# How to claim income paid in Germany but deemed earned in the US?



## DEScott (Jan 15, 2019)

I moved from the US overseas in the middle of last year. I am working for the same company, just now their German sub (being paid in Euros, paying German taxes, etc.)

When I got my bonus (in Germany) they determined part of it was from the time I worked in the US and thus not subject to German taxes (double taxation agreement). 

Technically on my German "Lohnsteuerbescheinigung" (tax form), the bonus attributed to my time in the US is listed in the "Steuerfreier abkommen nach Doppelbesteuerungsabkommen (DBA)"

I do not have a W2 for this income. 

Where and how do I claim this income on my 1040? Germany needs to see that I claimed it or they will end up taxing it after all. Thanks in advance.


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## Nononymous (Jul 12, 2011)

Does the Finanzamt actually need to see proof that you paid US tax on the bonus, or are you just assuming this?


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## Bevdeforges (Nov 16, 2007)

The German Steueramt generally doesn't see your 1040s or any of the other documents related to US taxes. Just do your US taxes as you would normally do. (And honestly, if the bonus was paid by the German office, I'd think long and hard before declaring it on the US returns.) 

German taxes (and indeed any foreign taxes) don't work like they do in the US. You generally don't need to prove payment of foreign taxes. If the Steueramt says that part of the bonus is not taxable, that means it's not taxable in Germany and you're home free.

I'd even be tempted to report the full amount of the bonus (along with your earned salary from the US) and take the FEIE against it. Unless your employer has issued a W2 for the amount, the IRS really doesn't know anything about it.


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## DEScott (Jan 15, 2019)

Thanks so much for the replies. I would like to claim the income to avoid any future issues. 

I believe there are a few ways to do this:

1. As Bevdeforges suggests, I can simply add the bonus amount to my foreign earned income and thus include it in my FEIE and Foreign Tax Credit. 

2. H&R Block suggests I put it in as income earned while I was in the US for a week on form 2555, section III (Physical Presence Test) line 18 column F. This seems weird. 

According to the double taxation treaty, I thought I had to pay social security (of some sort) on this income either in my home country or host country. Is this not valid?


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## Bevdeforges (Nov 16, 2007)

DEScott said:


> According to the double taxation treaty, I thought I had to pay social security (of some sort) on this income either in my home country or host country. Is this not valid?


I have no idea what H&R Block is getting at. Just include it on your 2555 as income you were paid in Germany (if you don't get a W2 for it, that is. If there is no W2 or 1099, then it's not US source income.) That way, you're declaring it (there is no statute of limitations on income not declared) and if the IRS thinks it should be handled differently, then they'll let you know. (Or maybe not.) I would give it until mid-February at least to make sure you won't be issued a 1099 or something on the bonus.

But if there is no W2 then there is no Social Security to be paid, either.


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## Nononymous (Jul 12, 2011)

You may just have gotten lucky here, where the part of the annual bonus that derives from the first half of 2018 (when working in the US) is paid in 2019 (when living in Germany full-time so FEIE applies). If Germany doesn't want to tax it and the US won't either, then it's a happy outcome: legal tax-free money.


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## DEScott (Jan 15, 2019)

Ha, Nononymous, I would be happy with that, but...

According to the Totalization Agreement info on the IRS website, I need to pay FICA somewhere on this. My fear is that if Germany deems I didn't pay it in the US, they will hit me (hard) for it. They know they paid me the money, and they might ask to see proof that I indeed paid FICA in the US. 

However, this is not self-employment income or anything, it was paid by my company. I would assume they would have just issued a W-2 for it (after paying their half of the employment tax) and charge me for the FICA. They did not do this, and I have no idea how to claim the income.

I am uncomfortable filing a return without knowing for sure about all of this...


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## Bevdeforges (Nov 16, 2007)

Seriously, file your return with the documents you have. (Though seriously, I'd wait a couple more weeks just to be sure that there will be no w-2 or 1099 for the bonus.)

I seriously doubt the German Steueramt will ask you for any sort of proof of what you did or didn't pay on the bonus. At least I've never heard of anything like that happening. They go by whatever documents are submitted directly to them and they don't compare notes with the IRS unless you're way up there in the income brackets.

It's entirely possible that the tax rules differ between the US and Germany, too. Germany is giving you credit for the part of your bonus "earned" while you were still in the US, while the US tax law very often concentrates on when the payment is actually made rather than when it was earned. (You see this principle in action every year when people in the US can elect to defer their last paycheck of the year into January to reduce their current year income.)


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## DEScott (Jan 15, 2019)

Bevdeforges, that certainly makes sense. I have a call tomorrow with my Germany tax guy and will report back what I hear.


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## DEScott (Jan 15, 2019)

Hi all, talking with my German tax person confirmed what Bevdeforges said. The Germans may think my income was earned in the US, but for the US tax authorities, income paid outside of the US is foreign earned. Thus, I simply added it to my FEI, used some more of my foreign paid taxes to offset any additional tax due, wrote a check for about $50 to cover what was left and called it a day. 

Thanks again for the help.


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