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My wife works for a German company with a huge employee base here in the United States. She's just been offered a stock purchase plan where she receives one free share for every three she buys, via monthly payroll deduction. Sounds like a great deal to us. They are listed on the Frankfort stock exchange, with the US dollars contributed first exchanged for euros for the purchase.
Our concern is tax consquences when we eventually cash out (probably in retirement). I imagine the IRS has special tax consequences for foreign investment income, as well as New York State, and maybe even taxes to Germany? But we're just not sure. She has to sign up by 12/17 for 2010 eligibility with a set dollar amount up to 5% of her gross annual income.
Should we just jump and worry about the tax consequences later? Anyone know how the IRS (or even NYS) handles tax on foreign investment stock profits?
Just in case anyone is interested...turns out there is reciprocal agreement between the 2 countries so that double taxation will not occur. We will simply owe the IRS taxes on Long or short term gains/losses at sale time.
The only exception is with dividends paid...in that case we will end up paying Germany taxes, as well as declaring them as income on our 1040. There are situations and procedures for recouping some, if not all, the taxes paid to Germany. We'll need to consult with tax advisor on that one.
Just in case anyone is interested...turns out there is reciprocal agreement between the 2 countries so that double taxation will not occur. We will simply owe the IRS taxes on Long or short term gains/losses at sale time.
The only exception is with dividends paid...in that case we will end up paying Germany taxes, as well as declaring them as income on our 1040. There are situations and procedures for recouping some, if not all, the taxes paid to Germany. We'll need to consult with tax advisor on that one.
We're jumping in.
Generally, if you pay German (or other countries) withholding tax on dividends, you will declare the dividend income and the taxes paid to the IRS. The IRS will calculate US tax due on the dividends but, provided there is a double taxation treaty in place, will also credit you with foreign taxes paid.
You should also check whether you have to declare foreign stocks in the same way we have to declare foreign bank accounts (FBAR reporting). I still have a pension fund (401k equivalent) in Switzerland from the years I worked there and I was advised that this had to be declared.
Old thread, I know, but I'm looking at the possibility of doing some investing in the UK (London exchange, probably - not sure if there are others).
If I buy 1000 pounds of some security, which then pays a 50 pound dividend, and a bit later I sell the investment for 1100 pounds (i.e. a 100 pound capital gain), what tax obligations and/or withholding goes on on the UK end? Is stuff automatically withheld? Do I need to file taxes in the UK?
I realize I would face US tax obligations from the overseas investment. I feel more comfortable navigating US tax rules and/or getting appropriate advice here. But I'm kinda lost on the UK side of things...
Old thread, I know, but I'm looking at the possibility of doing some investing in the UK (London exchange, probably - not sure if there are others).
If I buy 1000 pounds of some security, which then pays a 50 pound dividend, and a bit later I sell the investment for 1100 pounds (i.e. a 100 pound capital gain), what tax obligations and/or withholding goes on on the UK end? Is stuff automatically withheld? Do I need to file taxes in the UK?
I realize I would face US tax obligations from the overseas investment. I feel more comfortable navigating US tax rules and/or getting appropriate advice here. But I'm kinda lost on the UK side of things...
Your broker will handle the withholdings. You'll have to file a short tax form there once you cross a threshold of certain levels of income. For a gain that small there probably is no filing requirement and you can just forgo the withholding if there is any.
The US government requires you to report all income regardless of it's source. If you win $2 playing cards in a village in New Guinea you are required by law to report that income to the IRS. It is ironic how the Internal Revenue Service has been given the power to collect tax on external revenue.
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