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U.S. Citizen, living in Germany, U.S. Clients HELP! with taxes, etc.
Thread poster: Paula Trucks-Pape

Paula Trucks-Pape
United States
Local time: 09:03
German to English
Jan 5, 2006

Hello,

I've just read with interest the thread re: being from Europe but freelancing in the U.S. I'm definitely going to contact an accountant, but could use some advice from folks in the business.

I'm an American living in Germany (not temporarily, but for at least 10 years probably). I will soon (in June 2006) have the permit to take on freelance work from German customers, but I would like to also work for U.S. customers. I have an American bank account, so they could pay in U.S. dollars. My question has to do with taxes, social security and setting up a U.S. business or freelance situation. Do I have to set up a second business "in" the U.S. or can I use my German freelance basis to do this work? Am I then an international company of sorts? I want to keep this as simple as possible.

Thanks for any ideas you can give me.

Paula


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Sara Freitas
France
Local time: 17:03
French to English
Physical presence Jan 5, 2006

I know that for the IRS, the source of the income you earn is where you are physically present while you are completing the work, not where your customer is.

As I am located in France, the source of my income for U.S. tax purposes is France, even if the customers I work with are in the U.S., Switzerland, the U.K., or anywhere else.

As a U.S. citizen, you may still have some tax filing requirements even though you have been out of the country for a while. I'd check with your local embassy for that.

Can't help you with the German tax questions, though!

Sara


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Alison Schwitzgebel
France
Local time: 17:03
Member (2002)
German to English
+ ...
You are taxed where you are located, but.... Jan 5, 2006

Hi Paula!

Welcome to life in Germany - and congratulations on getting your permits sorted out!

If you are a German resident, you have to pay German taxes on your income from translation work - irrespective of where your customers are based.

If you are VAT registered, you have to charge your German customers VAT, but you do not charge VAT to corporate customers based abroad (in the US). However if you work for private individuals abroad you have to charge them German VAT.

When your US customers pay you, it doesn't matter if the money goes into an account in the US, Germany or in Nigeria - you pay income tax on that income in Germany.

I know from a friend of mine that if your income in Germany exceeds a certain amount, then you also have to pay US income taxes (i.e., you have to file a German and a US income tax return). However, I seem to remember that there was some change to this rule a while back so check with the US tax authorities to make sure what the deal is.

If you want health insurance (I only know one translator without health insurance!) you will probably have to pay your health insurance in Germany with a German health insurance company (Krankenkasse). However, what you do with your pension is pretty much up to you. If you have funds in the US you could take out a US pension policy - or you could shop for one in Germany. It all depends where you plan to be when you retire.

You do not have to set up a second business "in" the US. You might chose to do so, but that is your decision. As I mentioned above, you can use your German freelance status to do this work.

Kind regards,

Alison


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Michael Rose
Local time: 17:03
German to English
+ ...
As a US citizen you have to file almost always Jan 6, 2006

The income levels for filing requirement are very low, e.g. $ 7950 for a single.

Here's an interesting FAQ:

http://berlin.usembassy.gov/germany/faqs/tax.html


7. I am a U.S. citizen living overseas with no U.S. income but substantial foreign income. Must I file a U.S. tax return?
Yes. U.S. citizens must report their worldwide income on their U.S. tax returns. If you paid income taxes to a foreign country, you may qualify for
a foreign tax credit. IRS Publication 514 “Foreign Tax Credit for Individuals” explains how to calculate this credit. You may also qualify for a foreign earned income exclusion of up to $80,000 for 2004. Qualification requirements and forms to be completed are explained in IRS Publication 54 “Tax Guide for U.S. Citizens and Resident Aliens Abroad”.



IMHO filing twice is a hassle. But if you don't you might have problems when you go back, e.g. being asked where your previous tax returns are or where you got the money for the down payment.


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Irene (Renata) Liapis  Identity Verified
United States
Local time: 12:03
Member (2005)
Italian to English
+ ...
Michale is correct. Jan 7, 2006

As a U.S. citizen you have to also file in the U.S. - however, you won't have to pay taxes unless your income exceeds a certain amount (I believe about US$80,000). Also, in order not to have to pay self employment tax, I also include in my U.S. income tax return proof of the social security taxes that I pay where I live (Greece - which has a bilateral agreement with the U.S. for this, as I believe Germany has as well).
Basically the U.S. income tax form for U.S. citizens living abroad is very simple to fill out and you won't need an accountant to do it (though you probably will need one in Germany)while you can usually file about two months after you file your main tax return (in Germany).
Good luck to you!

Paula Pape wrote:

Hello,

I've just read with interest the thread re: being from Europe but freelancing in the U.S. I'm definitely going to contact an accountant, but could use some advice from folks in the business.

I'm an American living in Germany (not temporarily, but for at least 10 years probably). I will soon (in June 2006) have the permit to take on freelance work from German customers, but I would like to also work for U.S. customers. I have an American bank account, so they could pay in U.S. dollars. My question has to do with taxes, social security and setting up a U.S. business or freelance situation. Do I have to set up a second business "in" the U.S. or can I use my German freelance basis to do this work? Am I then an international company of sorts? I want to keep this as simple as possible.

Thanks for any ideas you can give me.

Paula


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Paula Trucks-Pape
United States
Local time: 09:03
German to English
TOPIC STARTER
Thanks to all who posted! Jan 10, 2006

I have a better idea now of what to expect. I look forward to contributing to and learning from this community as my business/career develops!

Paula


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