Are You Guilty?
Living in Korea as an expat can be great. One reason: the taxes that hagwons and corporations actually withhold from your monthly paycheck is low. The problem with this is that the amount withheld is too low. For many countries, that do not deploy the global taxation system, this is no problem. HOWEVER, if you are a citizen of a country that DOES observe the global income/global taxation system, then you may have a major problem. In fact, you would be committing tax evasion. Sound serious? It might be.
What the Heck is Global Taxation?
If you are a U.S. citizen, then you are required to file U.S. taxes, regardless of your residence. Now, the fact is that there is an “expat exemption” which is a credit that you receive when you live abroad. When you work at a hagwon, this amount is larger than your annual income. Therefore, you are most likely safe. The exemption that you receive is larger than your annual income, and thus, the small amount of tax withholding in Korea is adequate.
Large Salary Earned in Korea? Entirely Different
If you earn more than the foreign income credit, then the amount you earn more than this is subject to additional taxation by the US IRS. You will most likely need an accountant from here, since you may/may not prefer to take credit for the taxes paid in Korea. This is most likely not the case, but you should check.
The Tragedies of Penn State and Syracuse
Why, oh why, is there a mention of these heinous crimes against children and expat taxation? The ones in very serious trouble are not only the perpetrators, but also those that knew, and didn’t report the crimes, and worse yet, those that may have covered up the ugly realities. If you are in Korea and you have not filed US income taxes, you need an accountant and a lawyer, now. You will also need a plausible excuse.
At Penn State and Syracuse, those who know that crimes have been committed are in deep, deep trouble. Those that have known that this was occurring are getting excoriated in the U.S. The idea that persons did not report this issue in order to keep athletic programs running, and that somehow, this dominated the importance of reporting a crime is reprehensible, at best.
For tax evasion, however, it is not so clear. However, there are remedies as well. The US IRS has a confidential whistleblower process, and the reward is 30% of recovered taxes. The form can be found here. Now, clearly, the IRS isn’t likely to chase down cases of $5,000 of taxes, but if someone has not paid nor reported income for decades, and is a US citizen, and is highly-paid, then that is precisely the person that the IRS is looking for.
Let Sleeping Dogs Lie?
You could say that this is all unnecessary as a result of being against the tax laws of the US. You could say that you don’t want to tell authorities of the wrongdoing of another. However, as in the Penn State and Syracuse cases exhibit, the news, when it comes out, will be magnified as a result of letting sleeping dogs lie.