Do you need to file US taxes as an English teacher in China? Having taught English and filed taxes many times from China, in this guide I’d like to turn a complex answer into something easy to understand. Learn whether or not you need to file US taxes as an expat and if so, what you need to know to file.
I remember my first year teaching in China. I had no intention to file taxes back home since I already paid hefty amounts to the Chinese government.
After all, why risk owing more tax money to the US government especially since my employer didn’t report my income to the IRS?
Perhaps you’re in the same position, trying to determine whether you should even bother with taxes. So let’s start by answering the question this very important question: do you even need to bother with filing taxes?
US citizens with any income overseas must file taxes…no ifs ands or buts! On the IRS website, there is a page for foreign expats filing taxes abroad saying:
If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. Your worldwide income is subject to U.S. income tax, regardless of where you reside.
Coming from the IRS itself, that is as straightforward an answer anyone could ask for. If this alone doesn’t convince you to file your US taxes in China, perhaps the fact that should the IRS determine you owe the US government taxes from a previous filing period, they are subject to 3.25% interest and potential fines up to $10,000!
Hopefully we can agree that as a US citizen or resident alien, you need to file your taxes. That’s the bad news. The good news is that I’m about to walk you through step-by-step how to file your U.S. taxes while living in China.
Note: This article may contain affiliate links, which means that at no extra cost to you, I will be compensated if you decide to use some of these tools.
What Do I Need to Know about Filing US Taxes in China?
No matter your tax situation, you can have up to $120,000 of your China salary excluded for the 2023 tax year from federal taxes under the Foreign Earned Income Exclusion (FEIE).
What that means is if you made under US$120,000 from your teaching job in China (which as a teacher, is quite likely), that income is exempt from US taxes. You’ll still need to file your taxes, though, which means you need to fill out Form 2555 from the IRS to claim the FEIE exclusion here.
Does the FEIE mean you are off the hook entirely for paying taxes? That depends on your tax situation and the outcome of when you file. To determine if you can file by yourself or need help from a tax professional, answer the following questions:
- Is your tax situation simple to where you earned most if not all your income for 2020 in China?
- If you have any income from the US, is it on a single W2?
- Do you have zero self-employed income, limited to no tax deductions, investment income or rental real estate properties back home?
- Do you have considerable financial assets in China or stake in Chinese businesses?
- Lastly, if contacted by the IRS, would you be nervous at all in discussing your tax return documents?
If you answered ‘no’ to all the questions above, you shouldn’t have any problems filing on your own, provided you have the time for it.
If on the other hand, you answered ‘yes’ to some of these questions, I’d recommend reading more about what kind of tax professional you’ll need.
Tips for Preparing Your Own Tax Return in China
First things first: I am not a tax professional, so while I’m offering thoughts from my own experience, it’s best to ask your own tax advisor about your specific situation.
Should you decide you can file US taxes in China on your own, I’d jot down the following tips that can help you file:
- Tax Refunds: If you didn’t pay any US taxes, don’t expect a tax refund.
- Tax Software: Tax prep software like TurboTax and H&R Block are useful to help you prepare your return, but they charge additional fees for submitting your Form 2555 (foreign earned income exclusion).
- Pen & Paper: Filing a 1040 and 2555 the old fashioned way using pencil and paper is pretty straightforward and free. Keep in mind, though, that you have a 40% higher chance of having errors and therefore getting audited if you send in a paper tax filing.
- 2-Month Extensions: Expats are always entitled to a two-month-extension to file US taxes. Instead of April 15th, the deadline for submitting is June 15. It’s a bit complicated, though. While you’re granted an automatic extension, if you end up owing any taxes, interest on that money will accrue starting April 15, not June. Also, each state and local level tax deadline is different
Should you do things the old fashioned way and mail-in your return, fill out your return well in advance so that they arrive at the IRS before the deadline. By rule, mail-in returns must be postmarked by the due date and provided sufficient postage to assure delivery.
Don’t forget to also check your home state tax laws, as you may need to file taxes there as well.
Filing US Taxes in China with a Tax Professional
Should your tax situation be more complicated than just having a single source of income or if you want peace of mind when submitting your taxes, I suggest working with a tax professional.
Should also be in need of a tax professional, I recommend using a service like 1040Abroad. The fact is that while the average tax professional could probably help you file your taxes, finding a company that specializes in expat taxes is much better.
Using a service like 1040Abroad you can:
- Get assistance in filing your 2020 Federal and State taxes
- File late taxes from previous years
- Receive other tax consulting and advice
The best part of using a dedicated expat tax service is that they take all the pain out of filing your taxes and do it all for you fast. For most services, you can expect to pay a fee of about $300-$400 for a federal return, plus more if you want to add state taxes or other additional services.
And for those who are worried about uploading sensitive documents online – I know exactly how you feel. Any respectable tax service will provide you a way to upload and download documents in a secure way, but I also recommend connecting to a good VPN to encrypt your data as you transfer sensitive documents back and forth.
Final Thoughts | Filing US Taxes in China
As tax season picks up, remember that if you are a US expat working or traveling overseas, you must file your taxes with the IRS. Period. How you should file these taxes, however, depends on your individual situation.
If all your income came from a single employer and you have zero or few financial assets at home and abroad, chances are you can file a DIY return online. If your tax situation is more complex to where you have an LLC, investment income both at home and abroad, rental property, etc., I’d seek out a tax professional like 1040Abroad to help you file.
Remember the deadline for US expats to file is June 15! Hopefully you won’t end up owing the IRS, but if you end up owing taxes, my resources on sending money to China can help with paying back the IRS to avoid fines.
Hey Dan, to pass the physical presence test, you have to have lived abroad for 330 out of 365 days – but it doesn’t have to be a calendar year. This is an important distinction that allows most teachers to still submit Form 2555.
Most teachers I know use at least one of their vacations periods to travel elsewhere. As long as that’s not back in the US, you can still pass the physical presence test. You don’t have to stay in China the whole time.
If you have questions, contact a tax professional! Hope that helps 🙂