American do taxes for USA and Germany with Stocks and ETF's that generated dividends

[aaron L 1]

Hi fellow Toytown Germany members,

 

I have been gathering lots of useful information form this website, looking at different websites, and spent the last couple months speaking with different German CPA's. The CPA's would like to charge me at least 1,000 Euros as a base price with each additional hour costing around 300 Euros, without a fixed price for the total which is a little worrying and is quite expensive considering I make around 2K  a month here in Germany.  Unfortunately it is not 100%  clear to me on the best route to do taxes, being an American Citizen living in Germany. I make way less than 100k a year in Germany (excludes me from double taxation)  and have ETF's/stocks in the USA still which have generated dividends although I do not have any capital gains from 2021. I am attempting to do my taxes for the year of 2021 and would appreciate help for the steps on how to do this. I read that Germany charges around 26.2% tax for dividends made from Stocks (not sure how this works with ETF's). 

 

Does anybody have experience with this same situation as this is my first time doing this and I would appreciate some guidance: American doing taxes in USA and Germany while owning stocks/ETF's in USA.

 

Could someone please layout the groundwork in steps for how to approach this?

 

Additional questions:

 

1. Is it better to do the German taxes before USA taxes as I have been reading?

2. How do I pay specifically for the dividends, do I pay the difference from the 26.2% that Germany wants to have, being 11% to Germany first and then the 15% to the USA? How is this possible to pay?

3. Is this something that is do-able by yourself owning stocks/ETF's or should you consult a German CPA?

4. As far as the USA side of taxes, is it recommended to get a CPA or to do it on Turbo tax or another generic website that does taxes at a low-cost price. 

 

Lastly, I would appreciate input specifically about the ETF's and stocks and the steps taken that others have done in the past. If you have had help along your journey with taxes being an American, then please shed some light so I can soak up the knowledge as this is not an easy process.

 

Thank you so much for your time to read and help answer these questions!

 

Regards,

 

Aaron

 

 

 

[MollyWolly 59]

I use TurboTax for my US taxes and a local accountant for the German taxes. I did purposefully look for an CPA here who is familiar with international/US tax issues so he can accurately reconcile the two. Suggest going with an actual accountant and not a ‘steurring’ type service, unless you know from personal recommendation that they can actually handle your issues accurately.
 

TurboTax is pretty easy to use for standard issues like US charitable deductions, US investment accounts, anything that produces a 1099, rented out US real estate, etc. It can also handle the foreign earned income exclusion if you buy a tier up from the basic package. The year I moved to Germany I used H&R Block in person - it cost a small fortune and wasn’t any better than software, in that I still had to figure out necessary documents, forms, etc.

 

As to the order, I always file my individual US taxes first and then the German taxes (joint return with my non-American husband).

[aaron L 1]

Hi MollyWolly,

 

Thanks for the prompt response. Just to clarify, are you in a similar situation with having ETF's/Stocks in the USA and you are doing Turbotax entering this information there( I know you said investments can be entered but wanted to check if you have personally done it while living outside the US) ? Can you name any German CPA's or people that do your taxes that you would recommend someone also to go to? I would be willing to do this through the phone or even drive to meet someone who knows their stuff, as I live in the Bonn/Cologne region but am willing to drive somewhere. I have contacted so many people and many do not have lots of experience with specifically USA/Germany, and the ones that do have a little experience, they want a pretty penny (over 1K as a start and then more for additional hours). May I ask also what a normal price is for having someone do your German taxes?

 

I have been hearing mixed information when talking to CPA's, some said do your German (country of residence taxes first) taxes first and then do your American, and some said the opposite. 

 

Have you had any experience as far as the German side of taxes with owning stocks or ETF's? This is the topic that is getting me without any solid answers on how to approach this. 

 

Thanks so much for your time Molly! I really appreciate your answers as this is very new to me and I am trying to figure this out. 

 

Aaron

 

 

[MollyWolly 59]

Yup, I have stocks and ETFs although all owned through brokerage accounts like Fidelity, etc. I’ll pm you our accountant’s info. We pay him a fair amount but also have rental property in Germany, so it’s a more complex return than your standard income-only.

