Straightpoop

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About Straightpoop

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  • Nationality USA
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  • Year of birth 1949

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  1. Owing self-employment tax to the U.S.

    Try going to Schedule SE and overriding the computed result and/or the basis for computation carried over from Schedule C so that the tax result is "0".   If that doesn't work, print out Schedule SE, white out the tax or stick an opaque label over it bearing the word's ("Treaty Exempt" IRC §1401(c)) and file your return on paper.  (If you are claiming treaty exemption and attaching a D-USA 101 you have to file on paper anyway.)
  2. US Citizen foreign investment income

    Okay, let's be kind and see if we can find a way to interpret @Idyllic Blues's Steuerberater's advice in a way that does not having the local Steuerfahndung howling for his blood.   But first:  Idyllic Blues appears to have a correct understanding of the taxability of his investment income from US sources.  All of it is subject to tax in both Germany and the United States. (Subject to tax does not mean "actually taxed".  It is the difference between having a loaded gun pointed at you as opposed to someone actually shooting you.)   The treaty gives Germany the exclusive right to tax US-source interest and capital gain from the sale of intangibles (e.g. stock or bonds).  The US is allowed to impose a maximum 15% tax on US-source dividends for which Germany will give a tax credit against the German taxes that the treaty allows Germany to impose on this US-source dividend income.   To avoid double taxation, US-source interest will be "resourced foreign" under the treaty (Art 26) so that the US citizen can claim a foreign tax credit on his US tax return for whatever tax Germany actually imposes on that US-source interest.   Capital gains - if Germany's tax is at least 10% - will be deemed foreign sourced if Idyllic Blues is resident in Germany and he can claim a foreign tax credit for any German taxes imposed on this item of investment income.   So, in light of all this how to give the Steuerberater the benefit of the doubt?   Well, Idyllic Blues statement of facts to the StB said that the amount he proposed to invest would be small.  If so, then perhaps the Steueberater assumed (ah, that word) that the US investment income - together with all other taxable income would fall below the annual €801 Freibetrag (€1,602 if Idyllic Blues is married) and hence would not need to be reported to much less taxed - by Germany.   So . . . until all of Idyllic Blues investment income exceeds the German Freibetrag, he may follow the StB's advice to not bother reporting it on Anlage KAP.  In the meantime, of course, he will be reporting it and paying whatever tax is owed on it to the IRS. Depending on the nature, source and amount of all his other income it may very well be that he'll end up owing no tax to either country.          
  3. US Citizen foreign investment income

      Ask the Steuerberater to put this in writing and sign his name to it.  Tell him you intend to share his written opinion with the local Finanzamt and Steuerberaterkammer.   His advice - assuming you have accurately reported it - is at best wrong and at worst might very well be interpreted as aiding and abetting tax evasion (Steuerhinterziehung).  
  4. US working in germany, US LLC question

    What is a "DTT threshold"?   What does "falls below the double tax treaty" mean?   What, exactly, is the business of the LLC?   Why has it chosen to organize its business as an LLC?   How will you pay for your interest in the LLC?   Cash?  Services?  Good looks?   When is the LLC expected to be profitable?   When is the LLC expected to distribute such profits to its shareholders?   What (co)-management responsibilities in the LLC will you have as a partner/shareholder/corporate officer?    
  5. How German tax law applies to distributions from a US IRA/401(k) plan to a German tax resident remains an unsolved mystery.   The introduction into force of Article 18A of the USA-Germany tax treaty clarified many important aspects of taxation in the accumulation/contribution phase.   The existing Art 18, of course, clarifies the issue as to which of the two countries has the RIGHT to tax such distributions, but the treaty did not (and could not) clarify how the two countries, Germany and the USA, would tax distributions under their respective national tax laws.   In 2012, the OFD Karlsruhe entered the debate with a poopsheet (Merkblatt) containing its view as to how such distributions should be taxed:   https://datenbank.nwb.de/Dokument/Anzeigen/449077/   My question relates to the meaning of the word "Kapitalleistung" used by the OFD Karlsruhe in Section 2.2b of its opinion concerning the taxation of IRA distributions based on contributions that were tax-free only in the USA at the time they were made (i.e. generally before the treaty went into effect on 1.1.2008).   In its analysis, the OFD Karlsruhe makes a distinction between two types of distribution:   1.  A lifelong annuity/pension (Leibrente) and 2.  A Kapitalleistung   Leibrente is easy to understand and, in the case of an IRA could be accomplished by the simple expedient of arranging for the "annuitization" of the IRA.  (Economically, this is usually not very favorable especially in the current low interest rate environment but it would - if the OFD KA is correct - have the advantage of clarity as to how the distribution would be taxed.)   It is the meaning of "Kapitalleistung" that has me scratching my head.   Specifically, does the term imply a COMPLETE distribution, i.e. a "lump-sum" distribution of the entirety of an IRA/401(k) account or can the term embrace a PARTIAL distribution, i.e. one that is less than total but also not made as a life-long annuity (Leibrente)?   The OFD KA thinks that Kapitalleistungen are the way most IRA distributions are made.  If "Kapitalleistung" includes something less than a total distribution, then they would be 100% correct because few IRA owners elect either complete distribution or annuitization.   In the vast majority of cases involving an IRA, the beneficiary elects either to make a partial withdrawals from time to time after attaining age 59 1/2 or waiting until they reach 70 1/2 and are forced to make what are known as "Required Minimum Distributions (RMD)".   (RMDs, by the way, are computed according to a fixed formula that is based on attained age, life expectancy and the fixed total value of all IRAs on 31 Dec. of the year preceding the respective distribution year.  An RMD plan can normally be agreed with the IRA custodian who then does all the annual calculations and makes the required annual distribution for as long as the beneficiary is alive.  Such a plan has a lot in common with a "Leibrente" but with one important - possibly crucial - difference: it can be cancelled or modified by the beneficiary at any time.)   If such partial - or rather:  non-annuitized - distributions are considered "Kapitalleistungen" then the OFD KA says that the "income portion" - i.e. the difference between the contributions made and the amounts distributed will be taxable at the 25% Abgeltungssteuer rate as provided in § 20 para. 1 Nr. 6 of the EStG (Kapitalerträge) read in conjunction with § 32b EStG (Abgeltungsteuer).   Assuming the taxpayer has a complete set of records, the computation of income is easy in the comparatively rare case of a COMPLETE distribution.   But what if the taxpayer chooses neither to annuitize or completely distribute his IRA but instead elects a partial payout?  Would this be a "Kapitalleistung" in the opinion of the OFD KA?  If so, then how would the Ertragsanteil be computed?   Proportionally, i.e. the same way the IRS computes the taxable portion of an IRA in which the beneficiary has a "basis", i.e. non-deductible contributions (under US tax law)?   Or, would each distribution first be deemed a "return of capital" until the entire amount of contributions had been distributed and after that 100% of distributions would be deemed income subject to Abgeltungssteuer?   Of the two, the first - proportionate - makes a lot more sense but that's just my opinion.   The last issue is one I suspect no one can solve:   How does an IRA beneficiary substantiate their contributions to an IRA/401(k) that will be (German) tax-free under § 20 Para. 1 Nr. 6?   German tax law assumes - in its paternalistic way - that the insurance company or some other institution keeps records of contributions.  Not so in the USA. An IRA owner may change trustees several times and the new custodian has no knowledge of what went on before. An IRA can be inherited.  An IRA can be the result of a conversion from an employer-sponsored 401(k) or similar plan - sometimes for decades.   What practical avenue is available to the IRA beneficiary in Germany who does not elect annuitization yet cannot substantiate the amount (and date) of their contributions?   I would be most curious to learn your thoughts on the meaning of Kapitalleistung and the problem of substantiating contributions.  
  6. tax on company distributions

    Still way too little information.   What kind of "company":  a publicly traded regular "C" corporation (e.g. IBM), a REIT (real estate investment trust), a publicly traded partnership, or maybe a Regulated Investment Company, an LLC, an S-Corp?   ASSUMING: 1.  you are single, and 2. it is a "regular", plain vanilla distribution of corporate earnings from a publicly listed company, you will report it as income not subject to Abgeltungssteuer withholding on your German Anlage KAP, and 3.  the distributed amount plus all other investment income (Kapitalerträge) in the year of distribution does not exceed €801, then . . . .   your German tax will be zero.      
  7. tax on company distributions

    Whose taxes?  Yours?  The company's?  What country or countries?   If distributed to you, the tax consequences to you will depend on who and where you are when you receive the distribution the nature of the "company" and what, when, how and why it was distributed.   All of your other income and a myriad of other facts and factors may also influence the result.
  8. Capital Gains Tax On Property US Expat Living in Germany

    @PandaMunich   Then I guess the answer to my question would be:   Taxable gains from the sale of German sited real estate (pursuant to § 22 para. 2 EStG read in conjunction with § 23 para. 1 EStG) are subject to ordinary (i.e. progressive) German income tax rates by default because they are not included in the exclusive list of items (generally speaking: those investment income items (Kapitalerträge) - including capital gains - listed in § 20 EStG) eligible for the 25% max rate prescribed by § 32b EStG (Abgeltungssteuer).   Hence, there would be no logical difficuly in applying Progressionsvorbehalt to gains realized on the sale of foreign real estate for which a DBA precludes direct German income taxation.    
  9. Capital Gains Tax On Property US Expat Living in Germany

      @PandaMunich   Hi Panda,   I have a question concerning your advice above.   If a German tax resident sold a German real property interest that they had acquired after 31.12.2008 and owned less than 10 years at a gain, would the gain be taxed in Germany as ordinary income or would it be subject to Abgeltungssteuer?   (I know that rental income is subject to ordinary income tax rates in Germany but I'm too lazy tonight to look up the answer to my question on real estate gain.)   The reason I ask is simple:  if the CHARACTER of an item of income makes it subject to Abgeltungssteuer which is has a maximum rate of 25% (+soli), how could progressionsvorbehalt be applied?    
  10. Some questions about US taxes

    @DreamLight   You are to be congratulated for having the foresight to make this sort of tax inquiry BEFORE moving to the US.   By doing so you can potentially save yourself and your family members a good chunk of money and some serious headaches.   Before I mention some specifics you need to know how your situation is labeled in US tax parlance.  In the calendar year in which you abandon your German tax residence and acquire US residence you will be regarded as a "Dual Status Alien".   For general information about what this means and the options available to you please read (carefully) the following:   https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens   What the IRS information sheet does not discuss but which may be of critical importance to you is that once you become a US tax resident you are going to be treated just as bad as US citizens are with respect to any foreign financial connections that you may retain with the "Old World".   The administrative and potentially punitive horrors of owning foreign funds (incl. ETF's etc.) can be easily avoided by the simple expedient of selling ALL of said funds (and cancelling any Sparpläne you might have) before you acquire US residence and never - repeat: NEVER - buy any more FOREIGN funds afterwards.  Under current German tax law this should not be particularly burdensome because all funds are "marked to market" and for fund shares acquired before 1.1.2009 you have a €100,000 lifetime Freibetrag for realized gains.   Consider selling any other securities (e.g. stocks, bonds, etc.) acquired before 1.1.2009 that you are considering selling for whatever reason during the period of time you are resident in the US.  If you plan to live in the US permanently, that German tax free status will be lost for ever. If you sell them at a gain while you are a US resident you will get hit with a capital gain tax. (Not as bad as the Abgeltungssteuer but there will be no Sparerfreibetrag.)  On the other hand if the investments are solid and you think you are likely to be returning to Germany some day, then hold on to them - if your German Depotbank will allow it.   The opposite consideration should apply to any investment positions acquired before 1.1.2009 you might still have that are underwater. Their realized losses brings you nothing under German tax law but could be of use to offset US capital gains if you wait to sell them at a loss after you acquire US residency.   You may find that once your new US residence becomes known to your German bank that your bank may force you to close the account. (eg. Deutsche Bank, Commerzbank, et al.)  Plan for that possibility by asking ahead of time and if you need to keep German cash or securities accounts open find a bank to switch them to that won't care if you live in the US.   Although Germany will apply its Progressionsvorbehalt in calculating your tax rate on income earned in Germany before your "expatriation" to the US, the US does not use this for computing its taxes in transition years.   There's likely more depending on your particular circumstances but now that you have some basic information about the rules, you will be better able to pump your German and US tax advisors for specifics.   Bon Voyage!    
  11. @fichte   You are right to be concerned.   Your question touches on an issue that is not clearly settled under German income and inheritance/gift tax law.    You have correctly identified your father's trust as a "Vermögensmasse . . . .". This terminology was introduced into German inheritance tax law specifically to make transfers to a trust (especially but not only the US variety) a taxable event where the transferor was a German tax resident. You are also correct that a distribution to you as a beneficiary of something less than a total dissolution distribution of the trust would be a taxable gift to a "Zwischenberechtigte" under ErbStG.  That issue was settled by the Bundesfinanzhof in its 2012 decision:  BUNDESFINANZHOF Urteil vom 27.9.2012, II R 45/10 Schenkungsteuerliche Behandlung von Ausschüttungen eines US-amerikanischen Trusts Leitsätze 1. Zwischenberechtigte i.S. von § 7 Abs. 1 Nr. 9 Satz 2 Halbsatz 2 ErbStG sind alle Personen, die während des Bestehens eines Trusts Auszahlungen aus dem Trustvermögen erhalten.   The unclear issue is whether the mere creation - and more importantly: the mere funding of an irrevocable trust by your father resulted in an immediately German taxable gift to you because of your status as a co-trustee resident in Germany at the time title and control of trust principle passed to you as co-trustee.   I am sure there are solid arguments that can be made both for and against that proposition - and no doubt German legal academics have made them both - but to my knowledge the issue has not yet been addressed in the German tax courts.   The danger, however, is there and you may need to take prompt remedial action.   Before you take any action, however, I would urge you to contact your father to determine what goals he intended to accomplish with the creation of this trust.  Equally important is to discover whether your father obtained the advice of GERMAN tax counsel before setting up the trust and what that advice was (and if it was in writing).   The "remedial action" that immediately suggests itself as a "cure" for what MIGHT be anything from a harmless to a disastrous estate plan would be for you to resign your position as co-trustee with no residual authority or powers of any kind that might be sufficient for a local Finanzamt to argue that you have immediate possession, title and control over anything of determinable value held in the trust.   A trust can be a useful device in planning the transmission of wealth from a US resident to a German resident - if done correctly and with careful attention to the myriad real and potential traps lurking in both German income tax and inheritance tax law.  The possibility of double taxation (once as income and again as an inheritance) remains a real possibility if the structure is designed in ignorance of the danger.  (See, e.g. § 15 AStG which might make a portion of undistributed income accruals within a "Family Trust", defined as a one in which >50% of the beneficial interests are held by family members, subject to immediate income tax.)        
  12. German Tax Residency - 183+ days, or "registered"?

