Japanese Income Reporting

Questions covered:

My salary gets paid by an employer in Japan. Do I need to file?

Yes, you do. This certainly adds a bit of work to you or your tax accountant, but the effect on your taxes is likely to be minimal. For salaries less than USD $100,300 (for 2016) there is a zero net effect. It is placed on the form first as a positive, and then later on down the form as a negative.

My spouse is not a resident and has no U.S. income. Do I need to get a US tax ID number for them?

No, but there are situations where it may be beneficial to do so. Secondly, unlike Japan, they cannot be claimed as a dependent on your tax return. However, it is important to note that if you are married you are not allowed to file a single. You don’t have to declare your non-US spouse’s information, but you cannot file single on your tax return.

What about my spouse’s parents? Can they be claimed as dependents?

There are rules that must be met to qualify as dependents. One of the key rules is that your parents or your spouse’s parents must have US Social Security numbers or live in the US. Then other conditions such as their income may be further considered to qualify them as your dependents.

My filing status is head of household. Am I required to report income from my Japanese spouse?

No. The only time you must report your spouse’s income is if you file using married filing jointly status. Please see Tax Implications of Foreign Spouse of a US Citizen.

What exchange rate should I use?

Optimizing currency for the benefit of the client is a tool we use to help mitigate tax due. The Internal Revenue Service allows any published rate to be used, as long as it is consistently used throughout the return. There are some rates published by the IRS as guidance, though.

Unlike the tax return which allows more flexibility, the rates for form 8938 and FBAR must be the treasury rate.

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