Do I have to pay Taxes for my Online revenue?

[Dante2019 9]

I made some money from my Android Applications under $1000 last year. I currently live in South Korea. All the money goes to my US bank account. Do I owe the IRS any money or is that income I can claim in my Bona Fide Residence?

[pablo2752 106]

You pay tax on everything you earn. As annoying as it is, US taxes worldwide income. 

That being said, look up the laws about foreign income. 

[Merica-n 65]

17 hours ago, Dante2019 said:

I made some money from my Android Applications under $1000 last year. I currently live in South Korea. All the money goes to my US bank account. Do I owe the IRS any money or is that income I can claim in my Bona Fide Residence?

Did you write and produce the app and while you were residing in Korea?

Did your provide your South Korean contact information and address to google, or did you list a Usa address when you signed up as a developer?

Were all the app sales to USA android App Store customers or were the customers also in Korea?

Did you receive a us 1099 on the income?

 

The answer to whether you have to report the income on your taxes is yes.  

 

I'm not sure if you can exclude it as foreign income or not, but answering these questions will help make it more clear.

[Dante2019 9]

2 hours ago, Merica-n said:

Did you write and produce the app and while you were residing in Korea?

Yes.

 

2 hours ago, Merica-n said:

Did your provide your South Korean contact information and address to google, or did you list a Usa address when you signed up as a developer?

I used my US address. But I can change it at any time.

 

2 hours ago, Merica-n said:

Were all the app sales to USA android App Store customers or were the customers also in Korea?

Adsense. All over the world.

 

2 hours ago, Merica-n said:

Did you receive a us 1099 on the income?

I didn't withdraw the money out of the google. So no.

 

[Wuozopo 4,293]

22 hours ago, Dante2019 said:

I made some money from my Android Applications under $1000 last year. I currently live in South Korea. All the money goes to my US bank account. Do I owe the IRS any money or is that income I can claim in my Bona Fide Residence?

 What is your status? Are you a US citizen or greencard holder? A Korean who lives in Korea with no resident ties to the US?

 

[Dante2019 9]

8 hours ago, Wuozopo said:

 What is your status? Are you a US citizen or greencard holder? A Korean who lives in Korea with no resident ties to the US?

 

US Citizen. Also, In 2021, I didn't left Korea.

[Wuozopo 4,293]

15 minutes ago, Dante2019 said:

US Citizen. Also, In 2021, I didn't left Korea.

As a US Citizen you are obligated to file a tax return just like if you were in the  states if you earned enough income to file.  That would be income earned in the US or Korea or anywhere else in the world converted to US dollars. It includes investment earnings as well

If single, file if you earned at least $12,550  ($14,250 if age 65+)

If married, file if you earned $5. 

 

So you report all your worldwide income…wages, interest, dividends, capital gains.

Then you use form 2555 to exclude Foreign Earned Income (that’s money from a job or service you performed). You won’t have US tax on any “earned” income.  If you have “unearned income” meaning from investments, that is taxable. Just keep working through the return to the end. 
 

Likely you will owe zero or very little US tax and you have met your obligation as a US citizen to file. If you are a single guy and didn’t make at least $12,550 then you don’t have to file at all.

 

Did you get your $1400 (stimulus #3) from the US government? 

 

[Dante2019 9]

On 1/20/2022 at 11:15 PM, Wuozopo said:

Then you use form 2555 to exclude Foreign Earned Income (that’s money from a job or service you performed). You won’t have US tax on any “earned” income.  If you have “unearned income” meaning from investments, that is taxable. Just keep working through the return to the end. 

I created the Apps and I use their Google Adsense platform to make money, would that make me self employed? Can I still use form 2555 for income I earned from Google even though it's a US company and not pay the IRS any money?

 

I made over $12,550 in Korea. I will use Form 2555 from the income I got in Korea.

 

Is it possible that I can add my Korean income plus what I earned from Google Adsense in Form 2555?

 

On 1/20/2022 at 11:15 PM, Wuozopo said:

 

Did you get your $1400 (stimulus #3) from the US government? 

Yes, I received it.

[Wuozopo 4,293]

9 hours ago, Dante2019 said:

made over $12,550 in Korea. I will use Form 2555 from the income I got in Korea.

 

Is it possible that I can add my Korean income plus what I earned from Google Adsense in Form 2555?

It’s not based on where the income was paid into your bank account, if paid in dollars or won, or anything to do with Google Adsense. Taxation is based on income tax treaties between two countries. Often treaties state you are taxed by the place where you live, have a place of abode, etc. So you should be taxed by Korea for your income there and your app sales because that is the place you reside.  
 

The Korea/US treaty is here https://www.irs.gov/pub/irs-trty/korea.pdf

 

After briefly looking at it, the takeaway I get is you pay Korea for the app income along with any Korean income because you are resident in Korea. On your US return you will report all that income, but any US tax generated by that income will be credited back to you by using form 2555. 
 

it’s a very long-winded document, but the part with the briefest explanation that answers your question is—

 

ARTICLE 18 Independent Personal Services
(1) Income derived by an individual who is a resident of one of the Contracting States (Korea) from the performance of personal services in an independent capacity, may be taxed by that Contracting State (Korea). Except as provided in paragraph (2), such income shall be exempt from tax by the other Contracting State (US).
(2) Income derived by an individual who is a resident of one of the Contracting States (Korea) from the performance of personal services in an independent capacity in the other Contracting State may be taxed by that other Contracting State (US), if:
    (a) The individual is present in that other Contracting State (US) for a period or periods aggregating 183 days or more in the taxable year;

    (b) Such income exceeds 3,000 United States dollars or its equivalent in Korean won in a taxable year; or
    (c) The individual maintains a fixed base in that other Contracting State for a period or periods aggregating 183 days or more in the taxable year, but only so much of his income as is attributable to such fixed base.

 

That paragraph 2 doesn’t apply to you because you weren’t present in the US for 183 days in 2021. 

[Dante2019 9]

@Wuozopo

Thank you. 

[Wuozopo 4,293]

On 1/21/2022 at 8:48 AM, Dante2019 said:

I created the Apps and I use their Google Adsense platform to make money, would that make me self employed?

And to your previous question, yes you are self employed for anything that you did on your own and not as an employee of another person/company that sets your hours, issues you a regular paycheck, etc. You will use Schedule C to report your self-employment income, not the regular place where wages from employment go on the return. You also have the opportunity on Schedule C to deduct business expenses and reduce that $1000 earned. Money you had to pay Google for their service is likely an expense of doing business under advertising maybe?  Or perhaps a commission? Read the details in the instructions for the form. 

Schedule C will give you a net profit or loss for your business and will plug into Schedule 1

Form 2555 will give you your Foreign Earned Income exclusion and plug into Schedule 1 as a negative number

The total of those will be a negative number and will go on the 1040 on Line 8 Other income. 

See Schedule 1 below. It’s just a gathering place from other forms to get one total to put in “Other Income” on the 1040. Kind of an intermediate step to get to the main tax form 1040.
 

Edited January 22, 2022 by Wuozopo

[Dante2019 9]

@Wuozopo

Thank you so much for that information.

 

Off topic question. I'm planning to work remote for a company in the states this year. The pay is less than 60-80K a year. Since I will live in Korea for the rest of this year without entering the states. Can I use Form 2555 to not owe money to the IRS? From what I understand from the previous answers, since Korea and the US has a tax treaty, I don't owe money to the IRS, but I will have to pay taxes in Korea for the income I earned from the US.

[Wuozopo 4,293]

9 hours ago, Dante2019 said:

@Wuozopo

Thank you so much for that information.

