Wednesday, February 4, 2009

Paying American Taxes from Germany

It is almost tax filing time for 2008.

Unfortunately, I cannot file IRS Form 2555 for Foreign Earned Income Exclusion because I did not spend 330 days in Germany last year. If I were able to file this, only anything above $80,000 will be taxable. This will be taxed as ordinary income.

I may get to deduct all the costs necessary to maintain a residence abroad for work purposes. Not sure if I can do this even if I cannot file Form 2555.

No matter what, I get to file Foreign Tax Credit From 1116 for taxes already paid in Germany.

If I had any bank accounts with more than $10,000 at any time outside of the US, I have to file the Treasury Department From TDF 90-22.1, Report of Foreign Bank and Financial Accounts.

Since I moved this year, I should file Form 3903 for Moving Expenses. I have to use a separate form for each move to report transportation, storage, travel, lodgings, and more. I cannot deduct moving expenses reimbursed by an employer.

Since the Foreign Earned Income Exclusion only apply to federal taxes, this month I will register to vote in Texas, renew my driver's license in Texas, and open a checking and savings account in Texas so that my legal domicile is Texas, where there are no state taxes.

Fortunately (or unfortunately), I did not convert my 401k rollover into my Roth IRA in 2008. Otherwise, I would have had to file IRS Form 8606 to pay taxes for my Roth IRA conversion. I would have been taxed on my contribution and earnings as ordinary income.

I will do it in 2009, because this will be a low tax year for me. And I will try to max out at the 15% tax bracket.

Should I get an accountant? Or go TurboTax?

No comments: