I haven't visited here in a while but am still amazed at how complex and stressful an expat's finances can become when moving abroad, especially for US citizens.
The problem with tax consultants (as good as they apparently are) is that the costs are the same whether you have 10 dollars or 100 million to your name. One I spoke to told me that his normal clients "have a much higher net worth than (myself)".
I have still yet to attempt a conventional IRA distribution on my own but am determined to try and figure it out, however it's not as urgent now that Trump has f'ed up the stock market for now.
1. It seems clear that I withdraw an amount of my choice and have no US tax withheld. It doesn't matter in what country that money is banked. If NZ, it will go via a forex company.
2. On receipt I immediately pay NZ tax on the full amount at the normal income tax rate to avoid having a deficit of over $2k at filing time.
3. On my US tax return I fill out a 1116 Foreign Income Credit for that gross withdrawal and NZ tax paid, ticked as "certain income resourced by treaty". Effectively the treaty makes it NZ income with NZ having sole taxation rights.
4. That seems fine but there are two little issues.
a) Publication 514 indicates that NZ and AU are different from the other countries with treaties (see link below). There's no explanation other than to write to the IRS.
b) It's not 100% clear if I have to accompany the claim on 1116 with an 8833 "Treaty-Based Return Position Disclosure". Getting that wrong is a US$1000 fine. Nice, thanks IRS. One tax website says yes, another no because it's not an exceptional case.
Anyone else have experience with these forms?
Publication 514, see page 23, Tax treaties.
https://www.irs.gov/pub/irs-pdf/p514.pdf