    Here is the text of Article 15 of the US-Germany Tax treaty.   Article 15 is the only place in the treaty I am aware of offhand that mentions the "183 day rule".   Note that it's application is limited to employment income earned from his domestic employer during temporary absences abroad only.  It is one of 3 conditions that must apply to prevent the "other state" from having a crack at his employment income earned during his temporary presence on the "other state's" soil.   It has no application to issues of tax residence generally. (There is no mention of it in Article 4 of the treaty dealing with residence issues.)   The confusion is likely due to the fact that Germany's general rules on establishing tax residence refer to "six months" presence as raising a presumption of "ordinary residence".  That equates in many people's minds to "183 days" or "180 days".   BTW the time of actual physical residence to establish German tax residence need not fall in just one calendar year in order for "ordinary residence" to be established. Nor can you foil the tax man by breaking up the 6 month period by taking a quick jaunt out of the country. Without evidence that those absences are non-temporary, they will simply be ignored.  On the other hand, the presumption of "ordinary residence" after 6 months physical presence can be rebutted by a showing that the actual physical presence is not indicative of intent to be resident, e.g. medical emergency, family exigencies, etc.   Similarly, once tax residence is established, it will continue until the residence is actually abandoned.  For any period of the calendar year prior to abandonment in which the taxpayer had (worldwide) taxable income they will be subject to German residence taxation on that amount with Progressionvorbehalt applicable for income earned in that same year after residence is abandoned. (Works the same way in reverse, i.e. for the calendar year residence is established.)   Thus, theoretically, a German resident who abandons German residence on Jan 2 can be taxed as a resident on his worldwide income earned up to that date in that calendar year.   Article 15 Dependent Personal Services      1. Subject to the provisions of articles 16 (Directors' Fees), 17 (Artistes and Athletes), 18 (Pensions, Annuities, Alimony, and Child Support), 19 (Government Service; Social Security), and 20 (Visiting Professors and Teachers; Students and Trainees), salaries, wages, and other similar renumeration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State, unless the employment is exercised in the other contracting State. If the employment is so exercised, such renumeration as is derived therefrom may be taxed in that other State.        2. Notwithstanding the provisions of paragraph 1, renumeration derived by a resident of a Contracting State in respect of an employment exercised in the other Contracting State shall be taxable only in the first-mentioned State if:   a) the recipient is present in the other State for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and   b ) the renumeration is paid by, or on behalf of, an employer who is not a resident of the other State; and   c) the renumeration is not borne by a permanent establishment that the employer has in the other State.        3. Notwithstanding the foregoing provisions or this Article, renumeration derived by a resident of a Contracting State in respect of an employment as a member of the regular complement of a ship or aircraft operated in international traffic may be taxed only in that State.
  13. Tax on foreign income

