Why does the US tax non-residents
7 things you should know as a US citizen in Germany about taxes in the USA
America is the only developed country in the world whose citizens, no matter where they live or work, are subject to income tax.Here 7 important things to know aboutTaxes USA must know.
1. How did the US tax law come about?
Worldwide American tax liability has existed since around 1860. During the American Civil War, many people tried to escape their duty by fleeing abroad. In order to discourage and punish these national refugees, a law was passed that also required Americans to pay taxes abroad.
After the war ended, the law persisted on the grounds that the honor and benefits of holding an American passport were worth the price. So this law has existed for more than 150 years. Many people are not aware of this (or it is simply ignored).
2. How about taxes USA Germany?
How exactly does the American tax system differ from our German tax system?
American tax law is spread over various levels and can be very complex. If you have detailed questions, it is advisable to seek professional help from a US tax advisor.
3. When am I actually liable for tax in the USA?
America is the only developed country in the world whose citizens, no matter where they live and work, are subject to income tax. (with or without US passport, green card holder, others)
With regard to taxes, a distinction is made between:
- Residents, i.e. people living in the USA
- Non residents, i.e. people living abroad. This includes those who have been within the United States for less than 183 days in the past three years.
So-called resident aliens (Green Card holders with permanent residence) are treated like US citizens for tax purposes, i.e. they have to pay tax on their worldwide income in the USA.
Green Card holders who are still based in Germany usually do not have to pay any or almost no US taxes due to the fact that German taxes can be offset. However, this does not exempt you from the obligation to file a tax return in the USA.
So-called non-resident aliens (Temporary or non-US resident) only need to pay tax on US tax income and US trade income.
American citizens who have already paid income tax abroad can sometimes have it offset against US income tax.
For more information on US tax liability for all American citizens living abroad, visit our Knowledge Center.
4. Fatca and Taxes USA
FATCA and Taxes USA? FATCA stands for “Foreign Account Tax Compliance Act” and is a US law for the supervision of the tax obligations of foreign bank accounts. FATCA is introduced to investigate tax evasion by US citizens abroad.
Germany and the USA exchange data via financial accounts. The FATCA agreement was concluded for this purpose. The Federal Central Tax Office (BZSt) sends the data reported by German financial institutions to the United States Federal Tax Service (IRS) and receives the data reported by US financial institutions from the IRS.
As a US person, US taxpayer, you have to deal with this law. Among other things, the law stipulates that customers of German banks must provide the bank with their information using a FATCA form. This exchange of information via the FATCA form has consequences for American taxpayers.
5. US Tax Liability
In fact, in the states, you are required to determine the taxes yourself while completing your tax return. In the states, this is not done by the tax office after the documents have been submitted, as in Germany, but is collected by way of self-assessment.
Tax law in the United States exists at several different levels, such as the federal government, state, town, and county. Therefore, it can sometimes happen that you have to submit the tax return at all levels in parallel in order to avoid a double burden.
Especially in the initial phase, you should get the help of tax professionals who specialize in this.
6. Which forms do I need for the US tax return?
The IRS (Internal Revenue Service), which is subordinate to the US Treasury Department, is responsible for processing the tax return.
There you will not only receive the various forms for the tax return (such as Form 1040), but also all the necessary information about the American tax system and explanations of terms or special tax questions.
It is advisable to first find out about the American tax system. Please contact us with any questions about US taxes.
7. Solving the problem with US taxes?
Almost all people with whom we come into contact and who are hearing about their tax obligations for the first time take part in the so-called "streamlined procedure". This is an amnesty program run by the IRS, which avoids fines. This program has been running for some time and can continue for years ... or it can be terminated tomorrow by the IRS.
Americans Overseas received a lot of questions at the time and we can imagine that this is the case with you too. We answered many of our questions back then in our knowledge center, for example: (When am I liable to pay taxes, do I have to pay extra taxes, can't I just hand in my passport, get a letter from my bank, etc.) You can call us at any time to Discuss your questions with us (or possibly a US TAX specialist).
Americans Overseas can help you with US taxes
We, the founders of Americans Overseas, were born in the Netherlands. We came into possession of an American passport through our (American) mothers.
When we heard about this law and tax liability for the first time around 2013, we were unbelieving (that can't be true). Also anger (how can you just make decisions about us like that), fear (will I get a fine now or other problems await me), and panic (what do I have to do now).
There is no escape from American tax obligations. At that time there was no information for us from the authorities. The American consulate referred us to the IRS and the IRS was impenetrable.
That is why we started this initiative to help people who are in the same situation as us with comprehensive information. In order not to panic unnecessarily, to offer non-binding help in the form of a network of affordable experts. So we have also become interlocutors of the ‘Tweede Kamer’, the Dutch Bundestag.
However, we still have a long way to go before anything really changes - if at all. It is perhaps a relief for those affected to learn that 90% of the cases we deal with lead to clear solutions. In most cases, you will therefore not have to pay any tax in America.
Do you have further questions about US taxes, the consequences of FATCA and CBT? If so, contact Americans Overseas.Contact us now for more information
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