japan tax return. This, of course, assumes that you were here long enough to have to file at all.
> 
> The part about money remitted into Japan only applies to foreign income. If, for example, you sold stocks which were held in a brokerage account outside of Japan. It does *not* apply to wages earned while performing services in Japan. That is considered Japanese income whether the money showed up in Japan or not.


Well, I only moved to Japan last year, in September. I took my job with me, and I telecommute. I earned wages in an American company paid to an American bank account all through last year, but starting in September I lived in Japan while doing it. I sent some of that money to cover my living expenses while here in Japan starting during that time.



> BTW, if I were you, I'd be asking an expert these questions -- not a forum. I really doubt anyone here is qualified to give advice on either US or Japanese taxes so take these as suggestions only.


Will do. I need to do it quickly too. Do you have any suggestions?



> I don't understand what you're talking about with the dates and why you would have become a "non-resident" (unless you moved away from Japan, that's not at all clear).


More like I moved here, but I still "work" in America, although I perform the services here. It was only for 3 months last tax year though.



> I've never heard of a "foreign earned income credit". Perhaps you mean the "foreign tax credit". Or perhaps you mean something else??
> 
> If you make less than the $85k exclusion, you cannot claim foreign income credit on your US tax return. The foreign tax credit only applies to income on which you would otherwise be taxed twice -- and since the first $85k is not taxed in the US, you don't get to claim credit against US taxes for what you paid in Japan.
> 
> Now... there is also a foreign tax credit against Japanese taxes for tax you might have paid in the US. However, it's very complex and geared mainly to help Japanese citizens who have foreign investments that are taxed outside of Japan. I doubt that's what you're referring to.


Yeah, I was referring to what I am paid in America, and since it is under the limit I dont think it affects me at all.



> I have the typical Japanese forms and instructions. I don't see any place where it mentions anything about work-related expenses. What form are you looking at and what line? There is something called a "blue form" that I believe contains more blanks that would be pertinent to individuals running a business but if you intend to file a blue form, shouldn't you have someone who knows what they're doing filling it out for you?
> 
> On the individual form (Form A or B), I don't think there's any place for those kinds of expenses and, even if there were, I'd expect the computation to be a lot more complex than "half".


I had downloaded the forms from gaijintaxdotcom and they do list areas for receipts and expenses (Form B).


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## Bevdeforges

desertmover said:


> More like I moved here, but I still "work" in America, although I perform the services here. It was only for 3 months last tax year though.
> 
> 
> 
> Yeah, I was referring to what I am paid in America, and since it is under the limit I dont think it affects me at all.
> 
> 
> 
> I had downloaded the forms from gaijintaxdotcom and they do list areas for receipts and expenses (Form B).


Um, what sort of visa are you on?

As a US citizen, you are required to file US income taxes, no matter where you live in the world and no matter where your income comes from, you have to declare your worldwide income back to Uncle Sam.

If and when you qualify, you can take the overseas earned income exclusion for earned income (i.e. salary) earned while living overseas. But, you must file a return in order to claim the exclusion. Making less than the limit means it still affects you - you have to file in order to claim the exclusion, and if Uncle Sam catches up with you for not filing, they'll disallow the exclusion altogether in figuring your taxes.

Evidently your Japanese taxes are due very soon, and you need to get on those. But you need to get your US taxes filed, or at least an extension filed, by June 15th too.
Cheers,
Bev


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## larabell

desertmover said:


> Well, I only moved to Japan last year, in September. I took my job with me, and I telecommute. I earned wages in an American company paid to an American bank account all through last year, but starting in September I lived in Japan while doing it. I sent some of that money to cover my living expenses while here in Japan starting during that time.


Well... I'm guessing that since Sept to the end of Dec is longer than 30 days, you came over on a working visa. I'm also guessing that your wages are for personal services (ie: you *do* something for a living as opposed to selling a product). In that case, I would predict that the Japanese Tax Office will treat your income (all of it) as having been earned in Japan. What matters is not where the money is paid but where the work was performed.



desertmover said:


> Will do. I need to do it quickly too. Do you have any suggestions?


