Prologue – The Circumstances Of Your Birth Should Not Determine The Outcome Of Your Life …
Kids stuck with $2000 bill each for KiwiSaver https://t.co/gLb5TlCv1z
— John Richardson – lawyer for "U.S. persons" abroad (@ExpatriationLaw) October 24, 2022
The above tweet references a “human interest” story where US citizen children are denied benefits in their country of residence that are available to all people who are NOT US citizens.
The description includes:
New Zealand children born to parents’ who are citizens of the United States face a difficult KiwiSaver choice: Give up your US citizenship, or face a KiwiSaver tax compliance bill of $750 or more a year courtesy of the US taxman.
A petition has been started at Parliament asking MPs to change the KiwiSaver Act to allow people with KiwiSaver accounts facing the unreasonable demands from US tax authorities to close their KiwiSaver accounts.
The issue surfaced as a result of the plight of Auckland dual national Kira Bacal and her four New Zealand-born children, Harper, 13, Rowan, 10 and twins Malachi and Elias, 8.
It appears that the poor (New Zealand born) Bacal children are finding that the US (or at least US tax preparers in New Zealand) consider their KiwiSaver to be a possible vehicle for US tax evasion! Not only is the KiwiSaver a “trust”, but it’s a “foreign trust” which comes with all kinds of penalty laden reporting obligations and no tax advantages. An excellent analysis of the US tax implications of the New Zealand KiwiSaver is here. The story is somewhat comical in that one gets the feeling that the blame should be placed on New Zealand (and not the United States) for New Zealand’s failure to legislate special exceptions for US citizens living in New Zealand.
So what! They’re Americans and therefore they deserve it (you say)!
A previous post explained that for Americans abroad, changes in the laws of their country of residence can change their tax relationship with the United States. The purpose of this post is to expand on that theme by demonstrating that: