We’ve been filed many thousands of US tax returns over the years and have some helpful tips to share.
1. US citizens and residents outside the US who avail of the automatic two-month extension need to attach a statement explaining this when filing by the due date of 15 June.
2. If you have business income – you should be aware that the criteria for taking a deduction for items such as home office and entertainment are far stricter under US federal code than under NZ income tax legislation.
3. Any home office must be used solely, not principally, for business purposes. That is exclusive use of a room as a home office. No private use is allowed.
4. Receipts, invoices and adequate documentation supporting deductions must be retained for three years.
5. A special set of depreciation rates apply for depreciable assets that are located outside the US. NZ depreciation cannot be slotted in – the depreciation must be recalculated and this will affect the basis of the depreciable asset which in turn affects the basis for taxable capital gain. The §179 deduction is not available for assets located outside the US.
6. US citizens and residents who are married to non-resident aliens and who elect file a joint return must check the criteria to do so and must attach an election to their return to have the non-resident spouse treated as a resident in order to file a joint return.
7. Ensure payment is made by 18 April even if filing later (by applying for the six-month extension or the automatic two-month extension). At a late stage, it has come to light that the EFTPS, the secure system of making payments of federal income tax, is available to taxpayers located outside the US. It takes seven days to receive a pin. Maybe worth considering for payments required to be made subsequent to the 18 April payments.
8. Remember estimated tax – instalment one – is also due 18 April. This is paid quarterly, like the provisional tax in NZ, with the first instalment due next week and then another on 15 June for individuals.
9. The statute of limitations closes the timeframe for claiming refunds related to the 2007 year for good on 18 April.
If you need help with filing your US tax return contact us for assistance.