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Thread: US Self-Employment tax - Reducing or declaring as tax credit?

  1. #1
    trimprover is offline Member
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    Default US Self-Employment tax - Reducing or declaring as tax credit?

    I'm a self-employed US citizen living in NZ. The US requires me to pay a "self-employment tax" (including social security and medicare) on top of the usual income tax. The self-employment tax is based on worldwide income, and cannot be reduced by any foreign earned income exclusions or foreign tax credits.

    Some countries' tax treaties w/ the US let you avoid the US self-employment tax if the other country charges you its own self-employment tax. Unfortunately, New Zealand is not one of the listed countries.

    An IRS agent told me today that this means we always need to pay the full amount of the US self-employment tax, regardless of where we lived or what taxes we paid to other countries.

    My questions:

    1) Is there any way to reduce or eliminate the US self-employment tax (aside from declaring more expenses)?

    2) Can we declare the US self-employment tax as an overseas tax credit on our NZ taxes?

    Thanks!
    US citizen applying for Permanent Residence via Skilled Migrant Category

    2008-12-16 Submitted EOI
    2009-01-17 EOI successful
    2009-02-03 Received ITA
    2009-04-07 Mailed application

  2. #2
    Cliff's Avatar
    Cliff is offline Oh Masterful One
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    Are you going back the the USA or staying in NZ? They don't know what you make here. If you don't tell them they won't know. They official IRS position is always take 100% of your income and 20% and send it to them.
    Cheers

    Cliff

    Nelson, New Zealand
    NZ Citizenship in 2000, been in NZ 15 years now
    Arrived NZ in 1997 from Las Vegas, Nevada, USA

    "New Zealand isn't just a physical place it is a state of mind."

  3. #3
    cani is offline Junior Member
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    We have Americans living here in Canada who didn't know they had to pay US tax and got big shocks and even threats of fines and imprisonment so be very careful of not paying your US tax, they have ways of finding out.

    Kristina

  4. #4
    Cliff's Avatar
    Cliff is offline Oh Masterful One
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    Kristina

    Canada is next door to the USA of course they are going to have good relations with Canada and watch what is going on closer. NZ is far, far away and not on the radar, unless you put yourself there.
    Cheers

    Cliff

    Nelson, New Zealand
    NZ Citizenship in 2000, been in NZ 15 years now
    Arrived NZ in 1997 from Las Vegas, Nevada, USA

    "New Zealand isn't just a physical place it is a state of mind."

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