      @Hulie   The reporting on Form 1042-S appears to be inconsistent with what one would expect for T-Bill ownership. The 01 income code is "interest", i.e. an amount actually paid and credited - not an allocable amount of Original Issue Discount.  If you did not actually receive any such interest then this characterization of income code is incorrect.   The 05 exemption code is the "portfolio interest exemption under IRC".  This means that your interest is exempt from US taxation under domestic US tax law, i.e. you don't need to claim the benefits of a tax treaty to obtain exemption.   If, as you say, the amount (together with any other Kapitalerträge) adds up to less than your German annual Freibetrag of €801 then you should have no problems:  just ignore the whole thing.   However . . . .   The brokerage or whoever the withholding agent is may not be competent in correctly meeting its information reporting requirements (not an unusual circumstance, by the way).   This is a case of "no harm, no foul" but be advised: theoretically speaking, the amounts shown on Form 1042-S are made accessible by the IRS to the German government or the government of whichever country you gave as your country of residence on Form W-8BEN.  Some day - perhaps years from now - the FA may ultimately learn of the "interest" reported on this form in the year 2018 and may ask you to explain yourself.   So . . .   If you find time weighing heavily on your hands, you may want to write your broker/withholding agent and ask for an explanation of what appears to have been an incorrectly prepared Form 1042-S.   On the other hand, if you have a life . . . .  
  14. Tax on foreign income

      @NikoNiko   After reading your "plan" it is not clear to me that you have fully grasped the difference between a "capital gain distribution" of profits realized from within and distributed by a fund and a capital gain realized on the sale of the fund shares themselves.   That is the reason you are having such difficulty figuring the instructions for Lines 31-37.  They apply only to sellers of fund shares.  You did not sell any fund shares yet under your "plan" you insist on breaking out the "capital gain" portion of your distribution and entering it on Line 9 where it is not supposed to go. Line 9 (and subsequent detailing in lines 31-37) is reserved for the reporting of the sale of fund shares.   To uncomplicate your life and your German tax return just follow the instructions and - after converting to EUR - put 100% of the amounts distributed to you from your fund - INCLUDING the "capital gain" portion - as reported on the 1099-DIV on the line in KAP-INV that is intended for it to go:  Line 4 (for a stock fund).   As far as those foreign taxes you paid are concerned you can forget about reporting them on your German return. Note that KAP-INV has no line to report any such creditable foreign taxes withheld on your fund distribution.  Reason:  beginning 1.1.2018 they are no longer creditable if withheld on a FUND distribution.  Punkt. Ende. Full Stop. or in plain New York English:  Fuggedaboudit.   Summary:   Stick the EURO value of 100% of the value of 100% of your US stock fund distribution on Line 4 Anlage KAP-INV   Now you're done.   
  15. Tax on foreign income

    @Hulie   OK.  That is odd.   What income code number appears in block 1 of the 1042-S?  Is it by any chance 30 (Original Issue Discount = OID) or 31 (short-term OID)?   What exemption code number appears in block 3a?   Any taxes withheld per block 7a?   Ordinarily because of their short-term nature T-bills are not subject to OID computation and reporting for US citizens.  However, there might be a different rule under Chapter 3 of the IRC (Non-resident Alien reporting and withholding) of which I am not aware.   Please do let us know what's on the 1042-S.   In any event, if no taxes were withheld then for US tax purposes, if you have nothing else to report, you can ignore the thing for US tax purposes. No return, no nothing. Nada.   As far as German taxes are concerned I am no expert but the last time I looked Germany had yet to develop anything as sophisticated as the US rules on OID for so-called "zero coupon bonds".  The Finanzamt will likely be happy to wait until your 2019 tax return shows up reporting your gain realized when the T-bill matures in 2019.   FWIW here is what Wikipedia says about the German tax rules:   Bei im Privatvermögen befindlichen Anlagen ist nach dem Steuerrecht der Bundesrepublik Deutschland eine Versteuerung der Erträge erst bei Fälligkeit oder vorherigem Verkauf der Wertpapiere vorzunehmen, so dass die implizite Wiederanlage der rechnerischen Bruttozinserträge erfolgt. Im Betriebsvermögen besteht diese Möglichkeit nicht, soweit der Steuerpflichtige bilanziert. Andere Rechtsordnungen, wie die USA, besteuern bei Nullkuponanlagen jährlich einen fiktiven Zins.