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So you received a Fulbright fellowship to teach English in Taiwan. Congratulations! And they’re even going to pay you! Great! But if they’re paying you, you’ll have to pay taxes… so here’s my guide to doing your Taiwan Fulbright English Teaching Assistant taxes.

Note: Many of the considerations here are specific to Fulbright English Teaching Assistants (ETA’s) in Taiwan. If this exact grant doesn’t apply to you, you may be better off simply taking a look at the IRS’s guide for Fulbrighters and also the Tax Guide for U.S. Citizens and Resident Aliens Abroad. I am not a Certified Public Accountant, tax advisor, nor Enrolled Agent¹ so your mileage may vary. Consider yourself warned.

Leaving the States

First, make sure that any employers you’ve had so far this year know some permanent address of yours (your parents’, say) and will send your income statements to that address come next January. If they only have some temporary address of yours, try to see if you can change that record with your employers before you leave. Worst case, you won’t get one in the mail, and you’ll call them up when you start your taxes and have them send it to you then.

Your Taiwanese income

In terms of actually doing your taxes: there are a few things to note, most of which they will tell you during orientation or afterwards:

1. Your Fulbright payment will not exist in Taiwan for tax purposes—i.e., you do not pay Taiwan taxes—but they will count toward US taxes.
2. The ETA-ship payments, according to the IRS’s own guidelines count as wages, not as scholarships, for tax purposes as, after all, they’re paying you to teach.
3. You will not, however, receive a W-2 form for your “wages”—instead you’ll get a nice letter from the Foundation (with your income in US$) which you can use as proof of those wages.

All of the above are pretty straightforward. The bottom line is, you pay federal taxes just as if the job were in the US. The only major difference is that approximate payments will not be withheld from each paycheck like it would be in the US.

Filing your federal taxes

The fact that you’re filing from abroad, however, adds a few other issues:

1. Whenever you file from abroad, you get an automatic two month extension on filing. While there’s no penalty to do this and file by June 15th, if it turns out that you do owe taxes, those taxes will still have interest accruing since April 15th. So it pays to just figure it out earlier rather than later.
2. If you end up being out of the US for more than 330 days, as some ETA’s may (depending on their itineraries, or if they decide to stay in Taiwan afterwards), there’s an option to take a Foreign Earned Income Exclusion (IRS Form 2555), which lowers your tax liability in the US (and thus, lowers your taxes). It’s a bit complicated, however, so even if this option applies to you, if you’re like me and enjoy doing your taxes, you can calculate your taxes both ways: with and without Form 2555. My personal experience was that, as I was already filing for certain educational credits (Lifetime Learning), it didn’t matter whether I used it or not, so I didn’t.

State and local taxes

Finally, there’s the issue of state and local taxes. The bottom line is that you pay state and local taxes only for wages that were made in those states. The way this is done in most states is by filing a non-resident/partial-year-resident form which makes you calculate your total adjusted income and also your your adjusted income in that municipality, and charges you the appropriate tax based on your income in that place. As your Taiwan wages weren’t in any US state, they won’t count toward any state or local taxes.

Help is just a phone call away

If you get confused along the way, there’s always the option of calling the IRS. The IRS has a 1-800 number for individual taxpayers (1-800-829-1040), and 1-800 calls are free from Skype.

Related posts:

1. Obama for Taiwan 2008
2. Survival Tips for Visiting Taiwan
3. Family in Taiwan
4. 北京 Part 1: Fulbright love, the Forbidden City, the Temple of Heaven, and Houhai
5. Affirmative action, Taiwan style

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Tags: abroad, Fulbright, IRS, Taiwan, taxes

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This entry was posted on Monday, July 14th, 2008 at 10:11 am and is filed under how to. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.