The Complete 2023 Guide To Filing US Taxes as an American Expat in NZ

In 2022, many Americans who are expatriates are unaware of or uncertain about the US tax filing responsibilities. Since US levies taxes depending on citizenship, it needs to be filed. Every year. Nearly every other nation either levies taxes based on the domicile (so that only residents are required to file taxes there) or taxes all income earned within the nation, irrespective of residence (considered as a territorial dependent tax system).

In this article, we will discuss everything related to taxation for US expats living in New Zealand.

• Filing From Overseas
• When will the US Tax Season Begin in 2023?
• The 2023 US Tax Deadline
• The United States’ Business Tax Deadline
• Favourable Tax Policies or Perks
• Agreement of Social Security Totalization between the USA and New Zealand
• Let’s Address (FinCen Form 114) FBAR
• New Zealand and United States Tax Treaty
• Additional Taxes In New Zealand
• For Expat Families with Kids
• American Expats Who Have to Catch Up Can Apply for Amnesty
• Get Help: File Your Taxes

Filing From Overseas

Filing from overseas is more difficult when compared to filing from within the United States because expats must also claim credits or exemptions to lower or in many cases completely remove their US tax liability. Additionally, they might need to disclose any assets, bank accounts, and businesses with international registrations. US Tax Pros is the perfect companion along with this guide to aid you in filing from overseas.

American residents of New Zealand earn taxable overseas income, including:

• Salary
• Interest
• Rental Earnings
• Distributions from retirement accounts

When will the US Tax Season Begin in 2023?

The US tax year runs from January 1 through December 31 and is equal to the calendar year. The interval when the IRS starts taking income tax returns is known as the “tax season.” The 2023 tax season is expected to begin on January 24 and end just on the filing deadline.

The 2023 US Tax Deadline

US citizens have until April 18, 2023, to submit their Federal Tax Return for the tax year 2022. (The standard deadline on April 15 has been extended to this date.)

Nevertheless, this deadline is probably automatically extended for US citizens who reside abroad until June 15, 2022. Following that, you may request a second deadline extension through October 16, 2023. In extreme circumstances, you may even ask for a delay until December 15.

The United States’ Business Tax Deadline

The typical due date for non-personal income tax returns, such as those for partnerships or S corporations, is March 15, 2022. For corporations situated abroad, there is a fully automated extension to June 15 just like there is for individual tax returns. Most corporate entities can also ask for a further filing extension until September 15 after this.

Favourable Tax Policies or Perks

You should file a U.S. tax return for each year while you stay in New Zealand if you’re a U.S. citizen or resident living there since the US expat tax in the country of New Zealand is dependent on your worldwide income. The quantity of your overseas revenues that can be deducted from your U.S. taxable revenue as a U.S. expat, however, is subjected to adjustment due to inflation. You can also cut down a specified sum related to international housing. This is referred to as Foreign Earned Income Exclusion or Foreign Housing Exclusion.

Most US citizens living abroad are concerned about “double taxation,” or paying taxes to both the United States and New Zealand, when it concerns to US expat taxes. By claiming the Foreign Tax Credit of Form 1116, a U.S. taxpayer who works abroad in New Zealand could be able to lower their taxable income in the United States and avoid “double taxation.” Foreign tax credits that have accrued or that have been paid may be used as a deduction or credit on a U.S. tax return if any foreign income cannot be completely offset through foreign earned income exclusions, housing exclusions, or housing deductions. Taxpayers have the option of either claiming a tax credit or itemizing their deductions for taxes on Schedule A. Generally speaking, it is advantageous for you to claim foreign taxes as a tax credit.

The misconception that a return for the US expat tax within New Zealand is not necessary if there are no taxes due with these tax perks is prevalent but harmful. This is untrue. It is probable that you fulfil the filing criteria for filing a tax return and also are required to do so if you are employed abroad. It’s crucial to remember that until they are declared on a filed tax return, preferential tax treatments like the overseas earned income exclusion or foreign tax credit won’t affect the result of your tax liability.

There are various tax factors to take into account when paying US expat tax within New Zealand, however the aforementioned are by far the most prevalent preferential tax benefits. You can be confident that you will be paying the least sum of U.S. taxation that you’ll be required to pay thanks to the excellent experience and expertise of US Tax Pros in the filing of expat taxes.

