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How German tax offices are trying to collect on an active duty service member

Recently I have heard and read a lot about US military families that supposedly are being “harassed” by German tax offices. What is this all about? Actually, German towns that house U.S. troops seem to have expanded efforts to impose income tax penalties on some military personnel. One attorney is even warning that an assignment in Germany carries growing financial risk.

Here is the accusation as reported by the Stars and Stripes magazine:

Service members who already pay U.S. taxes and do little more than extend their tours in some cases face being charged thousands of dollars in German taxes. Others are being pursued after local tax authorities determine someone is married to a German, owns the property, sends a child to a German school, or does anything else they say denotes “specialties” to the country.

While authorities had imposed tax penalties on Defense Department civilians in recent years, the first case of trying to collect on an active duty service member, a Ramstein Air Base master sergeant married to a German, came to light last fall. By now, the Kusel-Landstuhl office, which oversees an area that includes tens of thousands of Americans assigned to Ramstein and several Army bases, is investigating the cases of 460 people.

Germany apparently is the only known U.S. treaty ally where certain U.S. troops and Defense Department civilians stationed overseas are in danger of having their military income taxed by local finance offices. The NATO Status of Forces Agreement has historically protected military and civilian employees in Germany from such taxes. But in recent years, some German authorities have asserted that the agreement doesn’t apply in all cases.

Married Couple

The German spouse of a U.S. soldier reportedly ran into trouble last year when she went to file her taxes at the local finance office. She was asked about her husband and told to fill out a questionnaire that probed information about his employment. She then received a letter ordering her to hand over her husband’s W-2 and other tax forms. After that, she got a phone call from the tax office, saying that their case was getting handed over to a case manager who handles “American-German couples.” The family then retained a tax lawyer to prepare for a court fight. His advice: never hand over any tax documents belonging to U.S. personnel and retain an attorney to resist the government’s attempts to compel their turnover.

Status Of Forces Agreement

U.S. military commands that oversee SOFA matters (“status of forces agreement “) in other allied countries that host large numbers of forces — Japan, South Korea, the United Kingdom, Italy and Spain — all have stated in the past that service members and DOD civilians (federal civilian employees of the Department of Defense) aren’t at risk of having their military income taxed. U.S. Army Europe, which overseas SOFA issues in Germany, says it has no plans to intervene in ongoing individual tax court disputes. But the Army said it is coordinating with U.S. European Command and six other NATO states to elevate the issue within U.S. and allied governments.

Some German lawmakers in Rheinland-Pfalz themselves are actually questioning why a tax office in the Kusel-Landstuhl area has ramped up efforts to collect taxes from some members of the U.S. military community. But the state government offered no sign that it was ready to intervene. It acknowledged there has been an increase in tax cases against American military personnel.

What is especially concerning is the fact that leaving the country doesn’t necessarily offer protection from regional finance offices, which have sought taxes dating back 10 years and pursued U.S. personnel after they return home. If you or someone in your family has run into a problem as described, we at Allure Accounting are happy to assist you with any tax issue that might arise here in the US or across the Atlantic.