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Mail Bag #8: Job Prospects, Home Sale, IRA Withdrawals and Social Security Considerations

Mail Bag #8: Job Prospects, Home Sale, IRA Withdrawals and Social Security Considerations
Ines Zemelman, EA
10-Sep-17

1. New Job

I am thinking of taking a civilian contractor job at Ramstein, AFB, Germany. They are proposing a salary in the mid 70K. What is my tax burden? Am I completely tax exempt? I would be under SoFA. No housing allowance.

We have actually published an article regarding advice for military contractors here on this.

Also, we’d be happy to prepare a projection for you to determine the tax hit. For our tax projection service visit this link:. In short, this service requires a $350 retainer, but $250 remains as credit for when your tax return is ready to be prepared. Thus net cost (if we prepare your return thereafter) would be $100.

New Job

2. W-9

I'm an American citizen who has been living in Canada since I was thirteen and in June I got a W9 from my bank, with very little explanation.

I've read multiple websites indicating that I should not send in my W9 before I've gone through the streamlined program or I could be at risk of worse penalties. Is this true? How much time do I have to file?

I am a student who works a minimum wage job so I do not think I have a very complex tax situation. I've worked only the past two years and earned under filing thresholds until 2017. I also have not had more than US 10k in my accounts up until this year. In Oct, 2016 when my student loans came in it put the maximum amount in my account to $9k USD. In Jan, 2017 that the rest of my student loans came in, which put me over the 10k threshold from my understanding for 2017.

It's my understanding from what I have read that in the streamlined program you are supposed to do 3 years of tax returns and 6 years of FBARs put if I do not meet the thresholds until 2017, do I just not file anything?

Another issue also very unfortunately, since apparently it makes US taxes more complicated, is that I opened a TFSA in Oct, 2016, and I'm not sure if I should report it in a special way if there's only 5k in it. I've made about 19$ in interest since I opened it. Is it less of a hassle to just switch it to a regular savings account?

If you did not meet the minimum filing requirements before 2017, you were not required to file a return. Your TFSA is considered a bank account over which you have signatory authority. Therefore you must report them on FBAR and form 8938 if applicable. Keep in mind - the $10k bank account balance for FBAR is aggregate. Your $5k balance in TFSA and $8k bank balance would require FBAR filing for 2016 tax year. Yes, we can take care of this for you.

In 2018, you will need to file a tax return and FBAR for the 2017 tax year.

Form W-9 is a confirmation of the American tax residency status. It is not a request for proof of your tax compliance. Bank will use your completed form W-9 as the proof of their own FATCA compliance. Please fill out the form, sign it and send to the bank.

W-9

3. Home Sale

My husband and I just sold our house in Israel living here in house 23 years we are not together I get half of the money from the sale he is 72 I am 68 both have dual citizenship we have never worked in Israel if we pay taxes here in Israel on the house are there taxes to be paid in America?

If this is your primary home in at least 2 of the last 5 years, there is a $250k (per person) exclusion on the sale - see link below. If you are subject to capital gains taxes in the foreign country in which you reside, you may be able to offset your US capital gains tax liability by claiming a dollar-for-dollar deduction using the Foreign Tax Credit. If total capital gains from sale of your primary residency is below $500K this sale does not need to be reported.

Of course, we would determine the best way to optimize your return after analyzing your completed tax questionnaire and reviewing your supporting documents.

Home Sale

4. Social Security

What would be the effect of renouncing US citizenship on my receiving Social Security survivor benefits in the future? My husband receives monthly SSA benefits as a US citizen. We are both living in Canada.

Generally speaking, you will be allowed to receive Social Security benefits as an expatriate. Please see the article we wrote for more details as there are variables to consider.

Social Security

5. IRA withdrawals

Are my IRA withdrawals taxable in Germany or the US?

In the US - Except for funds saved in a ROTH IRA, money saved in Traditional IRA and employment retirement plans are pre-tax. The tax rate on pension distributions will depend on the total taxable income of the retiree. If total income is below the taxable level then plan distributions will remain tax free for the recipients. Read our article on how much you should withdraw as a retiree - IRA Withdrawals.

IRA withdawals

Ines Zemelman, EA
Ines Zemelman, EA
founder of Taxes for Expats
She may be reached at: