The Day I Did My Taxes

It had been over a decade since I last filed my taxes. But no longer can I be labelled as a tax evader – as of today I am a law-abiding citizen. My justification for not doing them was that I was living outside the U.S. (yep, it’s been ten years now!) and in a legal grey area. I have been worried though, as to whether this would hold up or not.  

There are exactly two reasons that I finally broke my streak and did my taxes this year:

The first reason is fear. I was and still am afraid that the U.S. government will revoke my passport, that I will have to go on the run from the IRS, jumping from one country to another on fake identification. This is an unlikely scenario, but at the very least I would be forced to pay some backed taxes and a hefty fee, right? Honestly, I have no idea. It’s fear of the unknown. 

The second reason is curiosity. I wanted to see what the whole process was like. I’ve heard that doing your taxes can actually save you money depending on what deductions you get.

So last month I spent several hours on the IRS website, downloading and filling out forms, inputting my figures and finally came out with some god-awful sum to pay.

I then buckled and signed up for TurboTax. It cost $80 to relieve the headache. My total paid to the IRS: $11.

I also of course get the 1040 form filled out so that I can replicate it next time and do it on my own. 

I had two forms from two different investment banks showing how much tax I owed on stocks and brokerages. I did not have a W-2 because I don’t receive one working in a foreign country.

I think the key to making it work is having your deductions (line 40) be more than your adjusted gross income (line 38). I was being taxed heavily on ‘ordinary dividends’, so in 2017 I’m going to try to reduce that part of my portfolio.

I didn't see any mention of the Foreign Earned Income Exclusion, though it's certainly worth looking into if I do declare income in China (I didn't this time since I had no W-2 form).

How to Send Money Home from China

Where patience goes to die

Part of reaching baller status is building up a big fat cushion of money.  To do that I need to send a hefty portion of my income back home. I do my banking through Bank of China (BOC). The waiting time is abysmal and the processing speed of transactions is just as forehead-smackingly slow. But from what I hear all banks are like this, so I'm sticking with BOC.

In order to invest some of the money that I'm earning I need to send it to a bank in the U.S. I invest with Vanguard and cannot send either USD or CNY to them directly, so the process I use is this:

1. Visit the BOC in person, usually on a weekend morning (yep, they're open Saturdays and Sundays so they're not all bad) with the following documents ready:

• Passport (make sure it's the one you registered the account with)
• Bank card
• Employment contract (make sure it is the most up-to-date version)
• Work permit
• Tax receipt (I request the HR department of my company to provide this each month. The heading of the document looks like the screenshot to the right. It lets the government know that taxes have been paid on your received income.)



Tax Receipt Heading

• Information on where to send the money. This includes the bank name, address and phone number, account number and routing number. In my case I used a checking account I've had for years with my credit union in the U.S.  Note: After the first remittance you can just bring one of the carbon copy receipts that they give you - this has all the information about the bank written conveniently for the teller.  

2. When I get to the teller window, they'll ask for all the items listed above. The first process is transferring the RMB that I've been paid in to USD. They will calculate the amount I can transfer by the tax receipt and my contract. I usually have them transfer all of it, which typically comes out to just over 2,100 USD per month. Full disclosure: This is not all of my salary. I believe the government wants to make sure I have enough to live on as well. I'm fine with this number, since it's about as much as I'm able to send back. If I earned more, perhaps I could send back more, but I'd have to check to make sure.  

3. After the RMB has been converted to USD, they will send the money. During this process I'll need to input my PIN number and signed my name several times and many paper copies will be made. Two fees will be charged: 150 RMB and 50 RMB - my guess is that one is for the exchange and the other is for the remittance. So far this has been a flat fee for me.

4. The money will appear in my credit union account several days later and I'll invest it in a Vanguard index fund. Boo yeah!

I've been going through this process for almost a year now every month or two. I have also heard that Alipay can do the process for cheaper (only a 50 RMB fee) and without having to visit the bank. I can't confirm this, but I think it's worth looking into.

If you're working off the books, this probably won't work very well as you won't be able to offer a tax receipt, so you'd need to find a work-around.