US Taxes

Guide to taking care of US taxes, especially for first-years.

Info from CLAIR

In July 2004, the paperwork required to be filed with local tax authorities in Japan for the purpose of obtaining an exemption from Japanese income taxes changed. Now, in addition to the standard form provided by your local Japanese tax office, first and second year US JETs must obtain a Certificate of US Residency (Form 6166) from the Internal Revenue Service (IRS). This can be obtained by first filing an Application for United States Residency Certification (Form 8802), links to which are provided below. This form can be filed by fax or regular mail and can take up to 180 days to process. If you meet all the requirements your tax exemption Form 6166 (the actual certification) will be sent back to you. File Form 6166 together with the tax exemption application form obtainable at your local Japanese tax office. Once filed, the exemption will cover JETs for two years. For specific questions about Forms 8802 and 6166 please contact the IRS. For more information about filing these documents at the local Japanese tax office please contact your Prefectural Advisor or JET Programme supervisor or your local tax office.

Notes

• This form only needs to be filed by ALTs. CIRs are not required to obtain US residency certification.
• This filing has nothing to do with the filing of US income tax. This is solely for the purpose of exemption from Japanese income taxes. If the request for residency certification is filed in the way described below, JET participants do not need to worry about whether or not filing these forms will negatively affect their ability to obtain an exemption from paying taxes in the US as well.
• As the exemption from Japanese income taxes is only valid for two years, only first and second-year JETs are required to have this paperwork on file with the Japanese tax authorities.
• On form 8802, the certification should be requested for the year prior to that in which the JET participant came to Japan on JET. For example, current first-year JETs who arrived in July or August of 2006 would put 2005 for questions 7 and 8 on the form 8802. Second-year participants should already have this form on file, but in the case that they have not yet obtained and filed this certification, they will need to file the request using 2004 as the certification year and the year upon which the certification will be based (questions 7 and 8). Likewise, new JET Programme participants who are set to arrive in Japan in July or August of 2007 should request certification for the 2006 tax year. For all programme participants who lived in Japan or another country other than the US prior to beginning JET, please contact CLAIR with any questions about how to correctly file your residency certification request.
• The address to be written on the form will be the JET's address in the US during the time for which certification is being requested. In order for the form to be sent to the JET in Japan, the JET will need to check the "Other" box in section 3a and provide their current address in Japan in the available blank space.
• The following Penalty of Perjury Statement must be handwritten in the space provided for question number 11 on form 8802 or on a separate, attached sheet:

  "Under penalties of perjury, I, [JET’s name] ([social security #]), am a U.S. resident for tax purposes and will continue to be throughout the current tax year".

Downloads

Please use the following links to download the necessary forms and other related information. (All links are to Internal Revenue Service provided .pdf pages)

• Certification for Reduced Tax Rates in Tax Treaty Countries (provides information about the process and requirements for filing for exemptions from income taxes in countries with US tax treaties)
• Application for US Residency Certification (Form 8802)
• Instructions for US Residency Certification (Form 8802 Instructions)
• Links to other general information about income tax for US taxpayers overseas

If you have any other more specific question, please feel free to contact CLAIR at 03-3591-5489 or through email at jet@clair.or.jp

Info from the General Information Handbook

Personal Income Tax

Your tax status in Japan depends largely on your nationality, the length of your stay and your occupation in Japan. If you do not qualify for exemption from taxes in Japan, the terms and conditions of employment on the JET Programme allow for a higher gross salary to cover Japanese tax payments. It is important to note that first and second year Canadian and New Zealand ALTs, all third year ALTs, and all CIRs and SEAs of all nationalities are liable for tax in Japan. If your gross income is more than ¥300,000 and no tax deductions are made, ask your supervisor to explain your pay slip to you. You might be expected to pay a lump sum directly to Japanese tax officials later in the year.

