It’s no secret that the US tax system is difficult and confusing – the US has exceptions and exemptions and all kinds of tax breaks that make filing your taxes almost like an Easter egg hunt looking for tax breaks. I have used TurboTax to file my taxes online for years. I like the ease of it and knowing that all my tax info is at my fingertips whenever I want it and I like their online tool that walks you through the process.
So this year I had to file taxes in both the US and NZ. I only worked for one company last year in the US and I didn’t qualify for most of the breaks you get in the US tax code but I had to go through them all to make sure. And this was the first time I’d ever had to file as someone living outside the US so it was a bit stressful. I gathered my moving expenses, W2, charity receipts, etc. and walked through the online guide. I did it in 3 different sessions because there were some questions around filing internationally that I ran out of patience for and I had to do quite a bit of Googling before I admitted defeat and decided that my moving expenses to New Zealand were not deductible. Dangit.
Before I moved to NZ, a friend of mine who was an expat had explained how they understood the tax system worked for the US. They said that I would file in NZ and then I would file in the US and if I paid less in NZ than I would have in the US then I would have to pay the difference to the US when I filed. But either I read the instructions totally wrong or my friend was mistaken. The way the wizard walked me through it, if your overseas income isn’t higher than a certain $$ amount then you don’t need to pay US taxes on the money. And when I got done with my US taxes that was the case for me and I only had to pay US taxes on the money I earned when I was in the US. So filing was painful and a bit time consuming but no worse than any other year of US filing.
And then came time to pay my NZ taxes. When you first move to New Zealand, you have to apply for an ID with the Inland Revenue Department called an IRD Number. Info on this can be found on their website and it is pretty straight forward but I had difficulty applying for one before I actually arrived in NZ because I didn’t have an NZ bank account. Once you’re here though, you can go to any NZ Post office and they will have an IRD application you can fill out right there and send in. It takes a couple of weeks and they then send the IRD in the mail. An IRD isn’t the same as a social security number in the US but they are used in a similar way. The IRD is used for tax info, Kiwi Saver (the NZ 401K), student loans, starting a business, etc.
Once you have the IRD, if you’re a ‘normal’ employee (ie not self-employed or managing your own business) then your company will take your taxes out of your paycheck based on the specified tax rate. NZ’s tax year runs from April 1 to March 31 rather than January 1 to December 31 like it does in the US. But here’s the thing, at the end of the tax year most people don’t need to do anything and most people don’t file a tax return!! Craziness eh?
But it’s true. In NZ, if you earned income other than salary, wages, interest, dividends and/or taxable Maori authority distributions then you have to file an IR3 return. There’s a really quick guide online that tells you if you need to file or not. And if not, then you don’t! You do nothing at the end of the year. It’s very very odd. I actually went online and tried to file just to make sure I didn’t need to file. And they accepted my filing and then nothing happened except my coworkers laughed at my dilemma over happy hour. The NZ tax code is simple – you make money and you pay taxes and if you pay too much or not enough the government figures it out and lets you know.
And another thing that I particularly love is that there is no concept of married filing status in New Zealand. Your rate is your rate regardless of whether you’re married or not.
In the US at tax season you see lots of accountants advertising for help with your taxes and you see TurboTax and others with commercials all the time. But here, I’ve never seen them and I can’t even recall seeing a tax office. I’m sure they exist, but they are much less common because it simply isn’t needed. It’s like tipping in a restaurant, when I first moved here and I didn’t tip in the restaurant I felt like I had forgotten something. Not filing a tax report has a similar feeling but I like it!