Agreement of Social Security Totalization between the USA and New Zealand

To prevent the double taxation of revenue with regard to social security taxes, the United States has engaged into agreements with a number of countries known as totalization agreements. When assessing whether an alien is liable to the Social Security/Medicare tax in the United States or whether an alien who is a citizen or resident of the United States is liable to taxes regarding social security of another country, consideration must be given to these agreements.

There is no mandatory social security system in place in New Zealand that entails employee contributions. Therefore, since New Zealand and the US have not signed a totalization agreement, there is a chance to prevent the double taxation on social security earnings for The USA expat taxes in New Zealand.

Let’s Address (FinCen Form 114) FBAR

Regarding the notification of foreign assets on the FBAR, there is another crucial tax date that typically pertains to US expat tax in New Zealand (Foreign Bank Account Report – Form 114 – previously regarded as TD F 90-22.1).

The due date for FBAR submissions is June 30 (or the preceding day in case June 30th is a weekend). Sadly, seeking an extension for your particular return does not postpone the FBAR deadline because there isn’t one. After this date, any reports submitted are regarded as overdue FBARs. The FBAR is also unique from many other tax forms in that it needs to be submitted by the deadline date.

When you fulfil the FBAR registration requirements, which are essentially when a U.S. person has a monetary stake in or signature responsibility across a foreign monetary account, like a bank account, mutual fund, brokerage account, trust, or even other form of foreign monetary account (as well as an insurance plan with a capital gain for example life insurance policy), the FBAR should be filed with Treasury Department (it does not get filed with the federal income tax return).

You may be in compliance with the filing obligation to disclose your overseas accounts on the FBAR if you hold bank accounts with National Australia Bank,  Westpac, Australia, New Zealand Banking Group (ANZ), or any such bank in New Zealand or some other foreign country. Don’t hesitate to get in touch with US Tax Pros to find out more about what you need to file.

New Zealand and United States Tax Treaty

When an expat is unsure whether taxes must be paid on the New Zealand return or even on the US expat tax return, the US-New Zealand tax treaty can be beneficial. Although the tax treaty is rather simple, you should seek out expat tax assistance in case you have any queries about it.

Additional Taxes In New Zealand

The Accidental Compensation Corporation, or ACC, is a component of employment income in New Zealand. This programme was put in place to offer insurance for accidents that were “no fault.” Both employers, as well as employees, must contribute, and the rate is adjusted each year. The employee’s wage up to NZ$111,669 is currently covered by 2% of employment income tax. The same method as normal income taxes is used to withhold this. Although some capital gains are taxed under distinct tax systems, New Zealand doesn’t have a capital gains tax system. The best course of action if you are declaring gains is to speak with a tax advisor.

For Expat Families with Kids

In 2022, Americans who declare the Foreign Tax Credit and have children abroad might also be eligible for the Child Tax Credit. For tax year 2021, the Child Tax Credit had changed to provide a $3,000 US tax credit for every dependent child. Alternatively, taxpayers who have previously paid no US taxes by declaring the Foreign Tax Credit may now claim a recoverable $3,000 tax credit for every child in the manner of a direct payment. The dependant kids must be US residents with US SS (social security) numbers in order to be eligible for the Child Tax Credit. Use Form 8812 to submit a claim for the Child Tax Credit.

American Expats Who Have to Catch Up Can Apply for Amnesty

The IRS does offer a voluntary amnesty scheme for expats who got late on their US tax filing by 2022 because they didn’t realise they would have to file from overseas. This is good news compared to the other news. The Streamlined Procedure programme mandates that expats who owe back taxes submit their most recent three tax returns, six FBARs, and self-certify if their prior non-compliance was not willful. Back-filing as per the Streamlined Procedure exempts expats from late-compliance penalties and allows them to retroactively apply for the credits or exemptions that reduce or waive their US tax obligation.

Get Help: File Your Taxes

So far, we have covered everything that needs to be discussed about taxation for US expats in New Zealand. As an expat, filing your taxes can be challenging and costly penalties might result from incomplete or incorrect documents. Make your taxation ride smoother with help of US Tax Pros.