If paying tax in Japan, it is important to obtain a breakdown of such payments (Statement of Earnings) from Contracting Organisations. This statement can take the form of either: Gensen choshu ni kakaru shotokuzei no nozei shomei negai or Kyuryo shotoku no gensen choshu hyo. If your visa type and nationality exempts you from paying Japanese taxes, the statement may also take the form of Kyuyo shiharai hokokusho. Tax matters in Japan require very little paperwork. If exempted from paying tax in Japan, you have to file a form that confirms exemption, and you may be required to fill out a questionnaire for your local tax office. You should also be sure to keep your Gensen choushu hyo or Statement of Earnings (a small slip of paper which will appear in your December pay packet; see example on following page). The Gensen choushu hyo is important if you need to extend your Period of Stay and also when you return to your home country. You will need the Gensen choshu hyo for tax purposes and visa renewal. You will receive this slip of paper from your Contracting Organisation around the beginning or end of a calendar year (December or January). The Gensen choshu hyo details your income, tax you pay and how much you contribute to Social Insurance and Pension. JETs who have to file tax returns in their home country need this, as do all re-contracting JETs who apply for an extension on their visa.

The Gensen choushu hyo details all information valid within one calendar year (January to December) so first year JETs probably will receive a statement only for income earned from August to December. However some Contracting rganisations treat the JETs income according to the JET year (from August to July the following year) and are aiming to prepare the Gensen choushu hyo at the end of the JET year in June or July. If you need the Gensen choushu hyo early for some reason or your Contracting Organisation cannot prepare it formally, then ask for the same information written and stamped with your Contracting Organisation’s official seal.

The Tax Exemption Form

Those eligible for tax exemption in Japan according to the information in the previous section, should make sure they fill out forms for tax exemption (examples on the following pages). Your Supervisor will present you with these forms for signing shortly after you arrive. If you know that you should not sign these forms, please compare any forms that your Supervisor gives you with the ones in the example. If they are the same, do not sign them, but refer your Supervisor to the Contracting Organisation Manual (Keiyaku dantai-yo Manual), your Prefectural International Affairs Division or CLAIR. Tax exemption forms are produced by the Ministry of Finance. Some forms may have both English and Japanese (front and back) and some forms may have only Japanese. Both forms are valid, however some forms may follow a slightly different layout. If you are unsure about your tax related form, compare it to the example forms provided. If they are the same, the English translation should be as in the example. For U.S. JET participants (ALTs), in order to be exempt from paying Japanese tax, Form 6166 (issued by the IRS) certification of U.S. residency must be submitted together with the Tax Exemption Form. Please see the JET Programme website (www.jetprogramme.org/e/new/us_tax.html) and the IRS website (www.ips.gov) for information on how to acquire Form 6166. U.S. JET participants (ALTs) are encouraged to acquire Form 6166 before coming to Japan.

Please Note

Those who are exempt from tax in Japan are exempt for two years only. If staying on the programme for a third year, those participants will be required to pay tax in Japan. All participants who are required to pay tax in Japan have their gross salary upwardly adjusted to cover the amount of tax owed.

United States of America

All U.S. JET participants must file U.S. Federal Income tax returns. The following forms are necessary for US JETs when filing their tax returns:

• Form 1040 US Individual Income Tax Return
• Form 2555 (EZ) Foreign Earned Income Exclusion
• Form 4868 Application for Automatic Extension of Time to File US Individual Income Tax Return
• Form 2350 Application for Extension of Time to File

If you filed last year with a Japanese address, you will be sent the following year's tax forms automatically. First year JETs who, on the JET Participant Data Input & Confirmation form, request to have forms for the 2005 tax year sent, will automatically have their tax forms sent directly to them. All others MUST REQUEST the standard overseas filing package (the 1040-7 package) from the IRS Forms Distribution Center, P.O. Box 25866, Richmond, Virginia, 23260 USA. This package provides the forms most JETs will need to file their taxes from overseas. Forms and instructions can also be downloaded from the IRS homepage (www.irs.gov). You must report all your 2005 income, both from Japanese and U.S. sources. You may be able toexclude all of your Japanese income (up to US $80,000) so you should only have to pay tax on the income from U.S. sources.

Important

You must file a tax return in order to claim the $80,000 foreign earned income exclusion. It is not automatic! Failure to file a return could result in a loss of the exclusion and an individual may be subject to taxes, interest and penalties on the entire amount of their income.

