Hi! I’m a 20-year-old student and Japanese-American dual citizen. I’ve held both passports since I was born and have lived in Japan for the past ten years. Currently, I work part-time as a waiter and I also have a few small gigs on the side such as tutoring and babysitting. In total, I make roughly 700,000 JPY (4,900 USD) annually. I read that as an American citizen, I may have to declare/pay taxes even if I am not a resident in the US. What are my tax duties? (Both in Japan and in the US).
7 comments
As a us citizen you have to file taxes and also submit all financial accounts. Because you’re taxed in japan you probably don’t owe taxes to the us so just file races stating next year.
(Yes filing us tax even if you don’t owe anything is necessary)
You must file taxes in both countries, even though you will owe no tax in the US at your current income level.
If you never plan to live in the US, you may wish to renounce your US citizenship to avoid this extra requirement. You owe no tax now but if you make significant money in the future you may owe tax then. Being an American also greatly limits your investment opportunities due to tax reporting requirements.
You should check out /r/JapanFinance and read their Wiki, and you might want to ask questions there.
You should also start thinking about investing now as a 20yo, your future self will be very happy if you do.
You don’t owe anything as long as it is under $110k foreign earned income with IRS form 2555, but you still have to file it annually.
You have to file a tax return for the US but won’t have to pay.. should take you about 30 minutes… you get an automatic 90 day extension because you live overseas …
For a single person under 65, you don’t need to file taxes if you make under 12,900 usd.
https://www.irs.gov/newsroom/who-needs-to-file-a-tax-return
You need to file your tax paperwork with the US government every year, but if you do it correctly you shouldn’t owe any taxes. I follow [this](https://www.kumamotojet.com/reiwa/wp-content/uploads/2023/04/2022-U.S.-Tax-Guide-2nd-5th-Years-rev..pdf) guide.
Also, keep in mind if you have a bank account, or several bank accounts, that goes over 10k USD in any month of the year, you have to file additional paperwork (FBAR) documenting the contents of all your financial accounts.
And if you use NISA, iDeco, or similar investment accounts, the US government may come after you for taxes on those as well. You might want to look into [PFICs](https://www.tytoncapital.com/projects/america-tax-japanese-nisa-and-ideco-retirement-accounts/) for future reference.
If you can afford it, I’d honestly just renounce the US citizenship and avoid the headache. It costs around $2,400 USD to renounce.
You need to fill out forms 1040 and 2555, just google those forms and they’ll pop right up. If you’ve never done this it may seem repetitive and meaningless but understand that they likely use an old machine to read these things so it’s has to be.
For 2023 the foreign earned income exclusion is USD 120,000. If you earn more you’ll need to fill out different forms so that you won’t get taxed in the states.
You calculate your USD income using the average exchange rate for the year provided by the IRS, again google “IRS exchange rate” and find the average JPY rate for the year you are reporting.
The deadline for filing 2022 taxes have passed, as has the auto-extension granted to those living overseas (mid June). But since you owe no money there are no late fees so I suggest you file anyways.
FBAR is a different issue and you do not need to report that with your taxes. Furthermore you only need to report if you have more than USD 10,000 in the account.
I would not recommend renouncing US citizenship; these days it’s very hard to get and you never know if you want to go live in the states. There should be no US taxation issues when living in Japan since the tax rate here is higher.