US FEDERAL TAX INFO FOR FIRST YEAR ALTs
'Tis the season for taxes, and as Americans living abroad we have unique requirements for filing our taxes. Don't fret, the paperwork, once you understand it, is minimal and your return, barring any exceptionally thorny issues, should be finished in a couple of hours. Here is a breakdown of what needs to be done and why.
STEP 1:
Filing for the additional extension: FORM 2350 (file this before June 15th, preferably in April in case there are difficulties)
Taxpayers who are living abroad on April 15th receive an automatic two month extension, until June 15th. (If you owe taxes, you can use this extension and avoid paying a late fee for filing your taxes, but you will be charged interest on the taxes owed. This is usually around 1% of the amount owed per month.)
Here is the rub: this extension is not long enough for you to claim the Physical Presence Test, the requirement necessary to exempt your hard earned JET income on your 1040 tax return. There are two important, and counter intuitive concepts of "one-year" that need to be clarified. Your tax year for 2003 started on January 1st 2003 and ended December 31st 2003. Your taxable income for 2003 will include any money you made in the US before coming to Japan and your JET income from August through December. The Physical Presence Year starts on any date within the year 2003 and ends exactly one year later. Say what!? Yes, the Physical Presence Test requires that you reside and earn money in a foreign country for at least 330 days within a one year period of your choosing. For example, if you came to Japan on August 6th, you were only residing in a foreign country for 147 days in 2003. Thus, If your Physical Presence year were the same as your tax year (1/1/03- 12/31/03), you would not get the exemption. So your Physical Presence year needs to be from August 6, 2003 to August 5, 2004. This is why you need to submit FORM 2350, to gain an extra 2 month extension and push your filing date back to August 15th, 2004. It should take you a mere 5 minutes to complete. Last year's information said a personal statement, stating you were living abroad on April 15th, is also necessary. I've included a sample of this letter. Send it with your FORM 2350 to the following address:
Internal Revenue Service
Philadelphia, PA 19255-0215
USA
STEP 2: Filing your taxes with LONG FORM 1040 and FORM 2555 EZ (file these together before August 15th, 2004.)
If you worked in the US before coming to Japan have all of your W-2 forms sent to you from home. If you absolutely can't get your W-2s you may be roasted slowly over an open fire. Just kidding, you can file FORM 4852 instead. You also need a yen income statement (the Japanese version of a W-2), which you should receive from your Host Institution. It is called kyuuryou shotoku no gensen choushuuyou. There is a sample of this form on this website. On this form write "gross income" next to the total. You will need to convert this yen total into dollars for the 1040 form. Use the official average exchange rate calculated for all of 2003: 115.92.
FORM 2555 EZ: This is the form qualifying you for the tax exemption of your JET income. (Please refer to the sample attachment as you read these instructions) You DO NOT qualify for the Bona Fide Residence Test, check the no box. You DO qualify for the Physical Presence test. Pick a starting and ending date for your Physical Presence year. Your tax home, at least one of them, was here in Japan. Check yes for your tax home. If you earned money before coming to Japan, you had two tax homes in 2003, so fill both out on line 11a. If you returned to the US between your arrival in Japan and December 31st, mark that in Part III. On line 17 enter the money you made from August through December 2003. You should get the entire amount as an exclusion.
LONG FORM 1040: Fill this out as you normally would. Refer to the attached sample for specifics. Be sure to include your JET income in your total income on line 7. You will subtract this out later on line 21. Line 37 is your standard deduction, the amount everyone can subtract. Line 39 is your exemption, calculated from the number of exemptions you indicated on page 1 of the 1040 form (exemptions includes spouses, children, yourself, etc.)
Send your completed 1040 to the appropriate address, you can find it on the attached form: "Where Do You File?"
Or the back cover of your tax booklet from the IRS!
GOOD LUCK!!!
Please remember that while we are trying to help you, this information should be regarded as a guide only. While every effort is made to provide correct information, we are unable to take responsibility for the contents of this webpage. Please contact the IRS directly if you have questions!
IRS Homepage: http://www.irs.gov
or call the IRS: 03-3224-5466
You can also try contacting Patrick Nowlin, the creator of this packet and ALT in Kosa Machi. (He is not a tax expert but has researched this topic and kindly created this info, he may be able to help you!)
Work #: 096 234- 0102 Fax #: 096- 234- 2957
Email: psnowlin@hotmail.com
Brenna and Jason can also try to help at kumamotopa@yahoo.com but beware that they are not tax experts either!
STATE TAXES: Please keep in mind that this info has been made to help you with your FEDERAL TAXES. You may still have to pay STATE TAXES in your home state. To check that out, please check your STATE's official web page. We are attaching a sheet of US Tax Office addresses, but it may be easier to look them up on the Internet! Good Luck!!!
US
