Former Army Sergeant in Germany wrestles with double-taxation retirement math

"This situation is very confusing, compelling me to hire two tax consultants in the future—one American and one German”

-Ralph Lear

Dear Congress,

I am an American citizen, originally from Oregon, and have been a permanent resident of Germany for over 40 years since completing my eight-year enlistment as a Sergeant in the U.S. Army in 1982.

I decided to remain in Germany because I had started my family here.

My U.S. tax reporting as an expatriate goes back approximately 20 years, following the discovery of my obligation to report worldwide income.

As an employee of a German company, U.S. tax reporting was relatively straightforward for general income, although passive income was somewhat more complicated.

However, as a retiree, I am facing significant challenges in interpreting the tax treaty, protocols, savings clauses, and various IRS pamphlets that explain how pensions and Social Security benefits should be declared. Additionally, the Foreign Tax Credit, with its carryovers and carrybacks, remains unclear to me.

I have contacted the IRS both by telephone and in writing, seeking guidance, but I have not received adequate instructions on how to declare these incomes.

I have now received notice that I owe almost $4,500 in tax and interest on a previous tax return that I submitted, which required me to declare my U.S. Social Security payments as earnings. I did not include them because the tax treaty states that taxes on these benefits should be paid in the country of residence, and they do not need to be reported in the U.S..  Resolving this issue is now my top priority.

This situation is very confusing, compelling me to hire two tax consultants in the future—one American and one German.

Please put an end to this double taxation.

Sincerely,

Ralph Lear