Any US citizen - is required to report all income worldwide and has same filing requirements as those living in the US.
As an US citizen living abroad - the person may claim a foreign earned income exclusion.
The person may qualify for the foreign earned income exclusion - he/she should: -- Work and reside outside the United States for at least 330 days during the year, or -- Meet either the Bona Fide or Physical Presence tests.If the person qualifies, he/she may exclude up to $91,400 (2009 in foreign wages -- plus housing allowances (limited to 30% of the earned income exclusion).
To receive that exclusion - the taxpayer should file either form 2555 or 2555EZ.
Here are forms you likely need:
Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable. For instance dividends, investment income, etc - are not excludable.
Please also be aware - that you are not granted the exclusion automatically - to get the exclusion - you should file a tax return and claim the exclusion.
Let me know if you need any help.
Thanks. It is still unclear ; again ; This person Who lives in Germany from 2004, and pay the taxes in Germany , has declared and paid taxes for an income ( it is a Financial Institutin, investment , divident ... ) in Germany
It is normal (because she paid taxes in Germany ) to have a double taxation , and obliged to pay taxes to IRS also ?
Is there a reglementation between Germany and USA to avoid double taxation ?
IRS sent a Notification for " Non payment .....
What is supposed to be done ?
Generally - there should not be double taxation regardless of the tax treaty between US and Germany.
Because the same income is taxed in Germany - on the US tax return - the person may claim a credit for taxes paid abroad - that is besides tax treaty - so the person will avoid double taxation.
To determine the amount of credit -the person should use the form 1116 and attach it to his/her tax return. - http://www.irs.gov/pub/irs-pdf/f1116.pdf
Here are instructions - http://www.irs.gov/pub/irs-pdf/i1116.pdf
Sorry to boder you to much, but :
Again she paid in Germany taxes ( as per Germany law .. ) for this income made in USA ( again from a Financial Institution ... dividents )
You try to tell me : There cannot be a double taxation and USA ( IRS ) cannot ask for another tax ( as long as she paid it in Germany ??? .
If this is the case, she has to fill-up a tax return and attach form 1116 and wait if this form is accepted or not and how much is to be paid, if there are anything to be paid ?
Am I correct ?
Thanks
Gabriel
Gabriel,
yes - you are correct - the form 1116 is used to calculate the credit.
first the person should exclude foreign earned income - using form 2555,
then - file a form 1116 - on this form you will determine an income that is taxable in both countries and will allocate the foreign tax paid to this income in Germany.
Then you will determine US tax liability allocated to this income and will calculate the credit - the credit may not be more than US tax liability.
The credit will be reported on the form 1040 line 47 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
Yes - the form 1116 should be attached to the tax return.
Tax Preparer
Taxes, Immigration, Labor Relations