 

Off topic question. I'm planning to work remote for a company in the states this year. The pay is less than 60-80K a year. Since I will live in Korea for the rest of this year without entering the states. Can I use Form 2555 to not owe money to the IRS? From what I understand from the previous answers, since Korea and the US has a tax treaty, I don't owe money to the IRS, but I will have to pay taxes in Korea for the income I earned from the US.

That is the general concept of the treaty from the brief look I had. Of course there are so many variables with each person’s particular situation, like how much you earned in investment income that it’s impossible to say you will owe zero on your income. Will the US employer treat you as an employee or a contractor?
 

You will owe the US “self-employment tax”. That is based on your Schedule C self employment income that you calculate…profit after you have taken any business deductions. The form in your tax return will be Schedule SE. It’s the form that calculates how much social security and Medicare contribution you need to pay on your earnings. If you are working as a contractor, then your earnings are self-employment income and this is how you make your own contribution to social security and Medicare. If you are working as an employee, then your employer holds that out of your paycheck and sends it to the IRS on your behalf. He also holds out US income tax. As a contractor, the employer pays you your gross wages, nothing held out, and it’s up to you to pay any taxes you may owe and make your social security and Medicare contributions using Schedule SE. The rate is around 15% but you get to reduce that by half on Schedule 1.
 

Until you put pen to paper and work through a tax return or even a hypothetical one, you won’t know how it’s going to come out. There’s so many nitty gritty bits and pieces depending on the person. The concepts I’ve told you are very general and would lead you to things you need to dig deeper into. IRS.gov has something on just about any topic you want to know.
 

Also if you want to do this yourself, I would go to Amazon and buy the download software TurboTax Deluxe Federal Only ($30) and install on a computer. Then you can play with various scenarios and also do your 2021 return. You just save each each with a different file name. You could do a hypothetical return for you plans for 2022 tax year and save it with a file name like 2022hypothetical so as not to mess up your 2021 data. The rates and such can change slightly for actual 2022, but it would be close enough to get an idea. TurboTax will gather your information and create the forms and put all the data in the right boxes and do all the calculations. Then you can see/print all the forms to have a look.  The things you will need to research are what is allowed as a deduction on your “business” and decide where you might deduct any costs like if Google charged you. Is it advertising or what?  For 30 bucks, you can try it out and see if it all becomes clear as you work through it. If it is just more than you can comprehend, then pay an international tax consultant a bunch of money to do it for you. You’re only out $30 to try it yourself. I really like the installed on a computer version because you can create any number of “what if” scenarios by saving different file names. 

Edited January 24, 2022 by Wuozopo

[Dante2019 9]

On 1/25/2022 at 1:22 AM, Wuozopo said:

Will the US employer treat you as an employee or a contractor?

I will be treated as an employee. 

 

On 1/25/2022 at 1:22 AM, Wuozopo said:

Also if you want to do this yourself, I would go to Amazon and buy the download software TurboTax Deluxe Federal Only ($30) and install on a computer. Then you can play with various scenarios and also do your 2021 return. You just save each each with a different file name. You could do a hypothetical return for you plans for 2022 tax year and save it with a file name like 2022hypothetical so as not to mess up your 2021 data. The rates and such can change slightly for actual 2022, but it would be close enough to get an idea. TurboTax will gather your information and create the forms and put all the data in the right boxes and do all the calculations. Then you can see/print all the forms to have a look.  The things you will need to research are what is allowed as a deduction on your “business” and decide where you might deduct any costs like if Google charged you. Is it advertising or what?  For 30 bucks, you can try it out and see if it all becomes clear as you work through it. If it is just more than you can comprehend, then pay an international tax consultant a bunch of money to do it for you. You’re only out $30 to try it yourself. I really like the installed on a computer version because you can create any number of “what if” scenarios by saving different file names. 

Thank you for this information. I will try that approach you mentioned. 

 

Thank you again Wuozopo for your time and knowledge.