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Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience:  GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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I have a german pension and german social security income.

Resolved Question:

I have a german pension and german social security income. I have a form 8802 (us citizen and US resident) and therfore no german withholding is made.
I have aproximately $80000 of tax loss carry forward from my previous german taxes.

Can I use this carryforward against my german income that I am currently receiving?
Submitted: 5 years ago.
Category: Tax
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

Do i understand that you are a dual citizen?

 

Are you paying U.s. taxes on the german pensions?

Customer: replied 5 years ago.
I am only a US citizen but I worked for 20 years in Germany. I believe I am obligated to pay US taxes on both the German company pension and also the German social security but I have accumulated over $80000 of tax loss carryforward during that 20 year period
Expert:  Ed Johnson replied 5 years ago.

Thank you, XXXXX XXXXX really doing great.

 

One more question, and I will be able to give you an answer.

 

What is the source of the 80,000 loss carryover? business activities, etc?

 

I will address the issue ofthe German SS. Are you drawing U.S. SS and do you have other U.S. income as well?

Customer: replied 5 years ago.
I received salary income as a controller for a German engineering firm and I paid more German tax than that due on my US tax declarations. I am 63 and will wait until 66 for my US Soc. Sec. My other US income is only interest and dividends (about $9000 per year)
Expert:  Ed Johnson replied 5 years ago.

Dear DTB,

 

Thanks, XXXXX XXXXX have hit a snag.....Tell me this,

 

 

 

in what year did you first use the form 8802

Customer: replied 5 years ago.
This is the first year I have applied for it. I have paid full German taxes for the last 20 years including 2008. My pensions started on April 1, 2009.
Expert:  Ed Johnson replied 5 years ago.

DearCustomer

 

Typically, when you report world wide income in the u.s. you were to have taken advantage of at least two tax benefits, for all of those 20 yeas and last year befor using form 8802.

 

1. Foreign earned income exclusion, which excludes from U.S. income a large portion of your income from that german company. Had you been excluding from U.S. income your entitlement for foreign earned income?

 

2. Foreing paid taxes: You were entitled to get a tax credit on foreign paid taxes on the portion of income that exceeded the foreign earned income exclusion. Had you been taking advantage of the foreign tax credits on your annual returns filed in the U.S.?

 

3. Did your company pay you a fee often called hypo-tax

Customer: replied 5 years ago.
I have filled a 1116 all those years. I was treated as a "local national" for those 20 years and yes I filed and received the tax credit on foreign taxes paid (this is how I have acculmulated the $80000 (paid German taxes more than the equivalent due in the US).

As I was treated as a "local national" and was not an expatriate the company was not conerned with a hypo-tax issue.
Expert:  Ed Johnson replied 5 years ago.

DT,

 

I have enough now to give you an accurate response. But I have to sign off for an hour or two. Is that ok?

Customer: replied 5 years ago.
Fine. thanks Ed

XXXXX XXXXXg
Customer: replied 5 years ago.
Ed,

Are you back?
Customer: replied 5 years ago.
Ed,

Are you back? Now I have to go for about 90 minutes

Tom
Customer: replied 5 years ago.
Ed,

Are you back? Now I have to go for about 90 minutes

Tom

Ed, I am not back and waiting for your reply
Tom
Expert:  Ed Johnson replied 5 years ago.

DTB,

 

Sick mom to take care of. I am back now:

 

You can carry this forward.

 

you will still be doing a 1119 for the next years on the foreign taxes, but you have to break them down to the year that they were actually incurred.

 

There is a 10 year statute of limitations to take a tax credit for any foreign taxes you may have not used. Please get the following publication to find out how to do it.

 

http://www.irs.gov/pub/irs-pdf/p514.pdf

 

About SS from Germany, please read this: http://www.ssa.gov/international/Agreement_Pamphlets/germany.html

 

German SS benefits are taxable,if at all in the U.S. They follow the same rules as U.S. SS with regard to taxation. If your SS form Germany now, and later both together, exceed a certain income level (generally around 35,000) then they become taxable.

 

http://www.irs.gov/newsroom/article/0,,id=179091,00.html

 

 

 

Customer: replied 5 years ago.
Ed,
I believe that I am happy with the info but not sure of the answer.

In 2009 will have foreign sourced income (German company pension and German Soc. Sec) but will have no German taxes withheld in 2009 as the form 8802 will take over.

I assume from what you said that when I use the form 1116( for 2009) I will be able to use the remaining historical tax loss carryforward against my US tax obligation until the tax loss carryforward is extinguished over the next 2 or 3 years.

Is my understanding correct?

I will clearly hit accept but can you clarify the point above for me.

Thanks!
Tom
Expert:  Ed Johnson replied 5 years ago.

That is correct.

 

You are right. you just can not take an foreign credit on any incomed taht might have been taxed in the same year of the from 8802. this is a moot point for you, because you will not have had any taxable income in that year, it looks like.

 

 

Customer: replied 5 years ago.
Ed,
You have done a wonderful job. Many thanks. 2009 is a hybrid in that the 1st quarter was taxable in Germany (full salary) and starting April 1st (based on the 8802 form) there will no longer be a German deduction for the pension income starting April 1, 2009.

Tom
Expert:  Ed Johnson replied 5 years ago.
Thanks for your comments and feedback, I appreciate it.
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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