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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. Working in Germany for UK Ltd with >1 shareholder

    I am no expert on German-UK tax and social security relationships but I can say with confidence that Brexit is likely to have some serious disruptive effects on the current status quo.   Some things to be mindful of:   1.  After Brexit, the Germany-UK tax treaty will likely become highly relevant.  In particular, the character and scope of your activities in Germany on behalf of your UK Ltd may give rise to what is defined in most bilateral tax treaties as a "permanent establishment" of the UK Ltd in Germany the allocable share of whose profits may become taxable in Germany.   For the current history of this treaty see:   2.  The future of Social Security (retirement, health, unemployment, etc.) contribution liability and rights appears to be highly uncertain at this point.  Here is what I think is a brief useful summary of the possibilities:    
  2. German VAT when invoicing clients in the U.S.

    No.   Generally speaking goods and services exported outside the EU are VAT free.
  3. Is U.S. Self-Employment Tax Prorated in a Split Year?

      In my reply above just substitute "K-1 Form 1065" for "Sched. C USA" and "K-1 Form 8865" for "Sched. C DE".  Just like a Sched. C, the only thing on the K-1s that indicate the foreign source of the income will be the address of the respective partnership.   I doubt the DR will doubt your word on your application since it's no sweat off their back one way or the other. But, in the unlikely event they do, just send them something official looking from the Einwohnermeldeamt or something from the KSK showing your registration.   PS   Would you care to share your reasons for organizing your business as an LLC/GbR with all the associated compliance costs instead of simply as a sole proprietorship?    
  4. Is U.S. Self-Employment Tax Prorated in a Split Year?

    You pose an interesting question that I am surprised to realize I have never had to answer before.   Yours is not so much a question of "How much" as "how?".   I assume that whatever business you were in in the USA in 2019 was the same business you were in in Germany.  The only change involved a removal of the situs/seat/domicile of your business from the USA to Germany.    The tax consequences of that change can be roughly summarized as follows:   1.  Your US income (self-employed and other) prior to the commencement of your German residence in May 2019 is directly (income and Self-Employment) taxable only by the US but that income must be reported on your 2019 German income tax return for purposes of Progressionsvorbehalt.   2.  Your German income (self-employed and other) after commencement of your German residence in May 2019 is directly taxable by BOTH the US and Germany but, the SE business income is eligible for a (prorata) FEI exclusion and/or foreign tax credit on your US return and, as you correctly noted, you may also exclude that SE business income from US SE taxes.   So far, so good.  The next question is how do you show this on your US return?   After some thought I would suggest to you the following:   1.   You absolutely must prepare two Schedules C, one for your US business and one for your German business.  (NB:  if your business activity continued after your arrival in May, the date of your "coverage" under the German system began the day of your arrival and commencement date of residence, not in August when you registered your GbR and/or started paying into the KSK. The fact of payment to KSK is of no relevance to "coverage".)  Since you are a probably a "cash-basis" taxpayer, keep it simple:  cash in and cash out Jan-May on the USA Sched. C and the same for May-Dec on the DE Sched. C.   2.   You now are faced with a quandry:         You have to file Schedule SE to report your net SE income on the USA Sched C and compute your SE taxes on that form.       Ordinarily, Sched SE would require you to aggregate all your sources of net SE income so as to compute the SE tax but, in your case, only one of those two sources (Sched C USA) is subject to tax.         There are two possible solutions; neither is foolproof but neither is fatal either:         Solution 1:    File 2 Schedule SEs one for each Sched. C.  The SE for Sched. C USA shows the computation of SE tax and the SE for Schedule C DE shows a zero and a reference declaring "Treaty Exempt per IRC §1401(c). Certificate of Coverage attached."          Solution 2:   File 1 Schedule SE.  Show only the income from Sched. C on Line 3.                            On Line 2 of Sched. SE show the same amount but in the space (fortunately generous) above that number overprint the form as follows:                                Total of both Schedule Cs:                       XXXX                          Less "Treaty Exempt" Sched C DE:    -   xxxx                                                 Both solutions have their advantages and disadvantages but both have a crucial element in common:  They include the figures from BOTH Schedule C's on at least 1 Schedule SE and account for the exclusion of one of them from the SE tax base.   The IRS and most commercial software will automatically carry all Schedule C net income to a single SE for each filer.  If you include 2 Sched. SEs per solution 1, the SE with the Sched. C DE may get ignored and the other will be deemed to have a "computational math error" that may cause the IRS computer to spit out a "notice of adjustment".  On the other hand, 2 Sched. SE's may be more attention-getting than the more subtle approach of Solution 2.   If, on the other hand you use the single SE (Solution 2), the computations will at least be in one place on a single form SE where the IRS will theoretically be looking for it and hopefully one of its carbon-based units will actually see it and override their computer.  But if they don't then you may get the same "notice of adjustment".   In either case the likelyhood that what you have will actually be "seen" by a real live human being is enhanced by the IRS requirement that returns that claim the treaty exemption and include the certificate of coverage must be paper-filed.   There are, of course, technical challenges to both approaches:   Solution 1 requires you to crank out 2 Schedule SE's for a single taxpayer.  Your software may not cooperate and you'll have to download a .pdf from the IRS website.   Your return preparation software is not going to cooperate with Solution 2 either.  You will have to put the "bottom line" entries on Lines 2 & 3, print it out and then scan it to .pdf and electronically add the info in the space above the bottom line figure on Line 2 or just do the same with pen & ink on the paper printout.     Quite frankly, I cannot tell you which approach is more likely to save you the hassle of having to respond to an IRS adjustment notice.  (You will not, of course, let the IRS computerized notice bully you into paying more than you owe in SE taxes unless, of course, you don't mind unnecessarily adding a little bit of value to your future US Social Security retirement check.)  
  5. @Su_Ba   The US rules for determining the source of employment income ("US sourcing rules") are (I believe) the same as the German ones:   The "source" of wages is the geo-political place where the labor is performed upon which those wages are paid. (In other words if you are doing work on a project located in Bangladesh for an employer based in Botswana for wages paid in Rupees to a bank account in Bogata via a computer terminal in place where you can take a break and go out the door and shop at REWE where while standing in line you hear customers arguing the merits of Bayern München vs. Armenia Bielefeld in German it is highly likely that the geographical source of your wages earned from that computer work is Germany.)   However, these "sourcing" rules have limited impact on a US citizen who is tax resident in Germany.   Generally, (s)he will be taxed on those wages by the US based on his/her citizenship and by Germany based on his/her residence.   Art. 15 para. 2 contains rules that are designed to trump the respective treaty country's source rules on wage taxation jurisdiction (set forth in Art. 15 para. 1) where a short-term assignment would otherwise lead to the necessity of filing a tax return in more than one place.   Thus, if the wages meet the conditions of Art. 15 2 ) or 3 ) then only one of two treaty countries has the exclusive right to tax.   But, because of the so-called "Savings Clause" (Art. 1 4), Art. 15 2) or 3) has NO EFFECT on the right of the US to tax its CITIZENS or lawful residents (or former citizens or former residents) on income that according to Art 15 of the treaty could only be taxed in Germany.    The end result is that:   1.  If Art. 15 2) gives the US the exclusive right to tax wages, Germany will exclude the wages from its tax base (but apply Progressionsvorbehalt to the otherwise taxable income of its tax resident).   2.  If Art. 15 2) gives Germany the exclusive right to tax wages, both Germany and the US will tax them as it normally would but the US will allow the US taxpayer to claim a foreign tax credit for whatever taxes may be owed to Germany.   3.  If Art. 15 1) gives both countries the right to tax - one on the basis of residence and the other based on source - then the residence country will give its taxpayer a credit for taxes paid to the source country.        
  6. Guidance requested for investment in Germany

