I am a dual citizen of the United States and Germany living in the U.S. and had a life insurance policy in Germany that I had paid out to me in 2021. The payout in Germany is fully exempt from taxes, so I did not have to pay anything there. I was initially under the impression that the money paid out to me was simply the sum of all premiums I had paid since the start of the policy in 2004. I now became aware that this might not be the case and that a part of the payout might have been funds on top of the sum of the premiums. It is my understanding that I have to pay income tax on this ‘extra’ money in the U.S.. My question is whether I can simply file an amended return or would this would be considered a quiet disclosure of foreign income? I filed my taxes in February 2022 and did not become aware of the potential foreign income until July 2022. The amounts are correctly reported on my FBAR. I am worried that the IRS would not consider this an honest mistake, but rather think that I am trying to clean up a fraudulent tax situation (which is not the case - I absolutely would have declared the income on my return had I known about it.). Does anyone have any advice how to best handle this? Simply file an amended tax return or does this require something like one of the offshore penalty amnesty programs?
