Cashing in an overseas retirement fund

I have a "theoretical" question at this point.

If I were to cash in some of my retirement fund from the states (say under 8000 worth), do I have to report that on my German tax declaration? Do they expect to get any of it. Normally I report "no other income" because normally the only income I have is from Germany so never had to worry about it. But I dont know how it works with something like this as it isnt really income.

Anyone had any experiences with this.?

I know all about the US side (penalty, taxes etc...) so not asking for any comments on this - only on the German side.

Thanks

you have to report it. they won't tax it if you've already paid US-taxes for it, but they will add it to your overall income, so probably you'll have to pay a higher rate of taxes on the German part of your income. If you don't report it, and they'll find out, you can always claim you didn't know. But they'll ask you to send in all the details and you'll get retaxed, with additional tax to pay / less reimboursement (and from then on, it will be difficult NOT to report it any more, cause they will ask for it!).

This might help: expatica.com / story_id=1130

I dont really know where this income would fall under in the link provided by Elizabeth.

I only expect to make between 20,000 and 25,000 maximum this year. If I cash in the retirement fund it would only be roughly 5500 euros and I would have paid the penalty and taxes in the US. I am assuming since I have a quite low income already, that it wouldnt be much???

What would I expect to have to pay to Germany as the "added income" as mentioned by zee?

Thanks for any help, I really know nothing about any of this stuff. I of course have a tax guy do my declaration here, but want to find out what I am looking at first before mentioning it to him, as then is no longer theoretical

edit - single and no other income other than from my job (normal, not self employed) if that helps someone to have an idea of what I would have to pay extra.)

Thanks again

Hi,

I had a similar experience. You can see my post "Canadian RRSP income whilst living in Germany, Taxes and the "Registered Retirement Savings Plan" . My wife and I cashed in Canadian retirement accounts, and we assumed that they we tax free, so we did not report them. I received a letter from the government saying I had to redo my taxes in the years that I cashed the accounts. The Canadian government informed the German government about the income.

As has been mentioned, they add the "tax free" income to your German income, and then they check the effective tax rate at this higher income. They then apply this rate to your German income. In my case, I eneded up paying about 15% of my Canadian RRSP money to the German taxes authorities. I had also been charged 25% tax in Canada.

Thanks,

Ken