Every year the IRS for the United States sets the exchange rates to be used for computing your foreign earned income into US dollars (for all countries). These are the official conversion rates that must be used on your USA income tax returns. I spent a really long time trying to find them on the IRS web site and did not find them. Then I called the 800 number in the 1040 booklet and eventually worked my way to an operator through all the voice menus only to be on hold for about 30 minutes at which point I hung up.

For the rest of you out there who might need this information, here is the way to find it very quickly, call or email Roy Waite:

ROY E. WAITE
Homat Tomigaya Grand - 301
2-19-5 Tomigaya
Shibuya-ku, Tokyo 151-0063, Japan
Tel/Fax 81-3-3485-1971
Cell: 090 1850 2210
e-mail: rwaite@gol.com
web site: www.gutzeit.com/ustaxjp

He is nice on the phone and he can also help you get caught up for the last 15 years if necessary under IRS amnesty provisions. Or just do your presently due return.

IRS Tokyo at 3224-5466 has the exchange rates. Takes about 45 seconds. 2002 was ¥123.90.

I have found the IRS in Tokyo (at the American Embassy) quite helpful.

note from admin: from http://usembassy.state.gov/fukuoka/
2001 rate - 121.61 yen

From US Embassy email bulletin dated 30 April 2003:

As a convenience, we have on our web site a list of tax preparers in the Tokyo area. Our purpose is imply to present to you a list of names and contact information to aid in your own careful search for the right person to assist you with your tax needs. The American Embassy does not recommend or endorse these preparers, and assumes no responsibility for the professional ability or integrity of the persons or firms whose names appear in the list.

See the full list at http://usembassy.state.gov/tokyo/wwwhacs-tax2.html

Contact information, forms and other information from the IRS is also available online, here http://usembassy.state.gov/tokyo/wwwhacs-7126b.html

Hello, Can anyone recommend a US CPA who specialise in individual tax return? Thanks!!

I recommend Roy Waite listed at the top of this discussion. He is very easy to deal with and has lots of experience.

Annual 2003 exchange rate for purpose of US tax return not available until 15 Jan.
Tokyo IRS branch will close permanently 30 June 2004
Their fax 03-3224-5274. Also they are closed now for training from 8 - 30 Jan.
You can call 215-516-2000 in Philadelphia (EST working hours) ! Or email by starting at http:// www.irs.gov and going through the "contact us" key.

I'm sorry to see the office close. I guess we didn't know how we good we had it...

At 07:48 AM 01/15/2004, "Anybody ever hear if the tax laws in the USA have changed for people working overseas? I just heard on Eagle 810, for servicemen, that the $80,000 exemption was still in effect, but that they are supposed to pay 15% self-employment tax on their teaching income."

That's nothing new. USA tax payers have always had to pay the 15% social security contribution on self-employment income regardless of where it is earned. I have been paying 15% self-employment "tax" on a portion of my income in Japan ever since I arrived in Japan. (If one hasn't been paying it then maybe one has not been reporting all of one's income ;-) -- Yeah! for those private English lessons...)

Unfortunately it is a headache because there are additional forms that need to be filled out.

I have also heard Al Salazar praised highly for helping US citizens straighten out their taxes.

Salazar Tax Consultancy
2-23-6 Shibasaki, Chofu-shi, Tokyo 182-0014
Tel: 0424-86-8884
Email: ustax@gol.com

BTW, the Republicans in Congress made a major effort to remove the foreign earned income tax exclusion in 2003 and are expected not to drop the issue. (They think we are parasites . . . )

This issue may not be as "partisan" as the previous poster seems to imply. According to Wall Street Journal staff reporters Rebecca Buckman and Dan Bilefsky in their 22 May 2003 article on this topic: "The surprising thing this time, tax experts and businesspeople say, is that Republicans led the charge" since "repealing the tax exclusion has long been supported by some congressional Democrats."

However, even complete loss of the exclusion might not be the doomsday that many envision. According to Mr. Alec Wilczynski, Consul General of the American Consulate General in Sapporo:

-----

"It is true that foreign earned income over $80,000 is 'subject' to U.S. tax. However, there is a dollar for dollar 'foreign tax credit' for any Japanese taxes paid available as an offset against U.S. tax liability. It's all a tad complicated, but the bottom line is that an American citizen living in Japan and making even $250,000 per year will pay little or nothing to the IRS, provided Japanese taxes have been paid.

The Treasury gains very little from even well paid citizens living abroad, and the number of overseas taxpayers is trivial when compared to the millions of taxpayers in America."

-----

Let's hope that the majority of Washington politicians continue to see the reality of this situation as expressed by Mr. Wilczynski - as one having very little impact on overall tax revenue - particularly as unwise individuals increasingly view many things "foreign" in an apprehensive, distrustful manner.