    @BethAnnBitt   You are exactly right.   Until the qualifications are affirmed by the issuance of a US passport in response to an application for same, the OP is in no US tax and compliance danger.   However, if at some time in the future the possibility of having guaranteed entry to the US starts to look irresistible, he can always make the application (provided the law has not changed - again - in the meantime).        
  7. Guidance requested for investment in Germany

      @ahammed   Depends upon what you mean by "helps":   Your father's citizenship may have made you a US citizen at birth:   8 USC §1401. Nationals and citizens of United States at birth The following shall be nationals and citizens of the United States at birth: (a) a person born in the United States, and subject to the jurisdiction thereof; (b) a person born in the United States to a member of an Indian, Eskimo, Aleutian, or other aboriginal tribe: Provided, That the granting of citizenship under this subsection shall not in any manner impair or otherwise affect the right of such person to tribal or other property; (c) a person born outside of the United States and its outlying possessions of parents both of whom are citizens of the United States and one of whom has had a residence in the United States or one of its outlying possessions, prior to the birth of such person; (d) a person born outside of the United States and its outlying possessions of parents one of whom is a citizen of the United States who has been physically present in the United States or one of its outlying possessions for a continuous period of one year prior to the birth of such person, and the other of whom is a national, but not a citizen of the United States; (e) a person born in an outlying possession of the United States of parents one of whom is a citizen of the United States who has been physically present in the United States or one of its outlying possessions for a continuous period of one year at any time prior to the birth of such person; (f) a person of unknown parentage found in the United States while under the age of five years, until shown, prior to his attaining the age of twenty-one years, not to have been born in the United States; (g) a person born outside the geographical limits of the United States and its outlying possessions of parents one of whom is an alien, and the other a citizen of the United States who, prior to the birth of such person, was physically present in the United States or its outlying possessions for a period or periods totaling not less than five years, at least two of which were after attaining the age of fourteen years: Provided, That any periods of honorable service in the Armed Forces of the United States, or periods of employment with the United States Government or with an international organization as that term is defined in section 288 of title 22 by such citizen parent, or any periods during which such citizen parent is physically present abroad as the dependent unmarried son or daughter and a member of the household of a person (A) honorably serving with the Armed Forces of the United States, or (B) employed by the United States Government or an international organization as defined in section 288 of title 22, may be included in order to satisfy the physical-presence requirement of this paragraph. This proviso shall be applicable to persons born on or after December 24, 1952, to the same extent as if it had become effective in its present form on that date; and (h) a person born before noon (Eastern Standard Time) May 24, 1934, outside the limits and jurisdiction of the United States of an alien father and a mother who is a citizen of the United States who, prior to the birth of such person, had resided in the United States.   Whether this is a curse or a blessing will depend on your circumstances.      
  8. Depending upon what it really is - rather than how you or the UK institution label it - the US tax consequences will likely be somewhere between zero (not reportable or taxable) or a tempest in tea cup (reportable, taxable and 100% FEI excludable) .   For your reading pleasure:      
  9. Guidance requested for investment in Germany

