Correcting the Dom Post

By Bill Kaye-Blake 24/02/2014 2


The Dominion Post published an article on US/New Zealand tax negotiations. The US is trying to get New Zealand to have the IRD and banks release information about ‘US people’, whatever that means. The article was scare-mongering about poor Kiwis who will suddenly be targeted by big bad American tax agents. I wrote the following to the reporter, Ben Heather:
 
Hi Ben –

Your article, ‘American tax grab may target Kiwis‘, contained important errors, and I am writing to correct them.

– US citizens are subject to US tax on their worldwide income. This is true regardless of where they live. Thus, any actions by the US government to have those taxes paid are simply ‘enforcing the law’, not a ‘tax grab’.

– A child born abroad to a US citizen does not ‘automatically’ become a US citizen. He or she has the right to citizenship, but the parents have to apply, and the right lapses once the child reaches a certain age (18 years of age, I think). Thus, the couple in your article had to apply for citizenship for their child, which means they chose US citizenship and all the rights and obligations thereof. Those obligations include paying taxes on worldwide income.

– A green card lapses once a person has been out of the US for a certain period of time. From memory, it remains valid for 2 years, and one can apply for an extension, but only for another fixed period (2 or 3 years). One can keep a green card valid by returning to the US for some period of time, the details of which I don’t recall. All of this means that your statement, ‘Under US law, any Kiwi who has a green card, or US residency, is liable to pay tax in the US, even if they have not lived there for decades’, is false. If the person has not lived there ‘for decades’, the green card is no longer valid and the person is not subject to US tax laws.

In this situation, there are essentially four classes of people:

– People subject to US tax laws, that is, US citizens and permanent residents. They are legally obligated to pay their taxes. The US is asking for New Zealand’s help in enforcing US tax law.

– People tied up somehow with US citizens and permanent residents. These are, e.g., New Zealand spouses of US citizens. The New Zealand government is obligated to protect their privacy and not obligated to share anything about them with the US. They will need to work out what to do about things like bank accounts held by the non-citizen spouse.

– People who once held green cards (or US citizenship) and no longer do. They are no longer under any obligation to the US government, and New Zealand should ensure that their details are not sent to the US.

– People who do not fall into any of the above categories. New Zealand should ensure that their details are not shared, either.

You would be able to check the details of tax obligations and citizenship with the US embassy or consulate. Much of the information is also on official websites.

 
Kind regards,


2 Responses to “Correcting the Dom Post”

  • “If the person has not lived there ‘for decades’, the green card is no longer valid and the person is not subject to US tax laws.”

    Wrong. Look here:

    http://www.irs.gov/pub/irs-pdf/p4588.pdf

    “What if I have been absent from the U.S. for a long period
    of time?
    Your tax responsibilities as a green card holder do not
    change if you are absent from the U.S. for any period
    of time. Your income tax filing requirement and possible
    obligation to pay U.S. taxes continue until you either
    surrender your green card or there has been a final admin-
    istrative or judicial determination that your green card has
    been revoked or abandoned. Therefore, even if the U.S.
    Citizenship and Immigration Service (USCIS) no longer
    recognizes the validity of your green card because you
    have been absent from the United States for a certain
    period of time or the green card is more than ten years
    old, you must continue to file tax returns until there has
    been a final determination that is not subject to appeal
    that your green card has been revoked or abandoned.”