Deadlines

Most U.S. taxpayers must file their tax returns by April 15, but taxpayers who are living abroad on April 15 receive an automatic two-month extension and need not file until June 15. To make use of the automatic extension, attach a statement to your return stating that you were living outside the U.S. on April 15. If you owe taxes however, this payment must be made by the April 15 deadline. If the payment is late, you must pay interest on the amount due as well as a late payment penalty.

The 1040 is the U.S. Individual Income Tax Return form and the 2555-EZ is the form for Foreign Earned Income Exclusion that you will need to file. Do not file your 1040 and 2555-EZ forms until you have been in Japan for 12 months and have met the 330 day requirement for the Physical Presence Test. If you need an additional extension, as almost all first year JETs will in order to qualify for the foreign earned income exclusion, you should file Form 4868 which will give you an automatic additional 2- month extension which should allow you to meet the 330 day Physical Presence requirement for the foreign earned income exclusion. If you still need more time, you will need to file Form 2350 listing a specific reason for applying for this extension.

Necessary Forms

• First year JETs must send in a Change of Address Form 8822 to report their Japanese address to the IRS.
• You must fill out the long Form 1040. If you claim the foreign earned income exclusion, you cannot use Forms 1040EZ or 1040A. Form 1040 is included in the 1040-7 package which you should get from the IRS.
• You must report all your Japanese income on Form 1040. You may file form 2555 or 2555EZ along with 1040 if you qualify for the foreign earned income exclusion. Form 2555 and Form 255EZ will be included in the same overseas filing package.
• If you had over $10,000 in any foreign bank accounts at anytime during 2005, you must declare these accounts to the Department of Treasury (not the IRS) using Form TDF 90-22.1, available in the overseas filing package.
• If you have not been able to obtain a W-2 Form (Wage and Tax Statement) from your previous U.S. employer, file Form 4852 as a substitute for the W-2. Make sure you try to get your regular W-2 before using Form 4852.

Exclusion of Foreign Earned Income from Your Tax Return As U.S. taxpayers earning income abroad, you may qualify to exclude that income from your tax return up to $80,000 provided you meet the foreign tax home test and the physical presence test by maintaining your tax home overseas and being physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. Remember, if you spend more than 35 days in the U.S., you may not be able to claim the income exclusion. Plan your trips home accordingly.

Hints on Filling Out Forms

Form 1040

• Fill in your current address in Japan, your social security number, and your occupation: "English Teacher", "Coordinator for International Relations" or "Sports Exchange Advisor."
• Follow the instructions supplied for line-by-line proper completion of the Form 1040. Wages earned in Japan are reported on line 7. Your exclusion of Japanese income, from Form 2555 or 2555-EZ, will be entered as a negative amount on line 21.
• If your Japanese wages are less than $80,000 use Form 2555EZ instead of Form 2555. It is much shorter and easier to complete.
• If you claim the foreign earned income exclusion, you do not qualify to claim the "earned income credit". Also, if all your overseas wages are excluded on Form 2555, you cannot make a contribution to an IRS account, deductible or otherwise.
• Send the "Statement of Earnings" (Gensen choshuhyo) with Form 1040. You should have already received this income statement from your Japanese employer or city/prefectural tax office. By law, this statement needs to be translated into English, but it should be sufficient just to write "gross income" beside the appropriate figure.

Form 2555-EZ

• You should use your local office or school address with your Supervisor/Head teacher's name.
• Your occupation is "English Teacher", "Coordinator for International Relations" or "Sports Exchange Advisor".
• In Part I you should complete items 2 and 3.
• Complete all the items in Parts II, III and IV. You will show your foreign wages on line 17 of Part IV. This amount should also be included in your total wages on Form 1040, line 7. All items must be reported in U.S. dollars.

Form 4868 or Form 2350

Most first year JETs will need to file Form 4868 by June 15 in order to meet the 330 day requirement of the physical presence test. This allows you to defer filing your return until you qualify to claim the foreign earned income exclusion. If you arrived in Japan after August 15, you will need to file form 2350, listing a specific reason for applying for the additional extension.

DO NOT FILE YOUR RETURN until you have met the requirements of the physical presence test. For first year American JETs, that will be the end of June 2007 at the earliest. It is your responsibility to act and to file the proper forms on time with the IRS. Failure to file can have significant negative financial implications.