# German paying US taxes as a resident alien: Assets in German accounts



## bienchen

I've been living in the US on non-immigrant student visa for the past nine years. Because I've been here for so long, I'm considered resident alien for tax purposes.

I have savings in Germany that are right around the equivalent of $50000. I've always filed all the appropriate paperwork in Germany, however, I didn't know that I needed to declare my income here in the US.

What are the correct steps for me to take? I'm very worried about getting into trouble for not declaring all my assets here in the US.


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## Bevdeforges

You need to declare your worldwide income in the US. And as far as the assets are concerned, you should be declaring them on the so-called FBAR forms (Treasury form TD 90-22.1, available from the IRS website). Since you're also resident in the US, you may be subject to the lower reporting threshold for foreign financial assets, and there may be some extra forms to file as part of your income tax returns.

You're right in the middle of the US "tax season" so should be able to get some (low cost) assistance through the store front tax preparers to at least get this year's returns (calendar year 2012) in on time. Once those are done, you can work on back-filing the prior year returns that are needed.
Cheers,
Bev


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## bienchen

Thanks for your response. 
Just to clarify - I'm paying US taxes on my income from my job here in the US, just like any other resident alien. I've just treated my US income and the interest from my assets in German separately. 

Besides form TD 90-22.1, will I need anything else, such as my tax certificates from Germany?

What steps would I need to back-file my previous returns? Can the fact that I didn't file my taxes here correctly get me in any trouble in the long run?


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## santafe

I assume that you have been filing your US taxes each year if required by your income. If your income is under the threshold to file each year your only report the overseas account on the TDF 90-22.1 form and depending on the amount (if over $50000) in the overseas account also the 8938 form which is part of the 1040 return.

If you have been filling the 1040 you should be reporting the interest on your German accounts on schedule B and ticking the appropriate box at the bottom of schedule B Part III 7a and 7b.

If you have paid tax on your German accounts in Germany you may claim a credit for that on your US tax return on form1116 (but only if you are unable to claim that German tax back from Germany). If the foreign tax paid is less than $300 you do not to fill in the 1116 you can just claim in on the 1040 form line 47.


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## bienchen

santafe said:


> I assume that you have been filing your US taxes each year if required by your income. If your income is under the threshold to file each year your only report the overseas account on the TDF 90-22.1 form and depending on the amount (if over $50000) in the overseas account also the 8938 form which is part of the 1040 return.
> 
> If you have been filling the 1040 you should be reporting the interest on your German accounts on schedule B and ticking the appropriate box at the bottom of schedule B Part III 7a and 7b.
> 
> If you have paid tax on your German accounts in Germany you may claim a credit for that on your US tax return on form1116 (but only if you are unable to claim that German tax back from Germany). If the foreign tax paid is less than $300 you do not to fill in the 1116 you can just claim in on the 1040 form line 47.


I apologize for not responding earlier (I've actually spent the better part of the last 6 weeks harassing my banks in Germany asking them to send me old bank statements, year-end-tax statements and the like).

My question is whether I have to file an FBAR for a year in which I didn't actually have to pay US taxes? I came to the US in November 2003, was here as an aupair on a J1 visa until November 2004 and then came back in 2005 on an F1 visa and have been here ever since. The first time I actually worked (and received a W2) was 2009 (which is the first time I filed a tax return). However, going by the Substantial Presence Test, I was a resident alien for tax purposes in 2008. Do I need to file a tax return for 2008 and/or FBAR for 2008?


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## BBCWatcher

FBAR is a separate requirement, independently determined. Yes, it's possible to have a FBAR filing requirement without having a personal income tax filing requirement.


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## bienchen

BBCWatcher said:


> FBAR is a separate requirement, independently determined. Yes, it's possible to have a FBAR filing requirement without having a personal income tax filing requirement.


Thanks so much for that. I figured that I need to file the FBAR for 2008.

My other question would be if I need to file a 2008 tax return for interest received from my German assets even if I didn't have W2 income?


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## bienchen

I wanted to add that at the very most I would owe about $100 and taxes and since I'll likely be able to claim my tuition expenses ($9000), I probably won't owe anything.


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## BBCWatcher

Whether you were required to file a U.S. personal income tax return for tax year 2008 will depend on how much income you received. Check Publication 501 (2008 Edition) for details.

My understanding is that German bank deposit interest is taxable in Germany at a higher rate than in the U.S. Consequently you may have an excess U.S. Foreign Tax Credit that could be applied to past and future years of U.S. tax liability (with limits). If all that's true, even if you are not required to file a 2008 U.S. income tax return you may wish to do so anyway to take advantage of that tax benefit. (On edit: Using the excess foreign tax credit may require filing an amended 2009 tax return, for example. There are some limits on how far back you can go in filing/amended filings for tax refunds, but I'm not sure how far back that is.)