I had some tax questions recently and I found an English-speaking accountant at:
Japan Tax, Bilingual Accountant, Bilingual Bookkeeping, Bilingual Accounting Application �|Minato Accounting Office (I offer the URL in response to a direct question, not as an advertisement -- I have no affiliation with this guy). He is willing to answer questions in person or by email for only 8000 yen per hour, which isn't bad compared to pure tax preparation services. He's a bit slow when it comes to answering email so you might want to give him a call instead. His English is pretty good. I'd suggest you arrange a personal visit -- when I went, he walked me through filling out the odd forms (foreign stock gains) so I could do the whole thing myself in the future.

Of course, you could also look in the ads in Metropolis or do a Google search for tax preparation services in Japan, since you're in a bit of a rush.

It's also possible to get tax help from the Tax Office. Use Google to look up the Japanese Tax Office branch nearest you, take your documentation with you (if you only have wage income, a copy of your W2 should suffice) and just show up. You may have to wait in line for a while but they should be able to help you complete the forms. My experience is that the Tax Office folks can be very helpful, though you might not be able to find someone who speaks English on such short notice.

The other alternative -- which I mention only for the sake of completeness -- is to just ignore the problem. If (when) the Tax Office eventually catches up with you, the penalty is 10% of the tax you owe plus a year's interest at just over 4%. If you're salary is under $85K annually, I'm assuming you made no more than $30K in those 3 months -- and the marginal tax rate on that would be around 10%. So, at most, you'd owe $3k in tax which means the failure-to-pay penalty won't be more than $300... assuming they catch up with you. It would cost you more than that to have a professional prepare your return, anyway. Obviously, that's a decision you need to make for yourself -- I cannot "advise" you to skirt the tax laws. But if you're not going to be able to file on time anyway...

BTW, according to the instructions (and the Tax Office agent I spoke to recently), the 10% penalty only applies if *they* catch you -- which usually takes a couple years. So you could always file late and take the interest hit -- which gives you time to find someone competent who can consider your specific situation. You'll need to figure all this out before *next* March anyway.

BTW2, I've "arrived" for work in Japan twice so far and both times my company took care of my tax filing for at least the first couple of years. So I really have no idea how long you need to actually reside in Japan before your wages are open to taxation. For example, if you left Japan for a week or two in mid-December to get your working visa, you could always claim that Sept-to-Dec was a business trip which shouldn't be taxable. That would be a harder claim to make if you didn't actually leave Japan (or if you entered on a working visa in the first place) but it's something a tax professional might consider based on your specific circumstances.



desertmover said:


> More like I moved here, but I still "work" in America, although I perform the services here. It was only for 3 months last tax year though.


Sorry... if you're living here rather than there, and if you're paid for your personal services (ie: labor), you're working in Japan, regardless of where the money is paid -- at least for tax purposes. Assuming you haven't lived in Japan before, any money you get from sources *other* than your personal labor, which are paid in America and not remitted to Japan, aren't subject to Japanese tax (yet).



desertmover said:


> Yeah, I was referring to what I am paid in America, and since it is under the limit I dont think it affects me at all.


Foreign tax credit probably doesn't apply to you. But I agree with Bev that the exclusion itself (on the first $85K of earned income) requires that you file a return in order to claim the exclusion. It's not automatic -- and the IRS tends to be far less flexible when it comes to tax return filing or lack thereof.



desertmover said:


> I had downloaded the forms from gaijintaxdotcom and they do list areas for receipts and expenses (Form B).


Casualty losses, medical expenses, insurance payments, charitable donations, dependents, personal exemptions -- which of those sounds like a home office deduction? If you think I'm missing something, point me to a line number and I'll double-check the instructions.


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