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Credits

Thanks to Nureth from the MovingToJapan Discord Server for creating the initial version of this guide!

Introduction

So. You’re from the US. The country with arguably the worst tax system for citizens (if you’re not mega rich). But now you’re in Japan, which also makes this whole process much more annoying. It’s daunting, but this guide is here to help (hopefully!).

Let’s very quickly set our expectations:

This is a simple (as simple as any US tax guide can get) guide to filing your US taxes from abroad. This means that if you have anything that really complicates your taxes, this guide will not apply to you. This includes having a spouse, owning property/renting out property, or selling stock. If you are unsure about what this guide covers, please refer the to “Requirements” section.

DISCLAIMER: This guide is currently written for the 2020 tax year and based on the 2020 tax documents. In case any of the documents change in the future, please make adjustments accordingly.

Requirements

Before starting the guide, please check these requirements:

  • You are employed through an employer (i.e. not self-employed because this guide does not cover such cases)
  • You only have income in Japan
  • You have been in Japan for at least 330 days of the last year, or if you have lived in Japan for at least a year
  • For 2020, there are special COVID-19 exceptions to this if you left Japan and could not get back. Please check here: https://www.irs.gov/pub/irs-drop/rp-20-27.pdf
  • You have earned less than the threshold for the Foreign Earned Income Exclusion (FEIE) for the corresponding year:
    • 2018: $103,900
    • 2019: $105,900
    • 2020: $107,600
    • 2021: $108,700
  • Be SINGLE

Note: It might help to check out these FreeFile options to see if there are online alternatives for your situation before moving on: https://apps.irs.gov/app/freeFile/browse-all-offers

What you need

Additional Documents Depending on Situation:

  • If you have any money in the US in a bank account that gives you interest
    • Get a 1099-INT from the bank
    • This form shows how much interest you earned with your money in the bank

How to fill out the forms

Foreign Earned Income Exclusion (FEIE) Thresholds by year:

  • 2018: $103,900
  • 2019: $105,900
  • 2020: $107,600
  • 2021: $108,700

Form 2555

Let’s start with the Form 2555 (FEIE). For Part 1, just fill in the information by answering the questions. This is all personal information, so you must fill it out accordingly. In Part 2 or 3, you will fill out the requirements of determining if you count as a foreign resident.If you have lived in Japan for at least a year, fill out Part 2. If you have been in Japan for 330 days of the last year, then fill out Part 3. Again, these are more personal questions, and should be answered based on your situation. If you left Japan and could not come back, please check this document to determine if you still qualify under the COVID-19 exceptions: https://www.irs.gov/pub/irs-drop/rp-20-27.pdf

In Part 4, enter the total amount of money you earned as part of your income on line 19. You can get this number from the Income Tax Withholding Statement document you received from your company and converting it to US dollars. You can most likely just take the total and convert it when you fill out the form. No need to retroactively convert everything when you received the money. Afterwards, you can enter the same value for lines 24, 26, and 27. You may also enter a value for line 25 if it applies (in which case you have to re-calculate line 26 and 27). If you have to ask what qualifies for line 25, then it doesn’t and you don’t have to worry about it. Lastly, in line 27, you most likely will answer No if you meet the requirements of this guide, and proceed. Otherwise, you really need something more advanced than this guide...

In Part 7 and 8, you just need to follow the instructions written out on the form. At the end, you should be able to come up with the same numbers on lines 27 and 45. Keep in mind, you can basically just treat a blank line as a 0. [4:26 PM] Form 1040 Schedule 1 Now onto the Form 1040 Schedule 1. If you meet all the requirements at the beginning of this guide, you should not have any other types of income and/or deductions to claim. In that case, fill out -$X on Part I line 8 and 9 on the right side in the boxes where X is the value from line 45 on your Form 2555. Make sure to include the negative sign.

In addition, on the same line, after “Other income. List type and amount”, write Form 2555. This indicates that you will use Form 2555 (FEIE) to deduct from your taxes.

If you have no other income or deductions, you can just fill out 0s for the rest of the fields, or just not fill them in at all.

Form 1040 Schedule B

For Form 1040 Schedule B, everyone in Japan will have to fill out Part III because you will have to have a Japanese bank account to earn money in Japan anyways. This also means you must fill out the FBAR, which will be covered in the FBAR section.

If you have any interest from a bank account in the US, you will have received a 1099-INT form for each of them. Enter that information into Part 1 lines 1, and fill out the fields in Part 1 accordingly. (You most likely won’t need to enter anything for Part 1 line 3)

Form 1040

Last form! For the beginning of Form 1040, you must enter your personal information, so please do so. Next, enter the converted amount in US dollars for the total income you got from your Income Tax Withholding Statement from your employer in line 1. Next, in line 2, if you had any interest from US banks, enter the amount from Form 1040 Schedule B Part 1 line 4 into line 2b. You also need to copy the value from Form 1040 Schedule 1 Part 1 line 9 into line 8. Calculate line 9, and enter it’s value. You can then claim the Standard Deduction by entering the Standard Deduction into line 12 (The Standard Deduction can be gotten from the information box extending from line 12). Lastly, just fill in the rest of the form by following the instructions on the form and performing the correct calculations according to the instructions.

That’s all the forms you should need to fill out!

Now, just make a copy of all of your original documents (The Income Tax Withholding Statement, any 1099-INT forms, and all of the forms you have filled out here) for record keeping. Then, you can load up all of the documents you have into an envelope and send it off to the IRS!

FBAR

to be written