 

Since the accountant does all the work, I have literally no clue how overseas dividends or stocks are handled here. That’s what I pay him to know  Also, there’s no possible way he could do the German tax return without my US first specifically because of the investment accounts and the foreign earned income exclusion. For doing my US taxes, it’s straightforward because all I need is my annual salary tax statement, and the deadline is much earlier (April vs December).

[DoubleDTown 384]

I also do my American taxes first, using TurboTax.   Remember the American deadline in April is automatically extended to June for foreign filers (right?) and can be extended to October without much effort.  But don't forget your state's deadline, if applicable (e.g., rental income).

[wien4ever 435]

I just use TurboTax (it can import my Robinhood forms) and then I use germantaxes.de/wundertax for my germany taxes (in english). Steur2go is another competitor that offers English (I don't like the interface as much as germantaxes.de/wundertax but it has Unterhalt section for claiming deductions for support of family overseas unlike germantaxes.de). In the USA, I have a Vanguard Roth IRA on autopilot. So not much else to take care of.

 

I also file my FBARs directly via the government's BSA E-filing system. I don't have to file FACTA yet (not that rich, at least by its requirements since real estate is not counted)

 

Unless your tax situation is extremely complicated, I think those tax experts are really too expensive and don't really save you time (you must look up all the documents and bring them in yourself!).

[Petro6golf 453]

On 2/11/2022, 4:42:41, aaron L said:

Hi fellow Toytown Germany members,

 

I have been gathering lots of useful information form this website, looking at different websites, and spent the last couple months speaking with different German CPA's. The CPA's would like to charge me at least 1,000 Euros as a base price with each additional hour costing around 300 Euros, without a fixed price for the total which is a little worrying and is quite expensive considering I make around 2K  a month here in Germany.  Unfortunately it is not 100%  clear to me on the best route to do taxes, being an American Citizen living in Germany. I make way less than 100k a year in Germany (excludes me from double taxation)  and have ETF's/stocks in the USA still which have generated dividends although I do not have any capital gains from 2021. I am attempting to do my taxes for the year of 2021 and would appreciate help for the steps on how to do this. I read that Germany charges around 26.2% tax for dividends made from Stocks (not sure how this works with ETF's). 

 

Does anybody have experience with this same situation as this is my first time doing this and I would appreciate some guidance: American doing taxes in USA and Germany while owning stocks/ETF's in USA.

 

Could someone please layout the groundwork in steps for how to approach this?

 

Additional questions:

 

1. Is it better to do the German taxes before USA taxes as I have been reading?

2. How do I pay specifically for the dividends, do I pay the difference from the 26.2% that Germany wants to have, being 11% to Germany first and then the 15% to the USA? How is this possible to pay?

3. Is this something that is do-able by yourself owning stocks/ETF's or should you consult a German CPA?

4. As far as the USA side of taxes, is it recommended to get a CPA or to do it on Turbo tax or another generic website that does taxes at a low-cost price. 

 

Lastly, I would appreciate input specifically about the ETF's and stocks and the steps taken that others have done in the past. If you have had help along your journey with taxes being an American, then please shed some light so I can soak up the knowledge as this is not an easy process.

 

Thank you so much for your time to read and help answer these questions!

 

Regards,

 

Aaron

 

 

 

 

Ill get bashed for it but I dont care: How about 5: mention nothing to the Germans about your American accounts, pay your taxes from your salary here like normal and carry on with your life. They cant see your American accounts or your IRS Returns. Why volunteer to pay more taxes? 

[PandaMunich 16,086]

43 minutes ago, Petro6golf said:

I'll get bashed for it but I don't care: How about 5: mention nothing to the Germans about your American accounts, pay your taxes from your salary here like normal and carry on with your life. They cant see your American accounts or your IRS Returns. Why volunteer to pay more taxes? 

You seem to think FATCA is a one-way street.

It isn't.

 

Just like German banks share information with the IRS on accounts held by US persons, US banks share information with the Finanzamt on accounts held by German residents: https://www-bzst-de.translate.goog/DE/Privatpersonen/Selbstauskuenfte/FATCA/fatca_node.html?_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp

• Germany and the USA mutually exchange data on financial accounts. The FATCA agreement was concluded for this purpose. The Federal Central Tax Office ( BZSt ) sends the data reported by German financial institutions to the United States Internal Revenue Service ( IRS ) and receives the data reported by US financial institutions from the IRS .