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## bienchen

BBCWatcher said:


> Whether you were required to file a U.S. personal income tax return for tax year 2008 will depend on how much income you received. Check Publication 501 (2008 Edition) for details.
> 
> My understanding is that German bank deposit interest is taxable in Germany at a higher rate than in the U.S. Consequently you may have an excess U.S. Foreign Tax Credit that could be applied to past and future years of U.S. tax liability (with limits). If all that's true, even if you are not required to file a 2008 U.S. income tax return you may wish to do so anyway to take advantage of that tax benefit. (On edit: Using the excess foreign tax credit may require filing an amended 2009 tax return, for example. There are some limits on how far back you can go in filing/amended filings for tax refunds, but I'm not sure how far back that is.)


Thanks! It looks like I was under the limit for filing taxes. Phew - one less thing to worry! I did look at the foreign tax credit and I think it actually applies to me. Although at this point, my focus is just on getting everything straightened out with the IRS.


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## bienchen

In addition to filing late FBAR I'm also amending all of my previous tax return. 
AS BBCwatcher said, I don't need to file one for 2008. 
I'm almost done with the 2010 and 2011 amendments (looks like I owe them about $200 total), but I am unsure about the 2009 one: Even if I add my interest from Germany to my income, I still don't owe any taxes. Should I still file the amendment with the newly added schedule B or does it not matter? I understand that if I come in under a certain threshold I'm not required to file but given that I did file in the first place is it necessary to file the amendment?

Thanks!


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## BBCWatcher

As I mentioned, I think you can get Foreign Tax Credits on those back years because you paid tax in Germany on that income. What you seem to be missing is that the U.S. usually allows you to take excess Foreign Tax Credits and apply them to past and/or future years. That can save you money.

For example, let's suppose in 2008 you paid $100 in German bank interest tax. That same year let's assume your U.S. tax liability was zero. However, in 2010 you owed $500 in U.S. taxes. The U.S. generally lets you take the $100 you paid to Germany in 2008 above your U.S. tax liability, save it, and then use that $100 to reduce another year's U.S. taxes. So in this example instead of paying $500 in 2010 you would pay $400.

Current U.S. tax law lets you use those FTCs one year backward and in any of ten years forward. So an excess FTC in 2013 could be used to reduce tax paid in 2012 (using an amended tax return) and/or saved up and used in any tax year(s) through 2023. I think the law used to be 2 years back and 5 years forward, so just check the rules.

I'm oversimplifying a bit, as you almost always need to do in U.S. tax matters. But the general principles are correct.

The FTC is one of those things that sometimes allows you to do "better than zero." For U.S. expatriates the other notable parts of the U.S. tax code that sometimes help you do better than zero are the Additional Child Tax Credit and the now sunset Making Work Pay tax credit. Whenever you can do better than zero it's certainly in your interest to file, even if you are not required to do so. So many people think that zero (and no filing obligation) is the best they can do. Wrong, sometimes.


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## bienchen

BBCWatcher said:


> As I mentioned, I think you can get Foreign Tax Credits on those back years because you paid tax in Germany on that income. What you seem to be missing is that the U.S. usually allows you to take excess Foreign Tax Credits and apply them to past and/or future years. That can save you money.
> 
> For example, let's suppose in 2008 you paid $100 in German bank interest tax. That same year let's assume your U.S. tax liability was zero. However, in 2010 you owed $500 in U.S. taxes. The U.S. generally lets you take the $100 you paid to Germany in 2008 above your U.S. tax liability, save it, and then use that $100 to reduce another year's U.S. taxes. So in this example instead of paying $500 in 2010 you would pay $400.
> 
> Current U.S. tax law lets you use those FTCs one year backward and in any of ten years forward. So an excess FTC in 2013 could be used to reduce tax paid in 2012 (using an amended tax return) and/or saved up and used in any tax year(s) through 2023. I think the law used to be 2 years back and 5 years forward, so just check the rules.
> 
> I'm oversimplifying a bit, as you almost always need to do in U.S. tax matters. But the general principles are correct.
> 
> The FTC is one of those things that sometimes allows you to do "better than zero." For U.S. expatriates the other notable parts of the U.S. tax code that sometimes help you do better than zero are the Additional Child Tax Credit and the now sunset Making Work Pay tax credit. Whenever you can do better than zero it's certainly in your interest to file, even if you are not required to do so. So many people think that zero (and no filing obligation) is the best they can do. Wrong, sometimes.


I actually never paid any German taxes (and definitely not in 2008), simply because in Germany if the interest you receive in any given year doesn't surpass EURO 801 (currently roughly $1100), you don't need to pay any taxes on it (in return for that they take 25% of any interest over those EURO 801). I had one year where my overall interest was slightly higher, but it's barely worth mentioning (maybe $20 or $30, if that) and definitely not worth the trouble of amending a tax return.

So, given that I can't claim a foreign tax credit, should I even bother filing an amended return for 2009 if it's not going to get me any money back and I still don't owe anything? Or should I just do it, attach a schedule B, and have that be the end of it?


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## BBCWatcher

OK, if no FTC or other benefit, and if you didn't meet the threshold for filing (as described in Publication 501), then no, don't file.

If you're participating in an IRS compliance program for back filing I would include a short statement explaining that you had no filing obligation for that year to avoid confusion, unless the program instructions say otherwise.


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