It was mentioned that US citizens are expected to pay 15% self-employment tax on their teaching income. It seems I may have missed something on my tax returns! I had been under the impression that if one falls beneath the exemption rate and paid taxes in Japan on was exempt from paying anything.
I got this impression after a visit and consultation with someone at the IRS office at the US Embassy lo these many years ago. I have been faithfully sending in my tax form with "0" at the bottom and have received no notices or complaints from the IRS. Have I been "breaking the law" all these years!?

The only income that has to be reported as self-employed income is the money you make privately with no connection to an employer. So if you are teaching private students outside of a company or school environment and outside of the payment/tax withholding structure, then that would be the income you would need to declare as self-employment income. (And then you have to do a schedule C form, etc.) You do not have to pay income tax if it is under the $78,000 (?) ceiling, but you do have to pay social security tax (otherwise known as self-employment tax).

By the way, when you work for someone in the USA, they are paying the social security tax for you in part and you pay some of it, look at your pay stubs. The people hired who "do payroll" don't just cut checks. They have to also calculate and pay to the government "payroll tax" which is another name for social security tax plus unemployment insurance premiums and workman's comp. premiums, etc.

The reason the self-employment tax is such a pain in the butt is that it still has to be divided into four parts (for the year) and sent to the IRS as quarterly estimated tax payments. This is why I allocate my "refunds" over to the next year, to avoid all this quarterly calculation. But of course the IRS likes to fudge things up. Last time they sent a refund check anyway even though I asked to have the money applied to the following year. It's especially ridiculous to send a check to the IRS for $50 and have to affix $1.00 postage to it. That's higher than any interest rate you can get on your savings in this country.

OK. The list of tax preparers put up by the US Embassy is in my post above dated 8 May 2003, but here it is again:
http://usembassy.state.gov/tokyo/wwwhtax2.html
Other sites:
http://www.irs.gov/pub/irs-pdf/f2555.pdf This is your Form 2555 which you can print using this .pdf file

About Foreign Earned Income (FEI) exclusion...
At the IRS web site: http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html
And in another place: http://www.bnl.gov/ispo/Internship/FEI.htm

US Embassy --> to IRS: http://usembassy.state.gov/tokyo/wwwh7126b.html

Some links mentioned above have been discontinued. Try this link for the IRS information regarding overseas taxpayers.
IRS Home Page, http://www.irs.gov
Go to 'Individuals' and then 'Overseas Taxpayers'
Find a section of FAQ, which will take you to IRS Publication We really miss the IRS office in Tokyo!

American Embassy American Community February Update includes the following paragraphs on the 2004 IRS exchange rate to be used on your IRS return. This is the first time that I learned that there is no real official average exchange rate! Choose the one that works best for you!
____________________________________
IRS 2004 Exchange Rates
---------------------------------------------------------
The IRS provided us with the following information on exchange rates for use withy our 2004 Federal tax forms:

IRS will not post an exchange rate schedule on its web site.

Instead, here is the US Treasury rate from Financial Management Service (FMS):

Jan - March 2004: 104.02
April - June 2004: 110.19
May - Sep 2004: 108.82
Oct - Dec 2004: 103.11
Average 2004: 106.54

Other options: http://www.oanda.com provides exchange rates. People using that site should obtain the average exchange rate using the 'interbank rate' for the period January 1, 2004 through December 31, 2004. You input that information and the site automatically gives you the average rate for that period for any currency in the world. Per Oanda, the average exchange rate was 108.170.

If you go to http://www.newyorkfed.org/markets/fxrates, you can download the daily rates into an Excel spreadsheet and have the spreadsheet compute the average rate as 108.164.

Any of these rates could be used and accepted. If the IRS were to examine the return and ask how the exchange rate were computed, the individual would need to be able to show how the rate they used was computed. Since any of these are obtained from legitimate sites, they would be accepted.

Note that the Internal Revenue Service (IRS) office serving Japan is located in Philadelphia, and provides U.S. Federal tax assistance to Americans in Japan. The IRS office at the American Embassy in Tokyo closed on June 18, 2004. There is no one at the Embassy or our Consulates who can answer tax questions. However, a lot of information, including a list of paid tax preparers, is on our web site at http://japan.usembassy.gov/e/acs/tacs-7126b.html.

In addition, the IRS Home Page, http://www.irs.gov, has a lot of information available to answer many questions. Go to 'Individuals' and then 'Overseas Taxpayers' you will find a section of FAQ, which will take you to IRS Publication 54. Many questions of overseas taxpayers can be answered from that source.

