How much do you typically pay for TurboTax? Their pricing is so confusing with all the different versions and upsells.

We pay about $150 for the Self-Employed version plus state filing. You're right that their pricing is confusing - they start you on a cheaper version then tell you halfway through that you need to upgrade to handle certain forms. The most annoying part is that they increase the price every year while adding very few new features. We've looked at cheaper alternatives like FreeTaxUSA but haven't made the switch yet because we're already familiar with TurboTax's interface.

I switched from TurboTax to a CPA three years ago and it's been worth every penny. Cost is $350 but she found nearly $2,000 in deductions I was missing related to my consulting work. Plus she provides advice throughout the year, not just at tax time. The biggest difference is that software can only work with the information you provide and the questions it's programmed to ask. A good CPA asks probing questions based on your specific situation and knows the more obscure parts of tax code that might apply to you.

So even if I don't end up owing any US taxes on the NZ income, I still need to report every dollar I earned there? And do I use the tax year based on when I actually got paid in the US, or when the work was performed in NZ?

Yes, you absolutely must report all foreign income regardless of whether you'll owe US taxes on it. The IRS requires full disclosure of worldwide income even if it's ultimately excluded or credited. Failing to report foreign income can result in severe penalties, even if you wouldn't have owed any tax on it. For US tax purposes, you report income in the tax year you received the payment, not when the work was performed. So if you got paid in 2024 for work done in 2023, it goes on your 2024 return. Don't worry about New Zealand's tax year - just focus on when you actually received the money according to US calendar year (January through December).

I used TurboTax Premier for my foreign income from the UK last year, and it handled it fine. Make sure you don't just get the basic version - you need at least Deluxe, but Premier is better for foreign stuff. It walks you through Form 1116 pretty well. Just be prepared with all your foreign income docs and know how much foreign tax you paid before starting.

Isn't that super complicated to set up though? I looked into 72t distributions once and it seemed like if you make even a tiny mistake with the calculation or withdrawal timing, the IRS hits you with penalties for everything you've taken out. Has anyone here actually done this successfully?

It's definitely more complex than a standard withdrawal, but not impossible to manage. The key is getting the initial calculation right and being absolutely consistent with the withdrawals. You're right that any mistakes can trigger penalties on all distributions, which is why I recommend having a tax professional help set it up initially. But for someone who's lost their job and needs ongoing income, it can be worth the effort. I helped my brother set one up three years ago when he lost his job at 53, and it's been working fine - he just makes sure to take the exact calculated amount each year.

This is exactly what I did when I had a similar issue! I didn't realize there were timing requirements for qualifying for the penalty exception. Once I found out my distribution didn't qualify, I scraped together the money and rolled it back into my IRA just under the 60-day limit. Saved me from the penalty completely AND preserved my retirement savings.

What's considered a "reasonable salary" though? I've heard everything from 30% to 60% of profits should be salary. Is there an actual rule or is it just whatever you can justify?

There's no fixed percentage that's automatically considered "reasonable" - it depends on your industry, location, duties, and what comparable positions would earn. I've found that industry salary surveys are helpful for documenting your decision. For my construction management business, I settled on about 40% of profits as salary after researching what project managers in my area typically earn. The key is having documentation to support whatever number you choose. The IRS is mainly concerned with people taking a tiny salary and huge distributions to avoid payroll taxes. As long as you can justify your salary with market research, you're generally in good shape.

Oh crap I didn't even think about that. What state are you in? I'm in California and now I'm wondering if I need to do something separate for state taxes.

How much did the CPA charge compared to TurboTax? Was it still worth it after paying their fee?

The CPA charged me $350 while TurboTax Premium had been costing around $120. So yes, even after paying the higher fee, I was still ahead by roughly $1,670 that first year. The other benefit is that my CPA now keeps all my records from year to year, knows my situation, and proactively contacts me about tax law changes that might affect me. For example, he reached out last fall to suggest some year-end moves that saved me even more. That kind of personalized advice just doesn't happen with software.

That's really eye opening! I think I'll at least consult with a professional this year to see what I might be missing. My situation isn't super complicated but I do have some student loan interest and did some freelance work last year, so maybe there's stuff I don't know about. Thanks for sharing your perspective!