Please consult the FATCA agreement: https://home.treasury.gov/system/files/131/FATCA-Agreement-Germany-5-31-2013.pdf

• Whereas, the United States of America collects information regarding certain accounts maintained by U.S. financial institutions held by residents of the Federal Republic of Germany and is committed to exchanging such information with the Federal Republic of Germany and pursuing equivalent levels of exchange,
   
• 2. The information to be obtained and exchanged is:
  ...
  b.) In the case of the United States, with respect to each German Reportable Account of each Reporting U.S. Financial Institution:
  (1) the name, address, and German TIN of any person that is a resident of the Federal Republic of Germany and is an Account Holder of the account;
  (2) the account number (or the functional equivalent in the absence of an account number);
  (3) the name and identifying number of the Reporting U.S. Financial Institution;
  (4) the gross amount of interest paid on a Depository Account;
  (5) the gross amount of U.S. source dividends paid or credited to the account; and
  (6) the gross amount of other U.S. source income paid or credited to the account, to the extent subject to reporting under chapter 3 or 61 of subtitle A of the U.S. Internal Revenue Code.

 

[scook17 182]

10 minutes ago, PandaMunich said:

• Germany and the USA mutually exchange data on financial accounts. The FATCA agreement was concluded for this purpose. 

Is this true worldwide, or are they still some countries which respect privacy and didn't give in to the US bullying?

Are there actually any countries left where bank account information is still considered as private?

[jeba 4,194]

9 hours ago, scook17 said:

Is this true worldwide, or are they still some countries which respect privacy and didn't give in to the US bullying?

Are there actually any countries left where bank account information is still considered as private?

Not many, it seems: https://www.oecd.org/tax/transparency/

Maybe South Sudan and North Korea.

 

[PandaMunich 16,086]

The OECD's Automatic Exchange of Information (AEOI) mechanism is distinct from FATCA.

The USA wouldn't join AEOI and instead negotiated bilateral FATCA agreemeents with most of the world.

There are only a few countries who did not join FATCA and even within these countries, some banks still report to the IRS: https://best-citizenships.com/2019/12/06/non-fatca-countries/

 

 

10 hours ago, Petro6golf said:

 

[Petro6golf 453]

4 hours ago, PandaMunich said:

The OECD's Automatic Exchange of Information (AEOI) mechanism is distinct from FATCA.

The USA wouldn't join AEOI and instead negotiated bilateral FATCA agreemeents with most of the world.

There are only a few countries who did not join FATCA and even within these countries, some banks still report to the IRS: https://best-citizenships.com/2019/12/06/non-fatca-countries/

 

 

 

Im sure you are the subject matter expert on this stuff as I know you do taxes and deal with this line of work, im just saying ive never reported any earnings or accounts in the states and know easily a dozen other americans who do the same. I have yet to see anyone get investigated or prosecuted for not claiming a retirement account in the states that is used to invest with. Surely if I lived here and had $50m in an account in the states maybe there might be something to worry about but no one has come knocking on my door asking about a couple hundred grand that sits in an account and I have yet to hear of anyone else having to go through that. Maybe its out there but you need to be on someones radar first.

 

Also, the US does in fact report on the taxes of Americans living abroad to Germans IF: they hold 10% stake or more in a foreign held company. Does not appear the US is reporting joe blow for not claiming his mutual fund dividends. 

[fraufruit 40,450]

13 minutes ago, Petro6golf said:

Maybe its out there but you need to be on someones radar first

 

,he posted publicly on Toytown.

[jeba 4,194]

Last month I received a letter from the German Finanzamt asking whether my late mom had declared her 2017 income from UK sources. When I called and asked what that was about the told me they got notified about her portfolio there. The wheels of bureaucracy may be turning slowly, but they are turning.

[Straightpoop 665]

19 hours ago, PandaMunich said:

You seem to think FATCA is a one-way street.

It isn't.

