Filing Taxes as an American living in Germany

Are you an US Expat living in Germany and anxious about taxes in the US? Let me tell you about my experiences and maybe lift your anxiety.

Disclaimer: I’m not a tax advisor nor am I a specialist in taxes. In this post I’m describing my situation, which may differ from yours and what I did.

My situation

I was born in the US, but have been living in Germany since my childhood. I’ve gone to school and worked here ever since. My income has only been the salaries I have earned in Germany. Only after working here for 5 years and looking into tax returns for germany it hit me: US citizens are obliged to file any income. I thought I was innocently evading taxes. I started googling around and read more into what needs to be done and the consequences of not filing. I grew more and more anxious. Will the FBI be waiting for me the next time I visit the US?

If you are like I used to be, don’t panic. The IRS is most probably not after you, ..yet. What they do want to know of is the people that are hiding millions in offshore bank accounts and successful business owners.

Key points:

For most of us in Germany, there is a high chance that your income falls under a threshold of $108,7001 of your yearly gross income. You can basically remove $100k off your income and only what is left will be taxable income. So if you earn $125k, only $25k will be taxed.

If you are single, under 65 years old and earn less than $12,400 yearly, you don’t have to file at all. There might be other reasons why you might not need to file2.

If you have $10k or more, spread out in one or multiple bank accounts that are not in the US, you need to report them with an FBAR3. This is a simple form to report the bank accounts to the IRS. It’s simple: Visit this website to download the PDF. Fill it out and submit it on the same website.

If it’s been a while: you can file your last 3 years of income with a streamlining procedure.4

Usually you only need data that is on your Lohnsteuerbescheinigung(LBS)5 of the year that you are filing for.

How I did it

I started filing taxes after 5 years of working professionally. I used the streamline procedure of H&R block to file the last 3 years. H&R block is expensive. But you do get a great service. You will have direct contact with one or more expat tax specialists for your country. They will assist you in gathering all necessary documents via their chat or over the phone.

Using H&R block to file my yearly income has been expensive. Having a personal assistant is not required anymore if you know which data is needed. I have since switched to My Expat Taxes . The DIY standard packages lets you fill in all required data. The forms and questions about your income are simple and intuitive. They only file on your behalf. No tax support. Which should not be necessary when filing has become a routine yearly thing.

The first time I had to file an FBAR I needed to figure out the maximum value of my bank account. My banks website did not have any tool to do that so I needed to contact them. They had to run a query against their systems for me. Apart from that, the FBAR was simple to file.

Cost

H&R block wants you to make an appointment with them to explore your particular situation. In my case, the streamline process was about $1200. Filing yearly was $250+. You do get excellent support and don’t have to fill out any forms. A true hands off experience. You only need to print out 2 forms, sign, scan and send them back to H&R block.

My Expat Taxes is $149, based on their standard package6. You have to fill in all required data which can take a while. You will also need to print, sign and scan 2 forms.

Conclusion

No need to be scared if you haven’t filed, yet. Filing US taxes are not that hard if you have all documents ready. There are services that can help you out. A great resource on why it’s good to use such a service, especially for first time filers: You will be able to see the documents they sent to the IRS. Next time you can prepare all files yourself by looking at what the tax service has punched into the forms. You probably won’t get around paying money if you haven’t filed before. Once you have a good understanding of the forms required, you can file everything yourself.

  1. Foreign Earned Income Exclusion ↩︎

  2. Do I Need to File a Tax Return? ↩︎

  3. Report of Foreign Bank and Financial Accounts (FBAR) ↩︎

  4. Eligibility for the Streamlined Foreign Offshore Procedures ↩︎

  5. Every year your employer will give you an income tax overview. This is a summary on what taxes and other expenses went off your gross income of that year. If you switched jobs, you might have multiple for a year. ↩︎

  6. My Expat Taxes Pricing ↩︎