Discussion:Non-resident Citizen Income Tax Reporting
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Discussion Forum Index --> Advanced Tax Questions --> Non-resident Citizen Income Tax Reporting
Discussion Forum Index --> Tax Questions --> Non-resident Citizen Income Tax Reporting
Rand171968 (talk|edits) said: | 25 June 2008 |
| Help.....
Client moved to New Zealand in December 2007. As of now, all investments (personal & retirement) remain in United States accounts. I am not aware of any New Zealand source income at this point. I know there is a Tax Treaty with New Zealand, but reading it is greek to me. The following are the sources of income to be reported in 2008. Which, if any or all, are reportable and taxable to the United States? Interest Income from Financial Institutions Dividend Income (Ord and Qual) from US Corporations Mutual Fund Capital Gains Distributions Personal Investment Securities Capital Gains/Losses Passive Activity Limited Partnership (both 1250 & 1231 income flow through) General Partnership Real Estate Activity (with Ordinary, 1250 & 1231 income flow through)
Rental Property rented through 7/31/08 and sold in August 2008
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| 25 June 2008 | |
| Rand, so, what's life like in NZ? US citizens are taxable on their worldwide income regardless of their place of residence or domicile. Tax treaties generally specify circumstances where double-taxation of the same income is avoided. -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 25 June 2008 | |
| Rand, in order to help you with the treaty, we need to know if your client has a green card. | |
| 25 June 2008 | |
| A green card isn't relevant to a US citizen who's an expatriate. -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 25 June 2008 | |
| Can't tell if this is a nonresident who is a citizen of the US or a US nonresident/noncitizen. However, if the client is a US citizen, then the Treaty savings clause will serverly restrict any US tax benefits to this client. | |
Rand171968 (talk|edits) said: | 26 June 2008 |
| Mr. Hess...from the pictures I've seen, I wish I were in NZ...
Husband and Wife are both US Citizens and they've emailed me claiming to be "Tax Residents" of New Zealand effective December 27, 2007 (whatever that means).... and from "what they've read", they have limited income (sale of real property) that needs to be reported and taxed by the US... Thanks a lot and keep your thoughts coming!!! | |
| 26 June 2008 | |
| Tax Residents. Hmmm. The term comes up on the NZ govt. website as follows (you could have done that, too):
Double tax agreement between Australia and New Zealand If you are a resident in both Australia and New Zealand, the double tax agreement (DTA) between these two countries states that you will be a resident of the country where a permanent home is available to you. See the table below for further clarification. Also, Requirements for individuals You are a tax resident in New Zealand if you: * are in New Zealand for more than 183 days in any 12-month period, or * have an "enduring relationship" with New Zealand. I can only repeat what I've said about US citizens. They're taxed by the US on the worldwide income. If this were my case would read or seek expert advice (for a fee) on the NZ tax treaty. -- Larry Hess, CPA | Albuquerque, NM | Talk to me | |
| 26 June 2008 | |
| First poster, who are you? How about a profile for an answer. Otherwize get a good accountant and pay Uncle Sam his due. | |
Rand171968 (talk|edits) said: | 26 June 2008 |
| Hi Blrg...
I am telling the clients that the IRS is expecting their due from what I know and have read, but I certainly haven't convinced them yet.... Thanks for any help or insight you may provide... Randy | |
| June 26, 2008 | |
| The tax treaty is fairly straightforward. The avoidance-of-double-taxation article applies to U.S. citizens. It says that, when a U.S. citizen is a resident of New Zealand, New Zealand gives him a credit for U.S. taxes paid to the extent they would be owed regardless of citizenship, and the U.S. gives a credit for New Zealand taxes paid after the credit. You still have to report and, subject to the credits, pay tax to the U.S. on your worldwide income and to New Zealand on whatever it taxes (which I assume is the same). | |
| 26 June 2008 | |
| Randy, why not send 'em a link to Publication 54 on the irs.gov website - it's pretty definitive and convincing. | |
| 2 July 2008 | |
| Assumptions: Taxpayer is a US citizen.
ALL income is reportable in the US. ALL. Every last dang penny. Whether or not it's tax-exempt under a treaty. So our next question is, how much might be exempt from tax (but NOT from reporting!!!) under the treaty? New Zealand has a mighty flash 49 month exemption from tax on offshore investments for a first-timer moving to NZ. Someone arriving Dec 07 is exempt from tax in NZ on their offshore (non-NZ) income until 31 Dec 2011. Thus, as all this lovely US-source income is tax-exempt under domestic law in NZ, the treaty DOES NOT apply and instead, every blessed penny is taxed in US. Moral of this story: Don't spend a lot of time hunting for fish in an empty pond. | |
| 2 July 2008 | |
| To confirm: A Second Assumption was that the Taxpayer has never lived in NZ. Learn more about NZ domestic tax law for immigrants here: | |
