Moving to the USA
Should You Pay Tax in the USA?
New Zealand imposes income tax on a residency basis. Once an individual or organization becomes resident for tax purposes in New Zealand, income tax is imposed on worldwide income during the period of tax residency. We can inform and navigate you through this process, and provide you with a taxes for expats review in respect of tax obligations in your home country if this is still relevant to your status.
Whether making a permanent or temporary move to New Zealand, several issues arise.
A More Complex Taxation System
The United States Federal Government and most States, impose income tax on individuals on a citizenship and residency basis.
Individuals moving to the United States will find themselves entering a significantly more complex taxation system than that of New Zealand. The United States has the most developed body of income tax law in the world, galvanised into the 71,000 page Internal Revenue Code with accompanying regulations, revenue procedures and other pronouncements.
Dealing with the Internal Revenue Service is not the same as dealing with the Inland Revenue Department. Compliance with United States’ income tax obligations requires significantly more disclosure when you pay tax in the USA than what a New Zealand citizen may be used to. A typical example is the number of forms for completion, which, depending on an individual’s financial and personal affairs can be multiple times the volume of paperwork involved in meeting New Zealand income tax filing obligations.
In addition to complexity, differing terminology between the two countries frequently causes difficulty in understanding how individuals and entities are taxable in the United States.
Multi-Layered Tax Structure
Income tax is imposed at the federal and state levels, and in some cases locally with city and county taxes. Inter-relationships exist between the three levels of income taxation, with tax rates varying according to the filing category of the taxpayer. Furthermore the imposition of capital gains tax, self-employment tax, Social Security & Medicare taxes, unemployment tax, gift tax, estate tax, excise tax and generation-skipping transfer tax frequently can be overwhelming when you pay tax in the USA.
Individuals and organizations either relocating or expanding operations from New Zealand to the United States may also have the implications of a remaining tax presence in New Zealand to address in addition to dealing with the United States tax system.
Filing a United States income tax return
United States citizens and lawful permanent residents moving out of the United States will need to file a federal return and a part-year resident/part-year non-resident state return for the year in which they departed the United States.
Moving expenses may be claimable in the United States tax return where eligibility criteria involving time and distance tests are met.
The US-NZ Income Tax Treaty also may affect the way in which an individual or organization with a tax presence in the United States should file a United States income tax return.
We can assist you to plan ahead to minimize the financial effect of a move to or from the United States created by moving from one tax jurisdiction into another.
Tax obligations of United States Citizens and Lawful Permanent Residents, and find out about reparation and filing of the United States income tax return.