Who's eligible for Korean tax exemption? To be exempt from paying
Korean taxes, you need to employed by the government (e.g., public school teachers). Thus, private-sector workers (e.g., hagwon teachers) must still pay
Korean taxes. However, private-sector employees
CAN still be exempt from paying
AMERICAN taxes (more details further down).
Remember the
Korean tax exemption isn't forever--it lasts TWO YEARS.
How to apply for Korean tax exemption? In order to be exempt from paying Korean taxes (for two years), you need to give your school the 6166 form. However, you must first fill out the 8802 form in order to get the 6166. Please be aware that the 8802 is NOT the residency certificate, it is the
application for the residency certificate (6166).
Here are the steps.
1. I had to purchase the number of 6166 copies I wanted to have PRIOR to sending the 8802 to the IRS.
Here is the link for payment
https://www.pay.gov/paygov/forms/formInstance.html?agencyFormId=12164322.
You'll have to go on to the website, purchase the copies, and you'll receive a confirmation number. You can get up to 20 copies for $35. I'd say to shoot for at least 5-6 just in case your school needs extras. If you want to be really safe order all 20!
2. Fill out the 8802. I've attached it and the instructions below. Make sure to put that confirmation # on the 8802 form before sending it (I promise this will make more sense once you get down to paying for and filling out the forms). If you are having the form mailed to someone besides yourself (which is probably the case since many of you are already here in Korea), you'll have to name an appointee.
3. After filling out the 8802 form, you can fax or mail it to the IRS. Make sure that you mail the form to the correct place. If you pay for the 6166 via the link that I've given above, then you'll have to send it to one address. If you pay by check, the address is different. Just so you know, I faxed mine and it was kind of a huge deal because they have two different fax numbers, so I had to send it twice. My point is, call if you are unsure!
4. After the IRS gets your 8802, they'll send a letter telling you that they've received it and are processing your 6166. They will send it to a US address only, so send it to a family or friend. The letter will say that they'll respond to you within 30 days, but that's a lie. I had to call a few times. It took
THREE MONTHS to get my 6166 and that was only after calling. It'll take time, but it should work out.
How long does it take to get 6166?The IRS claims they will contact you within 30 days after processing form 8802, but that doesn't generally happen. It would be prudent to call the IRS to remind them; people typically wait
three to five months, sometimes LONGER. Constantly remind the IRS about it.
But what if I've already started paying Korean taxes, will I get my money back once my school gets 6166? Yes. If not, contact the tax office directly. Please be aware that the refund won't get handed back to you in cash--it will most likely come in the form of a tax credit at the end of the financial year.
Do I have to pay US taxes?Unlikely. If your contract is one year, you become a "bona fide resident" of Korea the day your contract commences and hence qualify for the exclusion. However, there is one exception to this rule: if you make more than $92,900 USD (2011 figure), but since EFL teachers in Korea typically don't make that much, you probably don't have to worry. Also, if your contract is less than a year (e.g., six months), then you don't qualify for avoiding US taxes. However, you can still apply for Korean tax exemption.
Is the foreign income tax exclusion automatic? Do I still have to file my tax return with the IRS every year in Korea?,
The exclusion is not automatic as you must submit form 2555 along with form 1004 (NOT 1004A or 1004EZ). You can request your school to give you a document showing your yearly earnings around tax time (late Jan.) as the IRS
may require proof of foreign income. Say/write to your school's administration office:
"원어민교사 급여지급내역"
This means "Foreign teacher's salary payments".
If your school refuses to give it to you, showing your bankbook (or a printout of your deposits via online banking) should suffice. You should convert your salary to USD for each month; one member used the Bank of CANADA's web site (yes, Canada) because it conveniently lists montly historical exchange rates. The IRS will likely take your word for it as they're aware the overwhelming majority of EFL teachers don't make close to the foreign income exclusion threshold.
Submitting 2555 with 1040 obviously means you're filing your tax return. But, you don't have to do it every year; you can file three years later . For example, a 2011 return can be filed in 2014 without applying for an extension.
Form 2555 or 2555-EZ?If you're exempt from paying Korean taxes, you must submit the 2555, NOT 2555EZ.
So, what's the diff between form 1040, 2555, 8802, and 6166?Form 8802 is the application to get 6166, the latter is what you need to submit to your school to
avoid KOREAN taxes. So, 8802/6166 is so you avoid paying KOREAN TAXES.
Form 1004 is the income tax return filing document.
Form 2555 (which you must submit when you file your US tax return using form 1004) is so you don't have to pay
AMERICAN taxes.
