Eric's Beijing Diary

Got my tax stuff from the IRS today. This time they sent me a booklet especially designed for overseas filers. Last time I had to download all the forms from the Internet. Not that big a deal, but this is a lot handier. Handier still would be filing online, using something like Turbo Tax, which I might be inclined to recommend if you have income from more than one country, or if your income exceeds the exclusion. Fortunately (Fortunately??), I don't make enough money to make such software that useful. I have one income from one employer, so my situation is pretty straightforward. It takes me a few minutes to do my taxes.

Basically, if you live and work overseas, your income is excluded from US taxes if you make less than 80,000 US dollars. Needless to say, it will be quite some time before I need to worry about that particular ceiling. Things do get complicated a bit if you are self-employed, because under American law, everyone who is self-employed must pay self-employment tax, no matter where they live. Since I work for a university, I don't have to pay Social Security, which is a relief, because it comes to 15% of income.

Generally, working people in China do not have to file income taxes. It is the company's responsibility to do this. China is a cash oriented society. I have never gotten a paycheck. Once a month, someone comes to me with an envelope containing a wad of bills, and asks me to count them and sign. That's it. The amount they give me is my salary minus Chinese taxes, which are not too bad at my income level. The US government does allow deduction for taxes paid to a foreign government, but for someone in my position, those deductions are irrelevant. Since my income is excluded, I don't need deductions. My US tax liability is 0 dollars and 0 cents.

There is another benefit of living overseas. Expats are automatically given a two month extension. Filing deadline for expats is June 15, not April 15. There are probably lots of American teachers who don't even bother to file income taxes. I think it is a good idea, though, even if you don't have to pay taxes. Don't know how much it matters, because the IRS would have a hard time proving that you had income you weren't reporting, since there are no W2 forms, or anything like it. When I report my income, the IRS has to take my word for it. I have no paycheck, no check stubs, no statement, no nothing. Everything is cash on the barrelhead.