How to File U.S. Taxes From Japan

When I came to Japan after graduating, I was excited to be an adult. (Forget the fact that the JET program holds your hand all the way over to Japan.) I had my own apartment. I was getting paid a decent wage. I was a car owner. I was making omelettes for dinner every night. But with adulthood come great burdens. One of these, which I was somewhat excited to take on, is filing taxes.

Fortunately, the process is relatively simple for foreigners living abroad, and I found Shana West’s great website which explains everything. That page is here. It is extremely detailed and helpful, so I recommend using it, but I’ve summarized the process below and added a couple of details.

1. CHECK YOUR FINAL PAYCHECK OF THE YEAR!

In Japan, your final paycheck of the year will include your 源泉徴収票 (げんせんちょうしゅうひょう). This is proof of how much you earned and were taxed that year – the Japanese equivalent of a W-2. It’s a small piece of paper and easy to lose track of, so keep an eye out for it. If you do lose it, it shouldn’t be too difficult to get another copy printed at your local town/ward/city office. (On a side note, that word is so much fun to say. 源泉徴収票, heh.)

2. File Form 4868 by April 15.

In order to meet the requirements for exemption from U.S. taxes, you need to have lived in Japan for 330 days. JETs generally arrive at the end of July/beginning of August. Foreigners abroad automatically have a two month extension, but that isn’t always enough for first year expats. Filing Form 4868 gives you until October 15. So submit this form, and then just wait.

3. Turn your 源泉徴収票 into an English W-2.

Because the 源泉徴収票 is in Japanese, you need to translate it for the IRS. I always copy it and then mark up the copy exactly as Shana says. At the top I write “FOREIGN INCOME STATEMENT.” I point out the Japanese calendar year “HEISEI 21 (JAPANESE CALENDAR YEAR) = 2009.” I show them my name in Japanese (although this year and last my name has been printed in English). And then I show them the amount paid: “AMOUNT PAID = X YEN x 1USD/93.68YEN = $Y.” I don’t notate the after taxes income, although it couldn’t hurt to point out that and then the amount you were taxed. That would kind of say “Shove it, you IRS tax monkeys. I’ve been paying my dues.”

At the bottom of the page I write (straight from Shana’s page): “Note: I used the 2009 average yen/USD exchange rate as reported by the Federal Reserve to calculate my income. That rate was 93.68 yen = $1.”

The Federal Reserve releases its annual exchange rates on January 1 every year. You can find them on their website.

4. Fill out Form 2555EZ and 1040 and send them along with your “translated” 源泉徴収票 to the IRS by October 15.

Form 2555EZ

This is the foreign income exemption form. The easiest residency test to pass is the “physical presence test.” Write the day you arrived in Japan and then a year from that date. From your second year onward these dates will always be 1/1 and 12/31. On the second page, note all the days that you were back in the U.S. (Remember, this is just the time back in the U.S., not the time you spent outside of Japan, so you don’t have to include that trip to Thailand – you JETs are all so predictable.)

Form 1040

This is the most annoying form. It’s only tricky if you have any earned income from the U.S. Follow Shana’s advice and fill out the form as you normally would, but include your Japanese income. This becomes significantly more simple your second year onward (at least it did for me) because you should have no earned income from the U.S.

I’m still not sure I’m filling it out properly. The one thing I do know is that I make significantly less than the $91,400 that you are allowed to claim as an exemption. My strategy is to just write “0” for any category I’m unsure of and then my Japanese income in parentheses for the “Other income” line.

And you’re done! Send that shit in and crack the beers!

A couple of notes:

– I didn’t fill out Form 8802 that Shana lists on her site. I was a CIR and was technically not able to get exemption from the Japanese taxes. Or so I thought. It was my understanding that the taxes would be deducted from my check and then given back to me in the form of a slightly higher salary. Wrong. I think I could’ve filed these forms if I tried. Oh well. Definitely get on that if you’re a JET.

– Some of my friends haven’t filed for several years and are worried that this will affect them somehow. I wouldn’t worry about it too much. Yes, you’re supposed to be filing them, but it’s not like you’re making a huge amount of money and embezzling it. And you actually are paying taxes. That said, if you are going to be moving home anytime soon (especially if you’re going for school), I’d try to at least get at least the most recent year filed. The good news is that you can ignore Step 2 if you’ve been here for over a year.

No excuses this year! You’ve got two sets of detailed instructions – the ones here and then Shana’s site – to help you through the process. がんばれ!

17 thoughts on “How to File U.S. Taxes From Japan

  1. For those who don’t file: the US allows you to just file them all after you get back, if you don’t mind wading back through 2-3-whatever years of tax info all in one sitting. I think there’s an allowance period of a few months after you get back or something, maybe just before the next tax period.

    Oh and I do my taxes electronically so it does everything all magical-like – you do fill out that 8802 form, which goes on a certain line on the 1040, but of course I forget which one… and I was a CIR too.

  2. My company helps a lot of taxpayers located around the world file tax extensions (Form 4868 as mentioned in the article). It’s a really simple to use service and as the article mentions, you get that extra time to file. A lot of people consider that really helpful because either they don’t have all of their paperwork because they are living out of the country or, they need to file a US tax return for the first time and just don’t know where to start.

    Right now we’re offering free extensions, co check us out at FileLater.com.

  3. Doug – Thanks for the tip! Confirms my suspicion that the IRS doesn’t really care about you when you’re abroad as long as you’re making less than the amount you can exclude. What site do you use to do your taxes electronically? I tried to do that my first year on JET but couldn’t find a site that was user-friendly.

    Wes – Thanks for the info – even if it comes at the expense of shameless self-promotion. ;o)

  4. Daniel: no prob, I think it’s great to have this kind of info up online all in one place, should help plenty of people – not just JETs – a whole bunch.

    I believe the place I used was http://www.taxactonline.com if I’m not mistaken… if you decide to keep your records on their database (totally secure, of course) then it’s totally simple as most everything is already done but the numbers, simple plug and play, electronic submissions and all. As long as your home state’s cool with that, which most are nowadays.

    And yeah, I don’t think they really care as much when they know they’re not getting a red cent from you anyway.

  5. Hi Daniel, thanks for writing up this great resource! I’m glad I stumbled onto it, since I’m a first year CIR and am preparing to file my US taxes. So are you saying even CIRs SHOULD file the 8802 form? Thanks again!

  6. Emily – Glad to be of help. I would talk to your Contracting Organization and see if anyone knows anything about it. It sounds like Doug filled it out, so it might be worth doing, and you still have plenty of time before you need to do anything. (And can I just say that I’m extremely jealous that you’re CIRing in Fukuoka…shows me the IP of all commenters, heh.)

  7. Daniel: Thanks again, sound good. I will send in the 8802 form, for shits and giggles if not anything else. Haha that’s interesting that you can see where we are… yep, CIR here in fabulous Fukuoka City. How long were you in Fukushima? And how is living in big, bad Tokyo? I’d love to hear more about your experiences.

  8. Also, your blog is really interesting and a fun read! It’s been added to my google reader :)

  9. So for the 1040 in the address blank, did you guys enter your US address or your foreign address despite the foreign info needed on 2555(ez)…? I cant find a straight answer on what to do. Im hoping its just home because thats what I typed on my PDF print out….

  10. I’ve just used a tax office to report 3 years of my taxes and 6 years of my FBARs. Now I am wondering what I should do from this point on. The forms listed here are insightful but I’ve seen other forms filed by other people such as 1116, 6251 and 8812. Are these files also necessary to file or just the 1040 and 2555? Thanks for your help and be well.

    PS. On the extension, it asks for the tax liability, what does that mean?

    Peter

  11. So after the extension should I use a tax accountant to file my tax form? I worked partially in the US and Japan and have other items that must go on from investments…..