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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7421
Experience:  15years with H & R Block. Divisional leader, Instructor
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I was off in Dallas on 4/1/12. On 6/1/12 I was hired in

Resolved Question:

I was laid off in Dallas on 4/1/12. On 6/1/12 I was hired in Germany by a German Company who moved me to Germany and I became part of the German system and attained unlimited work status and was paid in Euros and paid German taxes. I was laid off on 11/25/13 in Germany, and moved back to Dallas on 4/1/13 to work for AT&T. Do I need to tell the IRS that I received income (Euros) and paid German taxes as a German resident in 2012? How would they ever even know of this income? I don't have a W2 from this German company and I am certain they did not send the IRS any forms showing my German income.
Submitted: 11 months ago.
Category: Tax
Expert:  Robin D. replied 11 months ago.

Robin D. :

Hello and thanks for trusting me to help you today. I am a tax adviser with over 15 years of experience.
Do I need to tell the IRS that I received income (Euros) and paid German taxes as a German resident in 2012?
Yes, if you are a US citizen then you are taxed on your worldwide income. You of course are allowed credits against that same income that is taxed by another country. That is done by using Form 1116 when you file your US tax return.
Most other countries restrict taxation to income derived only from within its territorial borders. Not so in the United States; if you are a U.S. taxpayer, no matter where you are located in the world.

Robin D. :

Foreign-source income is considered gross income under § 61 of the Internal Revenue Code of 1986, as amended (I.R.C.). Foreign-source income is simply added to, and taxed at the same rate as, income derived in the United States.

Robin D. :


My goal is to give you excellent service. If you are satisfied, please rate me. If you have follow-up questions on this same topic, use the reply box below. To start a new conversation with me on a new topic request me again.


Robin D. :

If you wish you could even use Form 2555 to exclude the income from US taxation but you are required to report the income and then exclude it on the tax return to receive that relief.

Customer:

But how would the IRS ever know? How is it reported?

Robin D. :

If you were audited they could request bank records. And the US and Germany are friendly when it comes to sharing information

Robin D. :

You simply report is as wages on Line 7 of your return.

Customer:

Ok. do I need to do form 1116 and form 2555

Robin D. :

No just one. As you paid the tax in Germany then use the 1116 to report that and receive the credit

Customer:

ok thank you. Do I need any forms from the German Company to complete form 1116

Robin D. :

No you would just enter the amounts for 2012 that you were paid and the tax that was paid to Germany.

Robin D. :

As you were there in 2013 too you will do the same for 2013

Customer:

So, how does the IRS check my numbers to verify?

Robin D. :

This procedure is covered by our tax treaty with Germany under Double Taxation. If the IRS questions you then you would simply send them copies of your employment documents and German tax

Customer:

OK. Thank you very much. Very helpful

Robin D. :

You are most welcome.
Your positive rating is always thanks enough.

Customer:

will do. Have a nice day!

Robin D. :

I really enjoyed working with you – please feel free to request me again when you come back to ask another question.
You will find the request feature when you come back under your MY QUESTIONS section.

Customer:

OK . Bye

Robin D. :

Good day

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7421
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 3 other Tax Specialists are ready to help you

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