US expat tax and FBAR: Discussion thread (Ask your questions) Part Two
Please ask your questions here about US Expat tax and FBAR.
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NB: This discussion is a continuation of an older discussion that became to large for our software to handle well. See US expat tax and FBAR: Discussion thread (Ask your questions) Part One.
This video may be a help to those who can and need to this year actually make sense of a complex US IRS form:
Line by line, the information required for FATCA Form 8938, Statement of Specified Foreign Financial (which is in addition to FINCEN114 / FBAR)
Good luck if this is you. I was / am certainly one who could NOT do this myself, thus made the expensive decision to dip into my Canadian-earned retirement savings to pay for US law and accounting assistance to get it done — and out.
(Related YouTube videos are in the watching queue after this one.)
I’ve read through a lot of posts and comments, but can’t find exactly the answer I’m looking for, perhaps someone can help. I was a US citizen and moved permanently to Germany in Feb. 1987 and filed a tax return for 1986-87. Then I had no income from that point until 1999. All my earnings were paid to me by my German husband’s German company and my salary never exceeded US$4000. I never filed another US tax return.
In April 2002 I gave up my American citizenship and took a German one. Since January 2016 I also have British citizenship. Since 1987 I have spent fewer than 90 days in total in the US, and in that time I have received no income from the US, neither salary nor income from property, etc. The US Consulate in Germany did not inform me of any forms such as the 8854.
In 2009 my American nephew, an estates banker, said that I could receive Social Security from the US. I contacted SS and they sent me a statement correctly listing all my earnings from 1971 to 1987, but nothing for the subsequent years. I am now 63 and would like to start receiving this money.
Does anyone have any advice on how to approach SS or the IRS to make sure I don’t fall afoul of them? From my reading on this site, it seems that I probably have been “grandfathered” and don’t need to file an 8854. Is that correct?
Thanks for reading this long post and I’ll appreciate any comments received.
Addendum to my comment above: I just went through all my paperwork and found the instruction sheet for 8854 from the IRS (but in GERMAN!), but no form, which could tell me that I may have gotten the form from the US Consulate when I visited them, filled it in and gave it back. In which case the IRS may have it, or may have lost it. No way of knowing.
This gets stranger and stranger…
@Badger – if you can find out where is the nearest Consulate with a Federal Benefit Unit, you can apply for your SS there. I don’t think there’s any connection between the FBU and citizenship/tax, except your citizenship status may affect whether your SS is taxed by the US.
I applied through the London Embassy last September. They interviewed me by phone and put through the application to the US and payment began Jan 2016, backdated six months from the date of my application as I had requested. They weren’t at all fazed when I told them I was in the process of renouncing, and they never mentioned anything to do with tax.
At that time I was still trying to figure out what was the bare minimum I could file. In the end I just backfiled FBARs, and sent in the 8854. No problems, and the SS keeps coming smoothly. It has paid for my renunciation. 🙂
At
@Badger, you expatriated before June 2004 so there was/is no need for you to file an 8854 form.
https://www.irs.gov/pub/irs-pdf/i8854.pdf
There’s a booklet about receiving SS abroad at https://www.ssa.gov/pubs/EN-05-10137.pdf. Germany is on the list of countries whose residents don’t pay US tax on SS, so you should receive it with nothing withheld.
Looks like Germany has a Totalisation treaty with the US, as does Britain. You may be able to use your SS qualifying years to qualify for a pension from Germany and/or Britain, if you’ve worked in either of those countries but don’t have enough credits to claim.
@Badger
I don’t think that your SS benefits are contingent on you filing 8854. If you have paid the requisite number of years then you should be entitled to them.
Here is a useful link
http://www.wsj.com/articles/BL-272B-329
Usually SS will tax 85% of your benefit @ 30% but Germany has @ tax treaty with them and your tax rate will be 0%… Lucky you.
The SS website has info for non resident aliens with instructions.
https://www.ssa.gov/international/AlienTax_disclaimer.html
SS IS A WITHOLDING AGENT FOR THE IRS
As your WITHOLDING will be 0%, I am not sure what / if there will be any repercussions if you have not filed 8854.
@badger
Yes, the embassy in Frankfurt has a SS desk. They are extremely helpful and efficient, much more so than the disfunctional office in Philadelphia.
@Heidi – I hadn’t filed 8854 when I applied for SS, and I still hadn’t filed 8854 when the SS payments started coming through. No repercussions, and no withholding.
@iota
I guess that badger is OK as she expatriated before the magic 2004.
I would be a bit concerned about the IRS receiving a notice of WITHOLDING from SS of someone who was not up to date or had not filed those final forms though. Who knows what they eventually match up?
Badger and I both live in countries where the taxing rights for SS belong to the country of residence. I expect that in a country which is not on the “no US tax on SS” list, the FBU might require a W9 or W8-BEN. As far as I know, they would need one or the other form, in order to send a withholding statement to the IRS.
