Reporting foreign pension income after the fact?!

Hello, I have a quick question:

A family member just received a notice regarding a tax audit. Apparently, "Taxpayers who begin receiving income directly from abroad are required to report to the tax authorities within 8 days..." They need to disclose everything, list all income sources, and provide full documentation...

It looks like a violation of Section 58, Paragraph 1 has been flagged, and they’re threatening a fine ranging from 2,000 to $16667

The pension in question is foreign, coming out of East Germany. He’s been receiving it since 1997 and has already settled all his affairs with the German tax authorities. He had absolutely no idea that anything needed to be reported here at all...

They are specifically looking at the period from 2012 through December 31, 2015.

So, the core issue seems to be the failure to file with the IRS. However, since this income originates from the German statutory social security system, the tax liability has already been established in Germany...

Does anyone happen to know more about how this works?

Look, you really ought to just get ahead of this and contact the IRS. Between the data sharing agreements between America and Germany, they’ve already flagged that something isn't adding up somewhere. Better safe than sorry.

I’ve just finally made it back from the IRS office. I was stuck waiting at the entrance forever because the crowd was absolutely massive... 😁

The building is packed with people dealing with the exact same situation—specifically regarding German pensions—since everyone received the same notice. They are insisting that every single one of us register, and they've even gone so far as to write "Germany" in bold letters on the submitted forms. It doesn't change how we're taxed, yet suddenly there's this sudden requirement for everyone to be entered into a registry...

If anyone happens to have seen an official announcement regarding this, or if you can point me toward the specific section of the Law and Regulation that actually gives them the authority to do this, please post it here. I am genuinely curious to see what legal basis they are operating under...

Start right here and just keep scrolling through to that next related article...
And in the end, there isn't any clear answer—at least not yet—but don't worry, I'm sure the IRS
will find some way to make it work.
After all, nobody truly escapes death or the taxman... unless you count those few "honorable" exceptions, of course.😉

Jacob Martin2 said:I’ve just finally made it back from the IRS office. I was stuck waiting at the entrance forever because the crowd was absolutely massive... 😁

The building is packed with people dealing with the exact same situation—specifically regarding German pensions—since everyone received the same notice. They are insisting that every single one of us register, and they've even gone so far as to write "Germany" in bold letters on the submitted forms. It doesn't change how we're taxed, yet suddenly there's this sudden requirement for everyone to be entered into a registry...

If anyone happens to have seen an official announcement regarding this, or if you can point me toward the specific section of the Law and Regulation that actually gives them the authority to do this, please post it here. I am genuinely curious to see what legal basis they are operating under...

The Income Tax Act and the Tax Regulation are what handle all of this.

Section 14 of the Act states that income from non-employment sources—which includes pensions earned abroad by residents—counts toward your taxable total.
The Tax Regulation breaks down the rest of the fine print; specifically, Section 91 covers how you get added to the taxpayer registry.
There’s probably a dozen other sections buried in there too, but honestly, I can't be bothered to dig through the legal jargon right now. Just head over to the IRS website and look up the Law and Regulation yourself.

Yes, thank you, I will certainly look over all of that.
What strikes me as odd, though—assuming this obligation dates back to 2012—is why everyone is being summoned all at once in 2016... They’ve managed to trigger this massive wave of hysteria, leaving people genuinely spooked and creating these endless lines everywhere...

And perhaps I'm looking at this through a layman's lens, but are these individuals even considered tax liabilities? I mean, if the US doesn't even have the jurisdiction to tax those specific pensions in the first place?😁

Jacob Martin2 said:Yes, thank you, I will certainly look over all of that.
What strikes me as odd, though—assuming this obligation dates back to 2012—is why everyone is being summoned all at once in 2016... They’ve managed to trigger this massive wave of hysteria, leaving people genuinely spooked and creating these endless lines everywhere...

And perhaps I'm looking at this through a layman's lens, but are these individuals even considered tax liabilities? I mean, if the US doesn't even have the jurisdiction to tax those specific pensions in the first place?😁

Everyone was just waiting for the EU integration to kick in—specifically, the right to request and exchange information between EU member states.
That finally happened in 2014, after Germany thoroughly combed through every retiree receiving a pension from them. They started demanding retroactive reports on all income earned in America—covering a three-year span starting from when Germany passed their law regarding pension taxation, which I believe was around 2008–2010.
Some people had to pay back money—essentially the tax owed—while others were cleared with a 0% rate, exempt from any repayment, because it turned out their total income, both in America and Germany, fell well below the non-taxable threshold.
Given that the treaty between America and Germany is still in effect—under which Germany maintains the right to tax all pensions originating from their social benefits—and as far as I am aware, that bilateral agreement hasn't been repealed or replaced by a different arrangement, America has no right to tax German pensions. However, it seems to me that America won't be paying much attention to that distinction.
Very soon, both American and German retirees are going to be in for quite a surprise...

Just because someone registers as a taxpayer doesn't mean they're actually shelling out any cash.
I mean, some types of income stay under the radar if they don't hit a certain threshold.
Check out the local Police Department's brochures, though I honestly can't guarantee their data hasn't gone stale by now.