    @john g.   Thanks for the tip.  I'll check next time.   But . . . my caution also applies - with qualifications - to US lawful permanent residents ("Green Card" holders).
  10. Guidance requested for investment in Germany

    If you are a US citizen, that will play a major role since US tax treatment of many garden variety German investments may make them prohibitively expensive both in terms of tax and compliance burdens.    
  11. Living in Germany with US Retirement Accounts, 401K, IRA, Roth

    @SnowedIn   Just to dot the i and cross the t on the issue of whether an IRA can theoretically exist in Germany:   IRS Reg. §1.408-2(b) reads:   § 1.408-2 Individual retirement accounts. (a) In general. An individual retirement account must be a trust or a custodial account (see paragraph (d) of this section). It must satisfy the requirements of paragraph (b) of this section in order to qualify as an individual retirement account. It may be established and maintained by an individual, by an employer for the benefit of his employees (see paragraph (c) of this section), or by an employee association for the benefit of its members (see paragraph (c) of this section). (b) Requirements. An individual retirement account must be a trust created or organized in the United States (as defined in section 7701(a)(9)) for the exclusive benefit of an individual or his beneficiaries. Such trust must be maintained at all times as a domestic trust in the United States.   Besides Germany not being in or part of the United States, trusts as such cannot be created under German law.
  12. Filing Übungsleiterpauschale/Ehrenamt on U.S. taxes

      Yep.   But excludable as foreign earned income IRC §911. (Form 2555).   Moreover, if you are single and your total gross income - including the €2,400 - (in 2019) was $12,200 or less, you don't even meet the threshold for filing a return.   See the IRS " Do I gotta file?" tool:   On the other hand, you may want to do so anyway if you have not yet received your $1,200 EIP for 2020.        
  13. Living in Germany with US Retirement Accounts, 401K, IRA, Roth

      You cannot roll over your IRA or Roth IRA to a German IRA because that it is simply impossible.  There is no such thing as a German IRA - Roth or otherwise.  I suppose it is theoretically possible that an individual or corporate IRA custodian could be domiciled in Germany but I cannot conceive of the possibility that there would be a German financial institution capable or willing to maintain an IRA account for such a custodian.   If you take a premature distribution from your IRA you are subject to a US excise tax of 10% - not 20%.  The distribution will be otherwise US (income) tax-free because the Germany-US tax treaty gives Germany the exclusive right to impose an income tax on it.  The 30% withholding tax can also be avoided by first submitting a Form W-8BEN to the IRA trustee.  If properly respected a Form W-8BEN will eliminate the need to file an nonresident alien return (1040-NR) to obtain a refund of any income tax withheld. (That will not apply to the 10% early withdrawal penalty.)   As noted, you will have to declare the distribution and be taxed on it in Germany.  How much of the distribution will be taxable in Germany will depend upon when and under what circumstances you contributed to the IRA.  Germany's system for taxing US IRA (or 401k) distributions is mathematically similar to the US method applied when a US taxpayer has made non-deductible contributions to the IRA.  So, if at the time you made your contributions you were ineligible to claim any reduction in your current German taxable income (most likely because you were a German tax non-resident when you made the contributions), then a portion of whatever is distributed to you will be deemed a non-taxable return to you of your cost basis in the IRA.   See this Merkblatt from the OFD Karlsruhe:  
  14. Impact of COVID-19 Stimulus Check on German Taxes

      My preferred source of clarity would be at the bottom of the glass of a good scotch.   In this case I would recommend that as a cheaper alternative to a Steuerberater who is unlikely to have any better idea than John Walker & Sons but the tapping of whose ignorance will be a good deal more expensive.  
  15. Currency hedging

    I'm afraid I can't help with that.  You'll have to explore this with your broker.