# Help!Need Tax and Renouncement advice



## asti (Apr 30, 2014)

Hello,
I´m an American citizen, my spouse is a German citizen, living in Germany for the past 24 years. I never worked in Germany and therefore never had enough income to have to file a US tax return. Recently, I found out through a bank that US citizens are not able to open certain accounts and wondered why. The bank couldn´t answer the question, so I searched for answers online. To my shock, I discovered infos over FATCA and worse, information about FBAR filings and the penalties for not filing. I had never before heard of either of these so I called my sister in the US, luckily a CPA, who confirmed my fears. 
My sister has taken it upon herself to prepare my last 6 years of FBARS and also the last 4 years of 1040NR´s (my income for each of the last 4 years is below the threshold for married filing separately), additionally she will be meeting with a tax lawyer in St. Louis who will consult us through the filings... However, this lawyer has already stated that he can not help me in another issue. Renouncement
I have lived in Germany so long and built up my life here, we have our children here, we pay our taxes here, I will receive no pension or have other financial ties to the States and I would like to renounce my US citizenship as soon as my application for the German citizenship has gone through. If I need another lawyer to help me expatriate, who should I be turning to. I don´t know who to turn to and live further away from larger cities in Germany. I would like to go 'out' as an uncovered expat, but my hang up could be that I haven´t filed tax returns the last 5 years. (?) Then again, I didn´t need to and see myself as compliant in this... However, the FBARS were missing... I have no idea to whom I could turn for consultation. Can anyone give me a direction. Are there Expat lawyers in Germany that someone can recommend? I live east of Dortmund. I´d be thankful for any help.


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## Nononymous (Jul 12, 2011)

Once you get past the initial shock, this stuff is pretty simple. You shouldn't need a lawyer's help. Relax, take a deep breath, do a bit of research. There's no rush - if you've been off the radar this long, they aren't going to find you tomorrow.

Sounds like the taxes are very simple. For the FBAR, list any accounts in your name (i.e. anything that's your own or joint with your husband, but nothing that's just his). You can ballpark the amounts - they don't really care if it's correct down to the Pfennig. For tax, if you haven't worked or had any other source of income, then you probably fall below the threshold and never needed to file anyway (problem solved). But if it makes it easier renouncing, file five years of null returns. No lawyer needed.

Once you have your German citizenship - which probably requires that you renounce US anyway unless you apply for the Beibehaltungsgenehmigung (say that with a mouthful of soup) - then you march into the nearest US consulate and renounce. Possibly you can call it relinquishment (slight difference) because you took on German citizenship with the intention of losing US citizenship - this will save you the $450 fee for renouncing. Do the exit tax forms (again, really simple because you have no income) and you're good to go. No need for expensive lawyers.

In the meantime, you might want to take your name off all but the most necessary of joint accounts, if you want to avoid FATCA. Best to trust your spouse before doing that though!


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## asti (Apr 30, 2014)

Thank you for responding. I have some income from interest on joint accounts and a co-owned rental, although there still is a loan on this. Still, after the German taxes I do not come close to the threshold of married filing separately. My worry is the exit tax.... 

My husband owns several lots of land through an inheritance. On one lot we built our house on and we jointly own this. On another lot, we built a duplex to rent as a pension booster for later since I will not be receiving much of a pension. Two other lots are just yards, but my husband put me on these as a co- owner as well... The reason being, that according to German law I can only inherit 500,000 Euros tax free should something happen to my husband before me. My husband has more land in his name, but I have nothing to do with this - unless I would inherit it.

My earnings are not considerable enough to have to file a US tax return, yet I am afraid that if I have to go in as a covered expat and have to show my net value I would be over and have to pay an exit tax. I haven´t understood what the highest net worth can be... sometimes I read 658,000 and then again 2000000. (?) Sorry everyone, I´m still completely new into all of this and find it all very overwhelming. My husband and I haven´t always had it easy financially and now, where things are a little leveled out at age mid-fifty and we thought the worst is behind us... comes this.


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## Nononymous (Jul 12, 2011)

I looked into this myself once, figuring if my net worth was under $650k, why bother doing the paperwork to become compliant, just renounce as a "covered expat" and be done with it. If you are up to date on filings, there should not be an exit tax consideration, I don't think. So do your five years of 1040s and FBARs and you should be fine.

But given that you have a bunch of co-owned real estate assets, it might be worth investing in having a knowledgeable CPA aware of the expat idiosyncracies (i.e. possibly not your sister) do the returns with an eye to renouncing.


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## Bevdeforges (Nov 16, 2007)

First of all, don't panic. I kind of wonder about your comment that your sister filed 1040NRs for you. As a US citizen (at the moment, at least), you are NOT entitled to file a 1040NR at all. If you're going to file returns, you file a regular 1040 or nothing.

Check the website for your local consulate to see what they say about the procedure for renouncing. It may be possible to simply notify them when your German citizenship comes through that, by voluntarily taking another nationality, you are in fact renouncing your US nationality. (See the sticky thread here on Renunciation for more information on this.) Avoids the $450 fee for renunciation in any event.

And, despite all the hype (mostly online and from the US expat organizations), there is no indication that the IRS is going to swoop down and "punish" ordinary folks who have dead normal sorts of bank, savings and investment accounts who are permanently resident overseas and have nothing to hide. As Nonoymous says, taking German nationality will probably require you to renounce anyhow so take it all one step at a time.
Cheers,
Bev


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## DavidMcKeegan (Aug 27, 2012)

You will be considered a covered expatriate if your net worth is over 2 million dollars (basically assets- debts). If you still have mortgages on any of those properties, those can be subtracted from the net amount and may lower you below the 2 million threshold.

To get caught up enough to renounce, you should file the last five years of Federal returns (you can also file four years and then file next years once you have your German citizenship) and six years of FBAR. You will file the standard 1040, and not the 1040NR. After you have filed those and taken the proper steps at the embassy, you will file Form 8854 to finalize your tax obligations.

Since it sounds like you may be a covered expatriate, I would strongly suggest speaking to an expat accountant to make sure that renunciation is the best route for you.

Good luck!


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## jbr439 (Nov 17, 2013)

DavidMcKeegan said:


> You will be considered a covered expatriate if your net worth is over 2 million dollars (basically assets- debts).
> ...


In order to get below the $2M threshold, you can gift.
You are able to gift up to $145K to your NRA husband with no need to file any IRS paperwork. You can gift up to $5.34M (I believe that's the amount) to anyone, but it does require IRS filings.


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