My wife (who is native Japanese and moved us back here after 20 years in the US) and I (US citizen) have been having a hell of a time trying to figure out how to do our taxes here. We have a very unusual income situation as neither of us work for any company at all, and basically are freelance and have small online business (that is still technically based in the US with funds going into our US bank accounts and a US mailing address for the business) selling products based on our art. All of our clients are international, we have no income derived from clients in Japan.
Because of this, we pay taxes to the IRS despite living here. We have been going back and forth with the Japanese government tax office however, and at first they said we would be credited the amount we paid to the IRS for our 2021 taxes (so essentially we would owe nothing since it turned out we paid more to the IRS than we would have owed to the Japanese tax administration. Then they called us back again and said that actually since we paid the bulk of that tax for 2021 in early 2022 (in January and April of 2022, not unusual in the US), none of that money would count towards our 2021 taxes here in Japan and all of it would instead be applied to our 2022 tax credit here. In 2021 we did pay a lot in taxes (since our business took a huge hit in 2020 during the early Pandemic), so we essentially owed the Japanese government almost as much as what we just paid in the US – basically we are getting double taxed for 2021 because they said they will only give us credit for tax payments actually sent to the IRS in 2021 for 2021!
Has anyone ever encountered this? Is this correct here in Japan? Is this normal? Are we doing this completely wrong? What changes should we make to avoid this in the future?
Any help or guidance, links to good tax guides for complex income situations, or accountants here in Japan (Tokyo or Yamanashi or Nagano area preferably) who are familiar with US expat tax dealings would be massively appreciated. I wasn’t actually planning to be an expat (was planning to bounce back and forth and run our business as normal from the US but the US has become more of a shit show than ever) and thus did no preparation in regards to our business and taxation for actually being a resident of Japan. Ack!