 

Just like German banks share information with the IRS on accounts held by US persons, US banks share information with the Finanzamt on accounts held by German residents: https://www-bzst-de.translate.goog/DE/Privatpersonen/Selbstauskuenfte/FATCA/fatca_node.html?_x_tr_sl=auto&_x_tr_tl=en&_x_tr_hl=en-US&_x_tr_pto=wapp

 

Well, yes and no.

 

Generally speaking, the US does not do reciprocity with GF's ("Godless Furriners") and FATCA is no exception.

 

Attached to the "intergovernmental agreements" (IGA) between the US Treasury and foreign governments (including Germany) implementing FATCA is ANNEX I containing 11 pages of highly detailed reporting and due diligence obligations imposed on GERMAN financial institutions.

 

The IGA has no such Annex detailing ANY corresponding obligations on US financial institutions.

 

Despite vague promises of mutual love and affection, reciprocity and striving towards this, that or the other meritorious legislative goals, the "intergovernmental agreements" (IGA) between the US Treasury and foreign governments (including Germany) implementing FATCA IGA impose few, if any, concrete reporting obligations on US financial institutions with respect to holders of "German reportable accounts" that US domestic tax law did not already impose prior to FATCA.

 

In addition, it should be borne in mind that while this "Intergovernmental Agreement" purports to authorize the disclosure of "tax information" of US citizens to a foreign government, the IGA itself - despite its description in Germany as an "Abkommen" - is NOT a US law or treaty and does not and cannot supercede the general prohibition on releasing such information found in IRC §6903. Indeed, the legal status of these IGAs remains something of a mystery in the US.  (The legal validity of FATCA itself as a US law, however, appears to be settled.) 

 

The "intergovernmental agreement" (IGA) between Germany and the US Treasury implementaing FATCA defines "German reportable accounts" in a way that makes it appear to include the US accounts of US citizens who are tax resident in Germany.

 

But . . . neither FATCA nor US law requires US financial institutions to do anything to identify such US citizens much less require them to reveal a German tax number.  As a result, the data on information returns from US Financial institutions collected under Chapter 61 of Subtitle A contains nothing that the IRS can use to identify that information as coming from a "German Reportable Account".

 

Until fairly recently, even nonresident aliens (e.g. German citizens) weren't even required to reveal their German ITIN to US financial institutions when certifying their nonresident alien status under Chapter 3 thus making it extremely difficult for German tax authorities to match that info to a German citizen taxpayer.

 

(Chapter 3 of the IRC relates to informational returns for the income of nonresident aliens.  No information concerning US citizens - regardless of their residence - is collected under Chapter 3.  Chapter 61 refers to tax returns of all kinds - including 3d party informational returns applicable to US citizens.)

 

The IGAs with Germany and other countries are intended to ease the burden of compliance that FATCA unilaterally imposes on the financial institutions of all countries OTHER THAN THE USA.

 

FATCA inspired the OECD's Common Reporting Standard.

 

But, one of the main reasons the US refused to join the OECD's Common Reporting Standard is because it would require the US to pass legislation that might burden its financial institutions to an extent comparable to the burdens FATCA unilaterally imposes on all foreign financial institutions worldwide.  That would be politically unacceptable in the US.

 

We don't do reciprocity if we don't have to.

 

 

 

 

[linv14 1]

Thank you so much for asking this question and others who provided helpful responses.

 

Does anyone know the answer to OP's 2nd question?

 

2. How do I pay specifically for the dividends, do I pay the difference from the 26.2% that Germany wants to have, being 11% to Germany first and then the 15% to the USA? 

 

I am using Turbotax for my American tax and it would help me a lot knowing how it works.

[Straightpoop 665]

41 minutes ago, linv14 said:

2. How do I pay specifically for the dividends, do I pay the difference from the 26.2% that Germany wants to have, being 11% to Germany first and then the 15% to the USA?

 

Depends.

 

Qualified or unqualified dividends?

 

US source dividends or foreign source?

 

Can you satisfy the Finanzamt that you actually paid US taxes allocable to your US source dividends?

 

After allocating your €801 Freibetrag to foreign and US source dividends did you have any German tax liability on foreign source dividends?

 

See why the CPAs and Steuerberaters want so much money?

 

Answering these questions will require detailed, time-consuming analysis even if the person doing the analysis is familiar with the issues.