I was just sitting here pouring over a brochure from the local Police Department, specifically issue number 193, pages 7 through 8, dated October 15, 2015, and it lays things out quite clearly

Who actually qualifies as an income tax payer based on their pension payments?
1. Retirees who are drawing income from:
a) pensions paid out by foreign entities, and
b) pension annuities provided by domestic insurance companies

2. Retirees receiving pensions from abroad, unless a different arrangement has been
established via double taxation avoidance treaties or other international agreements.

http://www.irs.gov/publications/pensions_144.pdf

Here is how they’ve managed to disguise the whole thing, blah, blah, blah—we don't have any data, so please just send everything in:

http://www.businessinsider.com/us/tax..._source=cnn

"To ensure you exercise your rights and meet your obligations: "

I mean, couldn't they have just printed a similar statement and tucked it into those threatening letters they've been mailing out to everyone?

Honestly, our local bureaucrats 😁... you guys truly never fail to disappoint...

People have started reaching out, and there’s even an article over at the California Times:

I am asking any members who find themselves in similar situations to please speak up here, or perhaps just send me a private message.
It might be worth us organizing something to demand a clear, explicit explanation regarding their actual intentions here... specifically concerning what rights they believe they hold over recipients of German pensions, given that the international treaty doesn't actually grant them such authority...

We really ought to take some kind of action, because our local authorities are far too accustomed to dealing with a passive public; they tend to simply do whatever they feel like in the moment and then quietly try to fix the mess later on...

This applies to all pensions, not just those from Germany; my father-in-law actually ran into this exact same situation with his pension from Canada... He only received the notification yesterday, so he’s still trying to wrap his head around what needs to be done, and since he’s considered 100% disabled, it would be absolutely wonderful if he didn't have to spend half his day trekking over to the IRS office.

Exactly, it applies across the board. Back when I was working over at the IRS, everything revolved around those German pensions. But they completely fail to distinguish between people who actually have an obligation and those who don't:

Now we're seeing reports from other sources as well:

It’s just easier to harass the elderly, creating unnecessary headaches and financial burdens for them... If anyone happens to know if there is any legal recourse or a solid answer for these folks, please let me know...

Furthermore, if their own brochure from just three months ago states that such recipients aren't even considered TAXABLE ENTITIES, then on what legal grounds are they attempting to force them to register as taxpayers?

DECISION

REGARDING THE PROCLAMATION OF THE LAW RATIFYING THE AGREEMENT BETWEEN THE UNITED STATES AND GERMANY FOR THE AVOIDANCE OF DOUBLE TAXATION ON INCOME AND PROPERTY TAXES

Article 18.

Paragraph 2. Regardless of what is stated in paragraph 1, income received by a resident of one contracting state from the statutory social security of the other contracting state may be taxed only in that other state.

By what authority do they exert this kind of pressure on people?

The documents they use to force people into registration include things like: APPLICATION TO THE IRS REGISTER, SIGNATURE OF THE TAXPAYER; NOTE OF THE TAXPAYER, and so on...

And then, right here below, they specify who qualifies as a taxpayer:

Who is considered an income tax payer based on pension payments?
1. Retirees earning income from:
a) pensions paid out by foreign payers, and
b) pension annuities paid out by foreign insurers

2. Retirees receiving pensions from abroad, unless otherwise
provided for by double taxation avoidance agreements
or other international treaties.

http://www.irs.gov/publications/pensions_144.pdf

Jacob Martin2 said:People have started reaching out, and there’s even an article over at the California Times:

I am asking any members who find themselves in similar situations to please speak up here, or perhaps just send me a private message.
It might be worth us organizing something to demand a clear, explicit explanation regarding their actual intentions here... specifically concerning what rights they believe they hold over recipients of German pensions, given that the international treaty doesn't actually grant them such authority...

We really ought to take some kind of action, because our local authorities are far too accustomed to dealing with a passive public; they tend to simply do whatever they feel like in the moment and then quietly try to fix the mess later on...

The link isn't working 😢 is it behind a paywall?

Sent from my iPhone using Tapatalk

Here is yet another piece of evidence supporting my previous points:

If you're collecting a pension from abroad, you might want to sprint over to the IRS—unless, of course, you're looking forward to a penalty. 🙏🤦

"The surge of retirees heading to the IRS offices in Washington, D.C. was partly due to an error made by the agency itself. In an official notice, they instructed all retirees receiving foreign pensions to report to the main headquarters. However, it turns out they could have simply visited any local branch..."

They didn't even bother making a distinction; honestly, nobody there takes responsibility for anything, and they can essentially act however they please 🤣 . And what’s truly pathetic is that they are acutely aware of it...
They make a blunder and act as if nothing happened, all while hiding behind that lofty rhetoric regarding their "responsibility to the citizens" they supposedly serve... ☕

@Richie
No, it isn't a subscription issue; I'm not sure what's wrong with the link. The others seem to be working fine, and I just uploaded the latest version