The tax thing related to EPIK

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Well I guess there are good things that come out of Facebook… While reading down the group page I came across Jaclyn Harris, GURU OF THE TAX. The following is her explanation of the whole tax exempt thing to confuse anybody in their right mind…

For the US you have to be out of the country for 330 days in a single tax year and claim residency and paying taxes in that country.

Basically you want the residency certificate from the IRS so you are not double taxed both in the US and Korea which is why they have that agreement. For your first two years, you can chose to pay US taxes instead of paying Korean taxes (there’s a tax agreement that does that so you are not double taxed).

Since you are applying for the August intake (and if you plan to stay more than one year), pay the taxes for the pay you got Aug-Dec on EPIK and then jobs you held between Jan-Aug in the US to the IRS when you file. Also, remember to file form 3903 when you do your taxes. This form is moving expenses to be claimed as a deductible! So if you ship something from the US to Korea that you couldn’t fit in your suitcase, flight, or whatever moving expenses (including lodging so say if you stayed in a hotel and got to Korea early before orientation). You can ‘ll have to file taxes anyway for the other jobs you held.

Then for the 2013 tax year, get into paying Korean taxes. I would say just bite the bullet and pay Korean taxes for Aug-December period. Thing is Korean taxes are much cheaper! And you can claim what you paid into pension and health care and other things that I listed abroad.

Say if you earn 2.1 million for every month of 2013 for a salary of 25.2 mill and paid 2.665% (671,580) of that into health care and 4.5% (1,134,000) into pension (which are required whether you are paying Korean taxes or not, though when you decide to leave the US you can collect a lump sum of what you paid into pension). Just doing Korean taxes with those simple deductions, the total (which would be deducted throughout the year) would be 372,360 (1.477% of salary). You can look at pension as something you’d get back and money in your pocket when you decide to leave Korea (or toward retirement if you plan on staying in Korea forever). You can put in healthcare and think of it as taxes if you want but remember the US doesn’t provide you with healthcare and that’s an extra expense on you and wouldn’t be the 671,580won (~$580) for a year certainly! But taxes + health care = 4.14% of total salary.

A simple withholding calculator of the IRS would expect a year of a Korean salary, you would pay bout 1421$ in taxes (25.2 mill won = ~ 22131$). So that would be 6.42% but no healthcare counted. So add the 580 for what you paid into the National healthcare for Korea = 2001 or about 9% of your wage toward healthcare and taxes. Though you would need to add the renewal bonus and severance pay which would bump up this percentage.

I would just not fill out the residency certificate if you want to benefit from Korean taxes. The monthly Korean tax from Aug-December and then also paying the IRS would still be saving compared to US taxes. Korean taxes for 2013: 372,000 (taxes in 2013) + 671,000 (health care)+ say about 37,000 per month of 2012 you paid Korean taxes instead of getting the certificate (In an August intake I don’t think you get paid until September) so 37K * Sept-Dec = 148,000 roughly (though it’d probably be less) = 1,191,000 or 4.72%. It’s your decision. I say you save a lot in taxes if you accept double taxation for four months of 2012 and if you plan to stay for more than one year. If you only want a year in Korea then get the certificate because you won’t qualify for the residency form for Korea because you need to be in Korea for 330 days of 2013 and only a year on EPIK would mean you leave sometime in August and definitely not meeting that requirement.

Hmmm…I hope I made sense. ^^”

Link to application – Form 8802

Instructions – BAM!

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