


Ask the community...
Make sure you're considering the "tie-breaker" rules in Article 4(2) of the treaty! As a dual citizen, these determine where your tax residency is primarily located for treaty purposes. Also, are you reporting your income properly in NZ? I think they call it "schedular payments" for contractor income there, which has its own rules.
This is exactly the kind of confusing situation that kept me up at night when I first moved to NZ as a contractor! The treaty language is genuinely difficult to parse, but here's what I've learned after going through this myself: You're correct that as a US citizen, you can't escape US tax obligations regardless of the treaty - that saving clause in Article 1(3) is ironclad. However, you have several strategies to minimize double taxation: 1. **Foreign Earned Income Exclusion (Form 2555)**: Since you're living in NZ full-time, you likely qualify to exclude up to $120,000 of your 1099 income from US taxation. This is often better than relying on foreign tax credits. 2. **Totalization Agreement**: Apply for a Certificate of Coverage from NZ's Ministry of Social Development to potentially avoid US self-employment taxes (15.3%) since you're contributing to NZ's social security system. 3. **NZ Tax Planning**: In NZ, your US contractor income is foreign-sourced income. Make sure you're handling the schedular payment requirements correctly - the IRD has specific rules for this. The key is layering these strategies properly. I'd recommend tackling the FEIE first since it's the most straightforward, then working on the totalization agreement for SE tax relief. Don't try to rely solely on the treaty provisions - they're mostly neutered by the saving clause for US citizens.
This is incredibly helpful! I'm in a similar situation but just starting to research all this. Quick question - when you applied for the Certificate of Coverage from NZ's Ministry of Social Development, how long did the process take? I'm worried about timing since I need to file my US taxes soon and want to know if I can claim the SE tax exemption this year or if I need to wait until I actually receive the certificate. Also, did you find any issues with the IRD regarding the schedular payment requirements? I've been treating my US contractor payments as regular foreign income but now I'm wondering if I should be handling them differently.
Has anyone else gotten a 1099-K from Ticketmaster or StubHub for reselling? I heard they're going to start sending them for sales over $600 starting in 2025 instead of the current $20,000 threshold. That's gonna catch a lot more casual sellers like us.
The $600 reporting threshold got delayed again. I think it's still at $20,000 for 2024 tax filing season, but yeah it'll eventually drop to $600 which will affect a ton more people. So even if you're flying under the radar now, you should probably start keeping better records.
Thanks for the info! That's a relief to hear about the delay. I definitely need to start being more organized with my records though. I've just been doing this casually but made maybe $2k profit this year from about $12k in sales.
Hey there! I was in almost the exact same situation last year with concert tickets. The key thing to remember is that you only owe taxes on your actual profit, not the full sales amount. Since you don't have receipts, I'd recommend creating a detailed log of what you can remember - dates, games, approximate amounts you paid your friend. Check your bank records for ATM withdrawals around those dates, and see if you have any text messages with your buddy discussing prices. You'll want to report this on Schedule C since it sounds like regular activity. Put your total sales as income, then deduct your costs as business expenses. The IRS allows reasonable reconstruction of records when originals aren't available, as long as you're honest and can show some supporting evidence. Also, start keeping better records going forward! Use Venmo or at least write down cash transactions. With the reporting thresholds potentially dropping to $600 soon, more casual sellers like us are going to be on the radar.
This is really helpful advice! I'm curious about the Schedule C route though - doesn't that mean you're treating it as a business? I've only been doing this sporadically when I can't make games, not as a regular business activity. Would that still qualify for Schedule C or should I be reporting it somewhere else? Also, when you say "reasonable reconstruction" - do you have any idea what level of detail the IRS expects? Like is a simple spreadsheet with dates and estimated amounts enough, or do they want more supporting documentation?
Does anyone know a good affordable tax professional who can help with regular tax questions? After reading this thread I'm terrified of accidentally following bad advice. I tried using the free software options but my situation is a bit complicated (self-employed with some investment income).
Look into the Volunteer Income Tax Assistance (VITA) program. They offer free tax preparation services if your income is below $60,000. I've used them for years and they're staffed by IRS-certified volunteers. Local community colleges often host VITA sites during tax season.
Thanks for posting this question - it's really important that people know about these scams! As a tax professional, I see people fall for these schemes every year and it never ends well. The IRS has actually published a "Dirty Dozen" list of tax scams that they update annually, and sovereign citizen arguments are always on it. These promoters often target people who are genuinely struggling with tax debt or who feel overwhelmed by the tax system. What makes these scams particularly dangerous is that they often mix legitimate-sounding legal language with completely false interpretations of tax law. They'll cite real court cases but completely misrepresent what those cases actually decided. If anyone is dealing with legitimate tax problems, there are actual legal options available - installment agreements, offers in compromise, currently not collectible status, etc. The IRS has hardship programs for people who genuinely can't pay. There's never a need to resort to these bogus "sovereign citizen" theories that will only make your situation worse.
