EXPAT TAXES – FREQUENTLY ASKED QUESTIONS

• As a U.S. Expat Living in New Zealand, Do I Need to Complete a U.S. Tax Return?

If you are a U.S. citizen or hold a green card, you are required file a U.S. income tax return (Form 1040) on an annual basis to report your worldwide income (over certain threshold amounts). This is true even if you live outside and work outside the United States. This is also true whether or not you owe tax to the U.S. government.

Optimizing your U.S. tax return is important to ensure that your U.S. federal tax liability is minimized by virtue of the various exclusions and credits you can take – and this is where we can help!

• Am I required to file any forms besides my federal income tax return (Form 1040)?

The answer depends on your situation. The most typical form required outside the IRS Form 1040 is the FBAR, since most expats hold non-US bank or pension accounts by virtue of living abroad.

In addition to the Form 1040 and FBAR, expat taxpayers may be required to file certain other federal tax forms depending on their activities and income amounts. These include forms to report a non-US corporation, partnership, trust, gift, and other non-US assets and activities.

We prepare any and all forms that an expat taxpayer may need to file.

• Do my activities in New Zealand have U.S. tax implications?

With each item of income that an expat earns and with each foreign asset that is owned or acquired, special considerations need to be addressed. The following are examples of common activities in New Zealand and their potential U.S. tax implications:

• PTY Limited Companies

For instance, PTY Limited Companies, a popular business vehicle, may trigger the US anti-deferral regimes, such as the controlled foreign corporations (“CFC”) regime. CFC classification that can potentially have significant US tax implications. For instance, a 10% or more US shareholder of a CFC must include currently in his or her gross income the CFC’s so-called “subpart F income,” which generally includes passive-type income, such as interest, dividends and rental income (meaning, for tax purposes, a CFC’s subpart F income is considered to be earned directly by the shareholder prior to an actual distribution to the shareholder). Under the CFC regime, company loans to an expat owner can trigger a so-called “Section 956 inclusion,” i.e., current inclusion of the loan amount in a 10% or more US shareholder’s gross income. Starting with the 2018 tax year, certain non-subpart F income will also be required to be included currently at the shareholder level under the new so-called “GILTI” rules.

• New Zealand KiwiSaver

Another good example is participation in a New Zealand KiwiSaver, the very popular voluntary retirement fund. Despite having tax-advantaged status in New Zealand, a KiwiSaver may be considered by the US to be a direct investment by the plan owner in a passive foreign investment company (“PFIC”), which must be reported as such on Form 8621 (Information Return by a Shareholder of a Passive Foreign Investment Company). PFICs can be very tax disadvantageous as, absent certain elections, “excess” distributions and dispositions of PFICs are taxed at the highest marginal rate with an additional interest charge.

• Self-employment

For self-employed individuals, it’s important to note that the US does not have a so-called totalization agreement with New Zealand, so there is a significant risk that self-employment income can be subject to double taxation. Tax planning for self-employed individuals is critical in order to prevent this onerous outcome.

• How Can Expat Tax Professionals Help Me File U.S. Taxes?

Our U.S. tax return filing service is tailor made for the U.S. expat. Our process is fast, easy, and intuitive, and our tax return deliverable is rigorous, accurate and complete. Our in-house tax professionals are the core of our offer and of what makes us unique. We provide expert support from U.S. CPAs, EAs and tax attorneys at every step to tax compliance, providing the resources, knowledge and understanding of our clients’ needs to deliver the highest level of service and optimized outcomes.

Yes, we prepare tax returns. But we do so much more for U.S. expats around the globe. We strategically optimize your opportunities at every turn. It’s a story built on trust, on commitment and on serving our clients like we want to be served – with insight, care and a focus on supporting both short and longer-term goals. We offer fair and affordable fees and customize our solutions to meet the unique needs of each unique client we serve.

Contact us today to start the process!