In addition, if you have tax law and/or other general questions, you can contact IRS via e-mail via: http://www.irs.gov/help/page/0,,id=133197,00.html

This is indirectly related to USA tax returns.
---------------------------------
US-Japan Social Security Totalization Agreement
---------------------------------
On July 26, 2005, the United States and Japan exchanged notes on the implementation of the U.S.-Japanese Social Security Agreement. The agreement will enter into force on October 1, 2005. The agreement, which was signed by Commissioner Barnhart and Japanese Ambassador Kato in Washington, D.C. on February 19, 2004, will eliminate dual social security contributions on the same earnings, resulting in approximately 15,600 U.S. workers and their employers sharing in tax savings of $632 million over the first five years of the agreement.
To learn more about the agreement and its provisions re benefits and coverage, please see the Social Security Website at www.ssa.gov and under "International" on the right, follow the link "what’s new," or go directly to the following link http://ssa.gov/international/Agreement_Texts/japan.html

Application forms are not yet available, but you can direct questions to ssad.varo.manila[at]ssa.gov

I heard that Roy Waite has recently passed away (survived by his wife, Midori, and?)
His passing has left a huge vacuum. He was by far the most established of the US tax accountants available in Tokyo. He was extremely well liked, generous, and accessible.

One friend has told me that Roy is irreplaceable and that she is having a lot of trouble with the idea of working with someone else. There is a feeling of shock because it was unexpected and sudden. It is clear that Mr. Waite commanded a lot of respect and affection, and is sorely missed.

For those looking for a new accountant, you might start here: http://216.71.84.120/e/acs/tacs-tax2.html

The above http://216.71.84.120/e/acs/tacs-tax2.html is apparently a dead link, at least temporarily...
Can anyone else recommend any accountants in Japan? It is OK if they do not English-only service. My friend is a UK national, Japanese-fluent (w/ a Japanese wife) w/ some special tax needs.

Hi everyone! I wonder if anyone can help me with a simple US tax question. I'm an American woman married to a Japanese man. Can I simply file as "married-filing-separately," and continue to claim all of my income under the Foreign Earned Inclusion (as I did before I got married), or do I for some reason need to report my Japanese husband's earnings to the IRS, too?
Thank you for your help!

Rosemary,
You probably want to file separately if you are earning less than $80,000.
Over $80,000 and then you'd have to consider whether the larger deductions outway his income.

By Anthony Torbert on Thursday, March 9, 2006 - 02:42 pm:
In addition, there is a CPA living long-term in Japan who has helped my friends gets thousands of dollars in child credits. http://loophole-lewey.com/

Another good guy is Dan Schouten. He's a CPA in Tokyo and worked with some of the big accounting firms. He has offered to take Roy's former clients at the same low rates Roy used to charge. You can contact him through his website http://www.us-taxcpa.com or by email at Dan[at]us-taxcpa.com I thought he was a great guy.

This website by David Lewis (Kansai) has quite a bit of useful-looking information.
http://loophole-lewey.com/

There must be other good CPAs out there. Any favorites for 2006 (much of the older data is no longer valid).

There is nothing new on that CPA's website about the new tax changes to expat incomes that will affect Americans living abroad.U.S. executives warn expatriate tax increase may backfire

This will have an impact on probably only one or two people that I know, but here it is:

THE NEW YORK TIMES May 30, 2006
Americans Living Abroad Get a Nasty Tax Surprise
By KEITH BRADSHER and DAVID CAY JOHNSTON

HONG KONG, May 29 In an effort to raise revenues, tax writers in Congress added a last-minute provision that retroactively increased taxes for Americans living abroad. But the sudden imposition of new taxes has surprised overseas taxpayers, and it has employers concerned about the added cost.

The increase for Americans abroad was added at the last minute to the $69 billion tax cut legislation that was signed last week. Americans living overseas paid almost $3.5 billion in United States income taxes in 2001, the latest year for which data is available, according to the Internal Revenue Service.

The change, which is retroactive to the beginning of 2006, is expected to raise taxes on Americans abroad by $2.1 billion over the next 10 years.

The suddenness of the move meant that American Chambers of Commerce in Asia did not have a chance to mobilize against the idea as they had in previous sessions of Congress.

"We were held back by the U.S. Chamber because they didn't think it would be popped in this time," said Richard R. Vuylsteke, the executive director of the American Chamber of Commerce in Taipei.

Senator Charles E. Grassley of Iowa, the chairman of the Finance Committee, who has long been a proponent of higher taxes on overseas Americans, has said that the tax policy had been overly generous.

Americans living overseas say the provision wrongly focuses on allowances that their employers pay to cover higher costs — like housing, schools and trips home — that they incur by taking a job abroad. The law changes the way taxes are calculated on subsidies like housing allowances, which should push many of those Americans into higher tax brackets, analysts say.