It’s very satisfying to me that the US has ended up paying me back the $2350 they they outrageously charged me for renouncing. And the money keeps on coming – money they’d never have had to pay out if they’d left me in peace – I had no idea I was eligible for SS, until I got the news about CBT and started reading the forums looking for information about renouncing. I would encourage anyone living in a “no US tax on Ss” country to claim the money, it’s very rewarding in more than one way! 🙂
Maybe someone who has claimed SS while living in a country where it’s taxed by the US, will be able to say if a withholding form is required as part of the application process.
Here is the IRS list of countries where SS pensions are exempt from US tax:
https://www.irs.gov/publications/p915/ar02.html#en_US_2015_publink100097869
@Iota, @Badger…….
OK Badger relinquished pre-2004 and if that did not stick relinquished in 2016. Does badger have a CLN or is undocumented?
Regardless, Badger does not believe they have USness.
Yep, it looks pretty clear in the UK that US Social Security will not be taxed by the USA for a Non-US Citizen. But will it screw up the UK State pension, if you were already eligible for both?
But……I thought a so called dual in the UK would pay solely US tax on social security and HMRC got no bite at the apple.
@George – under the US-UK treaty, US SS and the UK State Pension are both taxable exclusively by the residence country. So, a NRA receiving both will be liable for onlynUS tax on both if resident in the US, or only UK tax if living in the UK.
My SS pension is a Totalization benefit. I never worked in the US more than two or three years before leaving for good – banging the door behind me. That’s why I thought I wasn’t eligible for SS. But lo! I learned from the forums fifty years later that the US had since signed a Totalization treaty with the UK, meaning that I would be entitled to a (small) SS pension on the basis of my working record in the UK. It’s an excellent deal – turns out my ex would also be entitled, as my ex-spouse, even though he never worked a day in the US, we’ve been divorced for twenty years, and he’s been through another marriage and divorce in the years since we split! America is insane. 🙂
My UK pension is not affected by the SS pension. I’ve been receiving it since 2000, and it continues just the same. The only downside to receiving the SS pension is that I now have to file a self-assessment return with HMRC to report it. That’s easy though.
@George – “But……I thought a so called dual in the UK would pay solely US tax on social security and HMRC got no bite at the apple.”
It’s Article 15(3) that provides for exclusive residence-country taxation. 15(3) is protected from the saving clause, so for once a treaty benefit applies even for those hit by US citizenship.
@Badger – one more thing I learned which might be useful – because of the way SS benefit is calculated, you might find that by waiting a few years to apply, you might get a higher benefit. There’s a chart and calculator at https://www.ssa.gov/planners/retire/agereduction.html
@iota
I am in a country in which the US taxes my SS pension 15% but no W8 Ben is required
I just had to prove residence here to the SSA and SS act as the WITHOLDING agent for the IRS. (I don’t know why WITHOLDING keeps capitalising all on its own accord) ! I believe I should get a tax credit from my Canton, but they chose not to honour that agreement. They tax the remaining 85% , and tell me that is their concession. That means I am effective losing 15% to the US!
@badger & iota
SS is broke, I wouldn’t wait, take it while you can. The way expats are being treated, who knows if that will be taken from us in the near future.
@Heidi – hmmm. I get taxed on 85% by HMRC. I don’t suppose it’s just a coincidence, but I don’t understand the significance of this 15/85 split.
I think you can only apply a tax credit to income on which tax has been paid to the other country. The two countries seem to have agreed on this 15/85 split which means that if there’s no exemption on either portion, you end up paying tax on 100%. Not fair, I agree.
@Heidi – You may be right about getting it while you can.
On the 15/85 split: the SSA says no more than a maximum of 85% can be subjected to Federal taxation. (http://www.socialsecuritychoices.com/info/taxation.php)
So with cross-border payments, that would be the maximum fraction of the SS payment that the residence country could tax. And the US would either tax the other 15% portion, or not, depending on whether the relevant tax treaty gives exemption from US taxes. Or that’s my guess.
@iota
The US tax my whole benefit @15%.
The Swiss also wanted to tax my whole benefit @ the level I pay tax in Swit. I complained that I was being double taxed and there was a treaty to prevent this. They then gave me a ‘concession’ to tax 85% of my benefits, which actually means I am paying aprox 40%!
Other Cantons I know give a tax credit for 15%.
Swit is similar to the US with each Canton being politically and fiscally independent, but it is much more Democratic with referendum being held constantly at the bequest of its citizens. But I guess tax Depts are similar worldwide!
@Badger,
It might be a bit confusing if you post using that moniker here. I’ve been ‘badger’ for years here. Would you be willing to add something to your username like a number or something else to distinguish us from each other?
Thanks.
@badger, sorry about that! I’m usually Artfulbadger, if they let me change that I will!
Thanks @Badger, cause even with the upper case ‘B’, sometimes I’ve been addressed as B(adger) and sometimes as b(adger).
Great username; Artfulbadger!
: )
Hi Artfulbadger,
Welcome to Brock!
If you’d do your future comments as Artfulbadger, that would be great. You can just create a new log-in using that name. I’m a moderator on the site, so I can change the name from Badger to Artfulbadger on your earlier comments. Then everything should be clear. Thanks.