Hooray!
Today I finally filed my taxes after two weeks of research and playing around with Turbo Tax. After this, I feel like I could be a tax preparer!
In my personal case, filing the the foreign tax credit, Form 1116, would have given me a tax liablity, whereas filing the foreign income exclusion, Form 2555, I got a small refund. So try it both ways! Even though the general wisdom I have seen is that the foreign income exclusion usually lessens your tax liability than the foreign tax credit.
I found a great great article from a professional tax expert about the Foreign Tax Credit. He explains the form in simple terms, using an example to fill it out. The site on which I found it is ACA, American Citizens Abroad, and they have a host of practical articles on taxes and other bureaucracy.
Now I just have to prepare my German taxes!
Showing posts with label american. Show all posts
Showing posts with label american. Show all posts
Saturday, April 4, 2009
Monday, February 9, 2009
More Findings on American Taxes
Even if I qualified for the Foreign Earned Income Exclusion, my investment income would not be excluded. I have to report income, earned or through investment, made anywhere in the world. If my investment income is greater than $1500, then I need to file Schedule B.
If the German tax I pay is more than the American tax I should have paid, then that excess could be credited back against my American tax payment (for example, when I move back to the States).
If I were single and had gross income of less than $8200, then I am not required to file, no matter where I lived.
Unfortunately, I make a bit more than that. So I should file the 1040, then claim a credit / deduction for my German income tax paid via the foreign tax credit form. I think.
To get more clarity, I ordered Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad, from the IRS. Free delivery to Germany!
If the German tax I pay is more than the American tax I should have paid, then that excess could be credited back against my American tax payment (for example, when I move back to the States).
If I were single and had gross income of less than $8200, then I am not required to file, no matter where I lived.
Unfortunately, I make a bit more than that. So I should file the 1040, then claim a credit / deduction for my German income tax paid via the foreign tax credit form. I think.
To get more clarity, I ordered Publication 54, Tax Guide for US Citizens and Resident Aliens Abroad, from the IRS. Free delivery to Germany!
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?
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?
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