Her story is a familiar one: a US citizen who has always lived and worked in another country who suddenly realizes they should have been filing US taxes all along. This growing group of Americans has been coined “Accidental Americans”, and with all the recent media coverage of the topic, more and more US citizens are finding out they are seriously delinquent on their US tax returns. Below is the story of one German resident who was surprised to learn her US citizenship meant she had US tax reporting responsibilities.
Helga was born in Germany and lived there her entire life. One of her parents were US citizens and even though she was born overseas, she received automatic citizenship. She never lived in the US (in fact, she had never even BEEN to the US). She is 25 years old and has been filing and paying German taxes.
Coming to Greenback
The US has launched a huge initiative to thwart tax cheats and force Americans to report (and pay taxes on) any income they receive, regardless of where they live. It is one of the only countries who employs citizen-based taxation, not residency-based, and the US has significantly increased their efforts to ensure every American applies.
Because of the aggressive campaign to enforce reporting requirements, Helga realized she was delinquent on her US tax returns. She had no idea where to begin or how many years she would need to file, so she searched for a tax preparation company. She found Greenback online and decided their expertise was just what she needed to get caught up.
Helga communicated with her accountant through email initially to assess her situation. He reviewed her income and the taxes she had paid to Germany, as well as her bank accounts to determine exactly what she would need to file.
Helga’s situation was perfectly suited to file under the IRS amnesty program, the Streamlined Filing Procedures. This program requires you to file the last three years’ tax returns, as well as FBAR (Foreign Bank Account Report) if applicable. Helga’s bank accounts all fell under the FBAR reporting threshold of $10,000, so all she needed to file were her Federal Tax Returns.
When Helga originally contacted Greenback, she explained that she spoke very little English so it would be difficult for her to communicate with an accountant. Greenback’s Customer Champion chose an accountant who was fluent in German in order to make the process simpler for Helga, which she very much appreciated.
Helga was thankfully quite organized with all her tax documents, so it wasn’t a time-consuming process to gather all the documents needed to file under the Streamlined Filing Procedures.
In the end, Helga’s German income tax was higher than what her US tax would have been, which means she could offset those taxes using the Foreign Tax Credit for each year. As a result, she avoided owing any tax to the US. And with the recent changes to the Streamlined Procedures, there were no penalties for late filing. While Helga considered renouncing her citizenship prior to coming to Greenback, she decided not to do so after discovering that the tax filing process is much simpler than she expected. She doesn’t have any plans to move to the US, but because of her young age she didn’t want to eliminate the possibility in the future.
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