U.S. tax filing costs are eroding my retirement savings in New Zealand

“I am currently on unpaid maternity leave, yet I still have to spend nearly $2,000 on yearly filing costs simply to inform the IRS of how poor I currently am.”

— Jennifer, an American from Colorado who currently lives in New Zealand

Dear Congress,

I have lived in New Zealand since 2013. I am married to a New Zealand citizen, and we have two young daughters who were born in New Zealand.

I have spent thousands of dollars simply to file my U.S. taxes. I do not make much money, as I have worked part time since having children, and any gains I am making on my retirement account and other investments are offset by the amount I have to spend from my savings to pay a qualified accountant to file my complicated U.S. tax forms.

Separate finances, shared costs

My husband and I keep our finances separate due to these filing requirements, as combining them would add even more complexity and cost to my filings. In 2024, I invested in some ETFs, as I am unable to contribute more to my retirement account than my employer does without being severely taxed by the U.S., which I discovered the hard way several years ago.

However, I was then blindsided by PFIC filing requirements for these ETFs on my taxes because they were held in Australia. The forms cost me $150 each. I have since closed those ETFs, as it cost me more to report them than I was earning in profits.

I am currently on unpaid maternity leave, yet I still have to spend nearly $2,000 on yearly filing costs simply to inform the IRS of how poor I currently am. I am also limited in my ability to invest much in the U.S., such as in U.S.-held ETFs, as New Zealand imposes a rather high tax on foreign investments over a certain threshold.

Trying to mitigate the damage

I have not applied for U.S. citizenship for my daughters, as I do not want them to be burdened with these reporting obligations unless they choose to take them on when they are old enough to make that decision.

It seems absolutely absurd that I still need to file complicated tax returns in a country where I have not lived since 2013. I do not want to renounce my citizenship, as all of my family still lives there and I would like the option to return if I wished to do so one day.

However, it feels like I am hamstrung in my ability to save for retirement and simply to be financially responsible so as not to be a burden on my family or the government in old age. I am already taxed anywhere from 17.5% to 33% on my New Zealand income, though I do not mind as much because we get much more benefit from our taxes here than in the U.S.

Sincerely,

Jennifer in New Zealand