Hi, I got a question concerning the taxation of Germans, living in Germany and having income in form of a K-1. How high is the tax bracket, are there specific exemptions? thx tom
Thank you for your expert answer, Mr. Green. It sounds like you are assuming Tom is a proprietary trader. Would your answer be any different if he got a K-1 from a passive partnership investment (say a hedge fund)?
GreenTraderTax one more question if you don't mind: I'm a German student whom is issued income in form of a K-1 Are there any exemptions? The LLC is California based .. how high would the tax bracket be fore me? And most important ... has the income to be taxed again at my German income tax bracket? thx, tom
DBA ist einschlägig. Da Du n. § 8,9 AO unbeschränkt in D steuerpflichtig bist, unterliegt das gesamte Welteinkommen der Besteuerung. Was ist K-1? Etwa Geschäftanteil an einer Körperschaft? Dann käme zu den US- Steuern noch Kapitalertragsteuer i.H. v. 15 % n. Art. 10 OECD- MA. Dann ist noch Halbeinkünfteverfahren n. §3 Nr. 40d einschlägig, abzüglich der Sonderausgaben, hierauf dann der persönliche ESt- Satz n. §32 a ESTG.
Have no clue what the German guy said in German, but I've got a different question... Greentradertax says the German owes US tax on the income reported on his K-1. Well, what if he doesn't pay it? a) Germany extradites him, or b) Germany doesn't care, but the IRS will report his name to border control and the guy better not come to the US, or c) Germany doesn't care and the IRS cares but doesn't do anything. He can come and go from the US as he pleases, or d) the IRS makes a claim on the person's assets in the US, or e) nothing. My guess is e. d would make sense, but I think the IRS needs a judgment to garnish assets and I think they only go through that bother for really big fish.
A nonresident alien that is engaged in a trade or business in the United States is taxed on income that is "effectively connected" with that trade or business. Effectively connected income is taxed at the applicable graduated U.S. individual n rates on a net basis, that is, deductions allocable to that income are allowed. This is because as a partner in a US business with US offices, you are deemed to be in the business of the partnership by operation of law and have a taxable permanent establishment under the German/U.S. income tax treaty. The effective tax rate is a function of your U.S. source income net of related expenses. Hannah Terhune, JD LLM (Taxation) www.GreenTraderTax.com www.GreenTraderLaw.com
Thanks, Hannah. What about nonresident aliens with passive income K-1's? What happens if they "forget" to pay? If you can be less formal (less legalese) in your response, I'd appreciate it.