Tax Time

This weekend we stayed in and took care of some lingering business: taxes. Even though we live in New Zealand and M is not (according to the forms) a “US Person,” we must still file taxes in the United States. And, of course, because we live abroad, taxes are even more complicated than usual.

Fortunately, expats get an additional two months to file taxes and can extend that another four months. The catch is that if you owe money, you have to get the IRS their money by the original deadline in April. Since we pay taxes in New Zealand (automatically, with no hassle), we don’t owe any US tax, but still must prove that in one of two ways. The first, easier way is to use the appropriately-named 2555-EZ form to claim a Foreign Earned Income Exclusion: all your income is first declared, then deducted so that your taxed income is zero. However, because of some technicalities this year we’re going the harder route and claiming the Foreign Tax Credit. This form is more complicated as you have to determine whether the tax you paid to the foreign country is as much as the tax you’d owe to the US (I think). Not so EZ.

Even the standard 1040 form is not so standard for expats. As M is’t a citizen, last year he had to apply for a tax ID, equivalent to a social security number but purely for tax purposes. The exclusions must be taken into account properly and, because of course we have foreign bank accounts, we have to declare them too. For some reason this is through a different system: it can be submitted electronically but has a hard deadline of June 30th, hence our activity this weekend. Reading through the form, we happily noted that M did not have to fill out a separate form (as he’s not a “US Person”). However, the instructions told us to fill out a supplemental Form 114a which, in the ultimate bureaucratic confusion, we were specifically told not to submit. Why fill out a form if we don’t even send it to the government?! We may never know.

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