[StuckInLA]

I know that US and NZ have some sort of tax agreement to avoid double taxation. I understand this to mean that if I'm a US citizen living and working in NZ, I pay NZ taxes first, and the US only collects any taxes that would have been paid in the US that haven't already been accounted for by NZ. Essentially the US will get zero federal taxes, because the lower tax rates in the US ensure that my NZ tax bill more than covers everything the US would have collected. Is this understanding correct?

Also, will I have to pay medicare tax, social security tax, state taxes, or any other taxes that US citizens pay when I work in NZ?

Thank you!:)

[Oregonkiwi]

You have to file a US federal tax return every year until you die, but you get an exemption on foreign income (up to US$82,400 in 2006), meaning you don't have to pay US federal tax on foreign earned income up to that amount. (If you're married filing jointly then the exemption would be US$164,800 between the two of you.)
It's all on the IRS website:
http://www.irs.gov/taxtopics/tc853.html

and also try searching the forum.

If you earn more than the exemption, then I guess the tax treaties would come into play as you'd be liable for both US and NZ tax on that excess amount - I haven't looked into that because I'm pretty safe from going over the exemption amount:laugh

[jess]

Also, will I have to pay medicare tax, social security tax, state taxes, or any other taxes that US citizens pay when I work in NZ. Page 8 of Publication 54 (http://www.irs.gov/pub/irs-pdf/p54.pdf) (Tax Guide for U.S. Citizens and Resident Aliens Abroad)
In general, U.S. social security and Medicare
taxes do not apply to wages for services you
perform as an employee outside of the United
States unless one of the following exceptions
applies.

1. You perform the services on or in connection
with an American vessel or aircraft
(defined later) and either:
a. You entered into your employment con-
tract within the United States, or
b. The vessel or aircraft touches at a U.S.
port while you are employed on it.

2. You are working in one of the countries
with which the United States has entered into
a binational social security agreement
(discussed later).

3. You are working for an American employer
(defined later).

4. You are working for a foreign affiliate (defined
later) of an American employer under
a voluntary agreement entered into bedress,
tween the American employer and the U.S.
Treasury Department.
By the way #2 does not apply since there is no social security agreement between the US and NZ. (You can see the list of countries with which the US has a SS or "Totalization Agreement" here (http://www.irs.gov/businesses/small/international/article/0,,id=105254,00.html).)

In my case I work for a US company via internet, and I have to pay SS and medicare (but no US withholding). Most migrants are working for an NZ company over here so would not pay US Medicare or SS.

As Oregonkiwi said you have to file in the US every year while you have a pulse, even if, because of the foreign earned income exclusion, you don't owe the US any money.

[tecso]

Thanks for this pertinent thread. I had a follow up question and wonder if anyone is self-employed and a US resident on long term visa in New Zealand?

We run two businesses, one makes a steady income and is like a part time job. The other is an internet based business with a large gross but rather modest net income. So far we haven't been able to figure out if we're going to get taxed out of existence - but the things we've heard on self employment taxation are awful!

I have a feeling we're going to have to talk with a tax lawyer, but thought to bounce this to the boards and see if anyone had advice.

[jdbob]

You have to file a US federal tax return every year until you die

If you got NZ citizenship and renounced your US citizenship I would think that you would be off the hook without going to the bother of dying, no?

[tecso]

If you got NZ citizenship and renounced your US citizenship I would think that you would be off the hook without going to the bother of dying, no?

You'd think so, but apparently dying is really the only way to get the IRS out of your pockets! My husband said for 10 years after you leave they still want to know how much you make... I suppose to be sure you didn't emigrate as you were about to inherit 10M or something...

[Super_BQ]

And don't forget that once you renounce your US citizenship, it would look very poorly the next time you travel to the US. Can easily raise an eyebrow from the IRS.

[Cindy]

Then let's hope that Ron Paul is elected the next President of the US for he has announced on various debates that he will get rid of the IRS.

[Ana&Steve]

Then let's hope that Ron Paul is elected the next President of the US for he has announced on various debates that he will get rid of the IRS.

I've been watching him...I'm interested to see more of what he has to offer. I like that he takes issues and deals with them case by case, instead of automatically taking a party view. We'll see I guess.
Ana

[Cindy]

Ana, did you here that Congress wants a raise? Also, CNN made a several interns call Senators for four days straight requesting by a certain date, itemized statements of where tax money's spent. Only a handful said yes and 19 said NO and one even said to request such a thing is illegal, something to do with breaking privacy law and rest didn't respond. I'm sooo disgusted!

[phatsharpie]

Thanks for this pertinent thread. I had a follow up question and wonder if anyone is self-employed and a US resident on long term visa in New Zealand?

Sorry for being late to the topic, but I've been looking into this issue as I am thinking of doing IT contracting work in NZ when I arrive. But it looks like being a self-employed US citizen in NZ is a BAD idea due to the lack of an US-NZ totalization agreement. Self-employed US citizens in NZ have to pay self-employment tax on all earnings - which amounts to around 15% (SS+Medicare for both employee and employer components). Apparently there is a way around it by establishing a foreign controlled corporation (FCC), but it looks complicated (and my eyes glazed over while reading about it).

See the following links:
http://www.expatfocus.com/expatriate-taxation-us-self-employed

http://www.globaltaxhelp.com/taxbasics.htm

http://wellington.usembassy.gov/irs.html ("This also applies to those people who are self-employed and earn a net-profit of US$400 or more as they are subject to social security and medical taxes").


Brian

[eternalkiwi]

From the links you listed, finding a client/company in NZ to work for as an employee/consultant might keep things simple for tax and administration, though may be difficult to find.

If you are able to find work in Wellington initially you may then be able to scope the best path to achieving your goals.

Shawn