This month we look for answers to some of those IRS queries
“Nothing in life is sure except death and taxes,” says Charles Ingalls in Little House on the Prairie. I must have been about nine years old when I first read this phrase and though the words meant little to me at the time, for some reason they stuck in my mind and have, sadly, proved to be true, at least as far as taxes go. April is tax month for many English-speaking countries. If you haven’t tackled your returns yet, here are a few pointers. Americans bear the greatest burden when it comes to tax matters, as every US citizen or green card holder must file a return in the States, even if they are already doing so in Germany. In fact both Germany and the Unites States tax your worldwide income, so if you are resident in Munich but earning money in, say, France this will need to be declared on both tax forms. Those with annual incomes below a threshold amount, however, do not have to submit a return. The threshold depends upon filing status and age (e.g., a single person under age 65 with less than $7,700 in 2002). Though all income must be declared, $80,000 of income earned here in Germany may be excluded from tax in the United States and if you earn over this amount you can use part of your German tax to offset the US tax dollar for dollar. The official submission date for US returns is April 15 but there is an automatic extension for US citizens living abroad until June 15. This extension, however, applies only to the process of filing. Should you already owe taxes, interest will be charged on outstanding amounts from April 16. If you have not yet sent for IRS forms these can be downloaded at www.irs.gov. US citizens living in Germany and receiving a US civil service pension or US social security benefits of any nature should note that, under treaty, the civil service income is exempt from German tax, while the social security is exempt from American tax. Two further things to keep in mind: fluctuations in the exchange rate of the euro to dollar will, naturally, affect the amount you have to pay and because tax is indexed to inflation this can also affect the sum on your tax bill. Ex-patriots from the UK will for the most part fall under the tax jurisdiction of Germany if they stay here longer than a couple of months. In fact, even if you have been posted to Germany by a British company and are receiving your income in the UK, you should consult a German tax advisor or look at the following Website:www.german-embassy.org.uk/. Click on the section titled “Welcome to Germany” and then go to “Living and working in Germany” for information on taxes. The tax year ends on June 30 for Australians, which does not, however, mean there’s time to sit back and relax. Tax laws relating to Australian residents living abroad are quite complex. The Australian Taxation Office have a useful Website: www.ato.gov.au, which can answer many questions. The corresponding Website for New Zealanders is www.ird.govt.nz. Finally, thanks to US tax preparer, William F. Robinson, for his help with this article.