Taxes for NZ resident working for US company

[denalipop]

I'm a US citizen, and am scheduled to arrive in NZ (as a permanent resident) in a few weeks.

I'll be continuing to work for my US-based company as a self-employed contractor (not an employee).

The US tax treaty page ( http://www.irs.gov/publications/p901/ar02.html ) says the following:

"Income that residents of New Zealand receive for performing personal
services as independent contractors or self-employed individuals
(independent personal services) in the United States in any tax year
is exempt from U.S. income tax if the residents:
* Are present in the United States for no more than 183 days during
any consecutive 12-month period, and
* Do not have a fixed base regularly available to them in the United
States for performing the services."

Does this mean that I won't have to pay any US income taxes? Will I only need to pay NZ taxes?

Also, I'm thinking about setting up an LLC (limited liability company) either in the US or NZ. How would that affect my US income tax?

Thanks!

[denalipop]

To complicate things, Publication 54 ( http://www.irs.gov/publications/p54/...blink100047390 ) says the following:

Who Must Pay Self-Employment Tax?

If you are a self-employed U.S. citizen or resident, the rules for paying self-employment tax are generally the same whether you are living in the United States or abroad.

The self-employment tax is a social security and Medicare tax on net earnings from self-
employment. You must pay self-employment tax if your net earnings from self-employment are at least $400.

This contradicts Publication 901, which said what I posted above:

Income that residents of New Zealand receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States in any tax year is exempt from U.S. income tax if the residents:

* Are present in the United States for no more than 183 days during any consecutive 12-month period, and
* Do not have a fixed base regularly available to them in the United States for performing the services.

So, Publication 54 says I need to pay income, and Publication 901 says I don't. Or am I misreading something?

[sks]

...Income that residents of New Zealand receive for performing personal services as independent contractors or self-employed individuals (independent personal services) in the United States in any tax year...

(Emphasis mine.)

You'll not be working in the US, will you?

[sks]

...This contradicts Publication 901...

No, it doesn't (see my previous comment).

...So, Publication 54 says I need to pay income...

I'm not a tax lawyer or accountant, but if you're still a US citizen, you generally pay income tax on your worldwide income, regardless of source (tax treaty with NZ means that you get credit for any taxes paid to NZ -- since NZ income tax is generally higher, you'd usually end up owing nothing to the IRS).

If you've been following the news, IRS has become awfully strict about overseas earnings and accounts (supposedly, expats owe upwards of US$ 100 billion annually, and IRS means to collect).

[Jolie]

As far as I'm aware, the one overriding rule is that you have to have a multi-national tax preparer do your joint NZ and US tax returns (or do it yourself, but I really wouldn't recommend that).

You will then be required to pay taxes in whichever country the tax amount is higher. Chances are good that that will be NZ, but it's not guaranteed.

[James 1077]

US taxes are hideously complicated and the IRS isn't an organisation that gives you the benefit of the doubt!

The general rule is that, as you will be tax resident in New Zealand, you will be liable to income tax in New Zealand on your worldwide earnings.

As a US citizen you may also need to pay US taxes on your worldwide income if it is above a certain threshold (I can't remember off the top of my head but think it is around $80k). You will receive a credit for tax paid in New Zealand so are unlikely to have to actually pay anything - but still need to file the return.

As you are going to be receiving income from a US company there may be added complications as to where that income is taxable.

Your best bet would be to find an accountant who specialises in US and NZ taxation or has offices in both countries. However the cost is likely to be worth it as you'll know exactly what you need to do.

With respect to setting up a company it probably won't make a huge amount of difference except that you'll need to prepare a tax return for the company as well as yourself. However an accountant specialised in both jurisdications will be able to let you know what the advantages and disadvantages are.

[BkyMonster]

As a US citizen you may also need to pay US taxes on your worldwide income if it is above a certain threshold (I can't remember off the top of my head but think it is around $80k). You will receive a credit for tax paid in New Zealand so are unlikely to have to actually pay anything - but still need to file the return.

As a US citizen you actually need to file US taxes from overseas no matter your income.eyes: You won't have to do much other than file in the US until you make over the 87k USD threshold or whatever it is. At that point the rules change a bit. You also need to file another form (I think seattle posted about it in another US tax thread) if you have more than 10k USD in an non-US account at any point during the year. Just file the form or face a fine kind of thing.

I'd also recommend an accountant for the OP's situation. At least for the first year or so.

[denalipop]

Which country's taxes do I file (and pay) first: the US or NZ?

Some people (including the US IRS and a US CPA) have said that I should do the NZ taxes first, and then get a tax credit towards the US taxes. This means NZ would get most of my tax money, with the US getting little, if any.

Other people (including the NZ IRD) have told me the reverse; that I should do the US taxes first and apply a tax credit to the NZ taxes. This means the US gets most (or all) of my tax money.

So, which way does it actually work? Which country gets the first (and largest) portion of my taxes?

[sks]

To be on the safe side, why not just pay both? If your effective NZ rate is 35% and your US rate is 28%, just pay 63%. It's a small price to pay for peace of mind.

Or, you could just hire a tax professional once you get to NZ. May not be as cheap as asking a bunch of strangers on a PMB, but you might just save money in the long run.

[denalipop]

I get your point.

Some people on here are (or will be) in the same boat as me, so I find it useful to try to get a general understanding on here, and then save the tax pro for when I've filled out all the forms and just want to something to look them over.