While the move will have limited effect on Americans living in countries with high tax rates — European countries, for example — those living in low tax jurisdictions with high housing costs — like Bermuda, the Middle East, Singapore and Hong Kong — will be hit hardest, partners at two major accounting firms said.

Over all, the bill raises taxes on overseas Americans by about 6 percent, but most individuals will pay nothing more, while others will see their taxes quadruple.

For Kristine Kraabel, a gift shop owner in Singapore, and her husband, who is now the regional human resources director there for an American company, the new legislation will more than triple their American tax bill. Their tax adviser calculates that they will owe $20,000 to $25,000 more in United States taxes, up from $5,000 last year, even as they pay $20,000 in Singapore taxes.

Americans working overseas get a dollar-for-dollar credit for income taxes paid to foreign countries to offset their American income taxes. They also get to exclude $80,000 from the income they report to the I.R.S. The new law increased the exclusion to $82,400 this year.

But analyses by the accounting firms Ernst & Young and PricewaterhouseCoopers show that by adding provisions to how the exclusion is calculated, it raises the overall tax bill and marginal tax rates as well for some overseas Americans.

Senator Grassley's staff, in a memo, said that the I.R.S. counted 306,393 tax returns claiming the exclusion in 2003, of which only 125,894 paid any American income taxes. When no tax is due it means that foreign income taxes paid by overseas Americans, together with the benefit from excluding $80,000, were higher than those that would be owed to the United States alone.

Michael Abdalian, a tax partner at Ernst & Young, said he has spoken to many employers about the increased tax burden. "Most companies have programs designed to protect their employees from additional taxes," he said, so the expense will likely be borne by employers.

Paying the higher taxes and then the taxes on the higher income to cover the taxes is a costly proposition, Mr. Abdalian said. Because the new rules will push many Americans overseas into higher brackets he said many companies will spend $2 for each $1 their overseas employees pay in taxes. The entire $2 will be deductible by the corporation.

He said rough calculations showed that a married couple paid $300,000, of which $20,000 was a housing allowance, would see their income tax bill rise by about $20,000 and their employer's cost by about $40,000. Most countries exempt their citizens overseas from income taxes, so the law will give companies an incentive to hire Australians, Britons, Canadians and other nationalities for whom they do not have to pay additional taxes.

The Kraabels, who own the Singapore gift shop, are especially upset because they used to live in Decorah, Iowa — Senator Grassley's home state — and still own a house there.

In a furious letter to Senator Grassley, widely circulated among expatriates, Ms. Kraabel contended that overseas Americans subsidize their countrymen in the United States by helping to pay for services they never use.

"You will be hard pressed to find us on federal roads, state roads, county roads, or even to find us on the ruins of Decorah's old green bridge," she wrote. "We are your subsidy. We are your constituents, whose interests you condemn and refuse to represent."

Senator Grassley has long attacked the tax break for overseas Americans as an overly generous subsidy that does little to improve the American economy. Because the tax is retroactive many families are just starting to realize that they did not have employers withhold enough tax from their paychecks for the first five months of the year. Many employers will have to adjust their budgets if they plan to make their overseas workers whole, cutting into capital available for investment.

Senator Grassley's staff said complaints about retroactive tax increases lacked merit because only one estimated tax payment was due before the law was enacted in May.

Jack Whiteford, a regional sales manager in Taipei, Taiwan, said he was worried that his employer, whom he declined to identify, might not indemnify him against the much higher taxes he will face under the new law, making it far less attractive for him to stay overseas. "It's pulling money out of all of our pockets," he said.

Mr. Whiteford's three children would go to public school tuition-free if he were in the United States, he said. But in Taiwan they attend a private, English-language school for which his employer pays $45,000 a year — payments on which Mr. Whiteford will now owe higher taxes.

His employer also pays for business-class tickets for the family to fly back to the United States once a year, and heavily subsidizes his rent, which is higher than it would be for comparable quarters in the United States. The $82,400 exclusion "hardly covers the extra costs I incur" by living overseas, Mr. Whiteford said.

Increasing taxes on overseas Americans was cited in a report last year by the Congressional Joint Committee on Taxation on tax reform and improving compliance, the staff noted, adding that it "has been in the works for at least several years" and should not have been a surprise.

In addition, analysts said the law did nothing about the hundreds of thousands of Americans living overseas who have illegally stopped paying income taxes.

Finding the right exchange rate for the US federal tax returns 2006. Using the site suggested above, http://www.oanda.com/convert/fxhistory, I got 116.34 yen to the dollar average for 2006.
August 15 deadline, here I come!

I used 87.82 for Yen/USD average exchange for 2010, also using the oanda.com site.