This is such valuable information! I had no idea the IRS actually published a "Dirty Dozen" list - that sounds like something everyone should know about. Where can people find this list? Also, you mentioned legitimate options like installment agreements and offers in compromise. For someone who might be genuinely struggling with tax debt, what would be the first step to explore these legitimate alternatives instead of falling for these scams?
Has anyone actually been audited specifically on LLC distributions? I've been taking money out of my real estate LLCs for years and just calling everything "distributions" without much thought. I'm starting to worry I've been doing it wrong.
My brother's construction LLC got audited last year and distributions were definitely part of what they looked at. They focused on whether distributions exceeded his basis, which apparently can trigger tax consequences. He ended up owing about $7k in additional taxes because some distributions should have been treated as gains.
This is a great question that many real estate LLC owners struggle with. You're right that in a passthrough entity, you're taxed on your allocable share of income regardless of distributions, but the classification still matters for several important reasons: 1. **Basis tracking**: Your outside basis in the LLC (which starts with your initial investment) increases with allocated income and decreases with distributions. If distributions exceed your basis, the excess becomes taxable gain - this is true even in passthrough entities. 2. **Capital account maintenance**: Proper capital account tracking is required by the regulations and affects how profits/losses are allocated among members. Return of capital reduces your capital account without affecting current-year allocations. 3. **Future implications**: If you ever sell your LLC interest or the LLC sells property, having accurate basis and capital account records becomes critical for determining gain/loss. While you don't need to classify each distribution in real-time, I'd recommend working with your accountant to ensure your basis and capital accounts are being tracked properly. Many people think "passthrough = no distribution issues" but that's not entirely accurate. The IRS can definitely scrutinize distribution patterns, especially if they exceed basis or seem inconsistent with reported income.
This is really helpful - I think I've been too casual about tracking this stuff. When you mention "outside basis" vs capital accounts, are these the same thing or two different calculations I need to worry about? My LLC operating agreements mention capital accounts but I'm not sure if my accountant is tracking basis separately. Should I be asking for both numbers when we do year-end accounting?
Nathan Kim
I want to emphasize something that might get overlooked in all the technical discussion - make sure you and your daughter are on the same page about this decision before filing. Even though you're providing most of the support, this can create family tension if not handled carefully. From a practical standpoint, you'll want to calculate whether claiming your granddaughter actually benefits your family more than if your daughter claims her. Sometimes the parent might qualify for credits (like EITC or additional CTC) that could be worth more than what you'd get, especially if they're in a lower tax bracket. Also, keep in mind that once you start claiming her, you'll need to be consistent about it or have clear agreements about alternating years. The IRS doesn't like seeing the same child bouncing between different tax returns without proper documentation. One more thing - if your daughter receives any government benefits that are based on household size or dependents, claiming the child on your taxes might affect her eligibility. Worth checking before you file.
0 coins
Joshua Hellan
ā¢This is such an important point that often gets missed! I learned this the hard way when I started claiming my nephew without properly discussing it with my sister first. Even though I was clearly providing more support, it caused some family drama because she felt like I was "taking" her child from her taxes. What really helped us was sitting down together and actually running the numbers both ways using tax software. We discovered that even though I got a bigger benefit from claiming him, when we factored in her potential loss of SNAP benefits, it actually worked out better for our overall family finances if she continued to claim him and I just helped support them both. @Nathan Kim is absolutely right about the government benefits piece - that can be a huge factor that people don t'think about until it s'too late. WIC, SNAP, housing assistance, Medicaid - a lot of these programs count tax dependents when determining household size and eligibility.
0 coins
Ethan Clark
This is exactly the kind of complex family situation where getting professional advice can save you from costly mistakes. As others have mentioned, you'll need to navigate the qualifying child vs. qualifying relative tests, and document everything carefully. One thing I'd add is to consider the timing of when you establish this arrangement. If you're going to claim your granddaughter, it's better to have all the documentation and agreements in place before the tax year ends rather than scrambling at filing time. Also, don't forget about state tax implications - some states have different rules or additional credits for dependents that might factor into your decision. The federal rules are complex enough, but state rules can sometimes tip the scales one way or another. Keep detailed records not just of direct expenses like food and clothing, but also indirect costs like the increased utilities, housing space, and transportation costs related to your granddaughter. These all count toward the support calculation and can really add up over a full year.
0 coins
Giovanni Rossi
ā¢Great point about the state tax implications! I'm dealing with a similar grandparent situation and hadn't even thought about how state rules might differ from federal ones. Do you know if most states just follow the federal dependency rules, or do they have their own tests? Also, when you mention documenting indirect costs like utilities and housing - how do you calculate the portion that goes toward supporting the grandchild? Do you just estimate based on household size or is there a more specific method the IRS expects? I'm trying to get all my documentation together before the end of the year like you suggested, but I want to make sure I'm doing the calculations correctly from the start.
0 coins