One of the many benefits of using tax professionals for advice and return preparation is to ensure that income is attributed to the correct source on an income tax return.

A commonly made error is incorrect sourcing. For example, many taxpayers incorrectly assess income from personal services as sourced from the country from which payment is derived. We frequently see cases of taxpayers declaring W-2 income all in their United States’ tax return, when in fact some or all of the income may need to be declared as foreign-sourced. This should be done when the taxpayer performs the services outside the United States, such as from their home in New Zealand. Income can be and should be apportioned based on the number of work days spent performing the services in each country.

Too often this error remains undetected until such time that the taxpayer’s return in their home country is prepared, which can lead to significant time and money spent sorting this out by filing amended returns, or, in the case of New Zealand, a letter to Inland Revenue requesting a reassessment.

Does your tax preparer know the source rules?  We provide specialist services in this area to ensure that you pay the correct amount of tax, and no more, in the correct country.